Silver prices on recovery amid the expansion of manufacturing economies
- Silver prices were up by 0.59% at $26.8280 as major countries recorded bullish manufacturing PMI figures.
- China, a key consumer of silver, had its manufacturing sector grow at a slower pace than in January.
- Investors are keen on whether Senate will also approve the $1.9 trillion stimulus package.
Silver prices are on recovery after several countries recorded an expansion of their manufacturing economies. On Monday, the precious metal was up by 0.59% to trade at $26.8280. In Japan, February’s manufacturing PMI is better than analysts’ forecast and January’s figure. While China’s reading missed the beat, it still signified an expansion of its manufacturing economy. Bulls in the silver market are now waiting to see if the US Senate will approve the $1.9 trillion relief package passed by the Congress.
Manufacturing PMI data
Silver prices are reacting to the data on the manufacturing PMI in economies like China and Japan. The figures released on Sunday indicate that China’s manufacturing economy grew at a slower rate in February compared to the previous month.
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Experts had predicted that the manufacturing PMI would be at 51.1. This would have been 2 points lower than the prior month’s reading. However, the figure came in lower at 50.6. The composite PMI also declined from January’s 52.8 to 51.6.
On Monday, IHS Markit highlighted a similar trend. February’s Caixin manufacturing PMI was 50.9 compared to January’s 51.5. Analysts had forecasted that the figure will remain unchanged. In both cases, February’s manufacturing PMI is the lowest since May 2020.
The drop is largely due to disruption of activities in factories during the recent Lunar New Year. This seasonal decline should not be a cause of alarm. It is common for commercial operations to slow down during this week-long annual holiday as workers go home to celebrate with family. Besides, the manufacturing PMI is still above 50. This is an indication that China’s manufacturing economy is still expanding, which is bullish for silver prices.
The manufacturing PMI in other economies has also offered support to silver prices. Japan, which is the third largest economy, has recorded a better-than-expected figure. At 51.4, the manufacturing PMI is higher than the forecasted 50.6. In January, the reading was below average at 49.8.
Eurozone’ manufacturing PMI has also come in better than expected. Experts had predicted a reading of 57.7, up from January’s 54.8. February’s figure surpassed the forecast by 2 points. In the United Kingdom, the reading of 55.1 beat analysts’ estimates of 54.9. Investors looking to trade silver are now keen on the manufacturing PMI from Canada, and the United States. The readings are set to be released in the course of the day.
US Stimulus package
In addition to its industrial use, silver is a precious metal that is valued as a safe haven. It is also used as a hedge against inflation. On Saturday, the US Congress passed the $1.9 trillion stimulus package. Investors are now keen to see if the Senate will also approve it.
The move by the House has increased investors’ hopes that the relief bill will become law. If it does, the increased circulation of the greenback will devalue it. This is bullish for silver prices as investors will shift their resources to this precious metal and other safe havens.