After falling nearly 25% in value between March and July of this year, silver has seen a strong comeback in the past few months and is now up more than 14% in the past three months here in the UK. In the US silver has performed even better, increasing more than 20% in the past three months in USD.

After hitting a yearly high of £19.91 in March on the back of the Russian invasion of Ukraine, silver struggled for much of the spring, falling as low as £15.27 per ounce in July. A combination of factors however has seen the metal reverse most of these losses since September and puts it in a good position going into 2023.

121222 GBP Silver Price Chart

Silver’s industrial uses link it much more heavily to the industrial output of the global economy, and China’s strict zero-Covid policies over the summer finally look to be easing. A spate of rare public demonstrations and public dissent in recent weeks has resulted in some signs of easing restrictions in China and could help to spark some increased demand for silver following months of periodic shutdowns that had hindered output.

One caveat to note here however is that demand from industrial output could still struggle as many economies around the world head for recession. There are signs of orders falling for many factories and this could keep industrial output subdued regardless of whether China continue to ease restrictions after almost three years of the pandemic.

Another key driver for silver in its recent rise, and for the year ahead, is the strength of the US dollar. The Fed’s more aggressive interest rate hikes, coupled with the US economy’s apparent resilience to them, has helped make the dollar an attractive buy this year, but has started to weaken in recent weeks.

The Federal Reserve have started to talk of slowing their rate hikes to try and achieve a ‘soft landing’ – bringing inflation down without crashing the economy and sparking another recession. With rate rises potentially slowing, the dollar has come down from this year’s highs, and is helping to pump up the price of commodities including gold and silver. The direction this goes will depend largely on whether US inflation falls towards their 2% target, and if the country can avoid recession and rising unemployment.

Geopolitics will continue to be an important issue for silver as well. This year’s high followed the invasion of Ukraine by Russia, and the fears of what a modern conflict with nuclear capable powers could look like. Nearly nine months on the conflict continues, and rhetoric remains over escalation. The recent price cap on Russian oil could add further pressure to Putin with uncertain results, and will remain a key issue for the silver price in 2023.