The silver price moved sideways on Monday morning even after the spectacular economic data from China. The metal is trading at $22.95, which is about 4.36% above the lowest level last week. Silver is still about 23% below the highest level in 2021.

China GDP data

Silver is an industrial metal that has vast uses. For example, it is widely used in the manufacturing of semiconductors, kitchenware, and other products. China is the biggest buyer of silver and other industrial metals like copper and lead.

Therefore, in most cases, the silver price does well when the Chinese economy is performing well. Data published on Monday morning revealed that the Chinese economy is firing on all cylinders even as the Omicron concerns remain. 

According to the National Bureau of Statistics (NBS), China’s GDP grew by 1.6% in the fourth quarter on a QoQ basis. This was a better performance than the median estimate of 1.1% and the third-quarter growth of 0.2%. 

The strong QoQ performance translated to an annualized increase of 4.0%, which was also better than the expected 3.6%. 

All sectors of the Chinese economy did well in the fourth quarter. For example, companies increased their fixed asset investments as they hoped for more demand. These investments rose by 4.9% in December after they expanded by 5.2% in the previous month. 

Government spending also increased. Most importantly, external demand jumped sharply, pushing the country to record its biggest ever trade surplus. Last week, data by NBS revealed that the country’s trade surplus jumped to a record $676 billion after companies shipped goods worth over $3.36 trillion in 2021. Exports and imports jumped by over 20% in December alone.

Therefore, while the real silver statistics are not made public, the strong performance means that the metal also did well.

Monetary policy

Analysts expect that the silver demand will do well in 2022 as most economies reopen. Also, the large investments in clean energy and semiconductors will push the price higher.

However, the silver price will likely be affected by monetary policy. Like gold, silver prices are usually affected by the actions of the Federal Reserve.

All indications are that the Fed and other global central banks will start to embrace a tighter monetary policy this year. For example, in the United States, the Fed has hinted that it will end quantitative easing in March and then start hiking interest rates. Fed officials and analysts are pricing in three to four rate hikes this year.

The urgency for tightening is mostly because of the surging inflation. Data published last week revealed that American inflation jumped to 7% in December as expected. It was the highest inflation figure recorded since 1982.

Other central banks like the Bank of England and Bank of Canada will also hike rates several times. Still, this is not entirely bearish for silver prices. Besides, prices have struggled in the past few months even as the Fed has maintained low rates.

Silver price analysis

The daily chart shows that the silver price has been in a tight range recently. As a result, the price is hovering around the 25-day and 50-day moving averages, while the Average True Range (ATR) has been in a bearish trend. 

A closer look shows that the silver price has formed a symmetrical triangle pattern that is shown in black. Therefore, since this triangle is nearing its confluence zone, there is a likelihood that it will have a breakout in the near term. At this point, the breakout will be in either direction.

The silver CFDs price chart showing the triangle formation beginning in June