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Silver’s window of opportunity is closing, with prices poised for an ‘explosive move’ in 2024

Silver prices could be headed for an “explosive” rise in 2024 if global supplies continue to fall short of demand, and the Federal Reserve makes good on its plans to pivot to interest rate cuts in the coming months, according to metal-markets analysts.

While silver this year has underperformed gold, which saw prices touch record highs this year, the opportunity to snap up silver at bargain prices may be brief.

“The window for buying silver in the low- to mid-$20s is ending,” said Peter Spina, president of silver news and information provider SilverSeek.com.

It is likely that silver prices next year will be pushing up toward the major $30-an-ounce technical resistance, he told MarketWatch, adding that he “fully” believes that the price barrier will fall. 

On Thursday, the most-active March contract for silver futures
SIH24,
-0.89%

SI00,
-0.89%
settled at $24.39 an ounce on Comex, with prices up 6.4% for the session to erase what had been a loss for the year. It traded 1.4% higher year to date, according to Dow Jones Market Data.

Gold futures
GCG24,
-0.54%

GC00,
-0.54%,
on the other hand, settled at $2.044.90 Thursday, up 2.4% for the session, up 12% for the year so far, and trading close to its record finish of $2,089.70 from Dec. 1.

Silver’s underperformance

Generally, silver moves with gold much more than with other commodities such as copper or oil, and silver’s moves tend to be bigger than gold’s as a percentage, said Keith Weiner, chief executive officer of Monetary Metals.

That’s what happened with silver’s recent move lower, he said. Silver, on Wednesday, tallied an eighth consecutive session loss, marking the longest streak of losses in just over a year and a half.

Both gold and silver had experienced similar trends in terms of “lack of investment demand” due to rising interest rates, said Chris Mancini, research analyst at Gabelli Funds. This has primarily manifested in outflows from both gold- and silver-backed exchange-traded funds, he said.

The iShares Silver Trust
SLV,
which holds 441.47 million ounces of silver, has seen a year-to-date net asset value return of negative 0.3% as of Thursday.

Gold, however, has benefited from a surge in demand this year from central banks, which are buying gold to “diversify out of the U.S. dollar,” said Mancini.

Read: Global central-bank gold purchases reach a record high for the first 9 months of the year

Also see: Gold just hit a record high. Is it too late for investors to add it to portfolios?

Solid economic performance this year around the world, and specifically in the U.S., led to higher short-term rates from the Fed and other central banks, and the “subsequent decline in investor demand for gold and silver,” Mancini said.

Global physical investment demand for silver is forecast at 263 million ounces this year, down 21% from 333 million ounces in 2022, the Silver Institute reported in mid-November, citing data from Metals Focus.

Change of course

Silver prices rallied by late Wednesday afternoon, after the Federal Reserve penciled in three interest-rate cuts in 2024, instead of the two that were projected in September. 

That marked quite a change, as prices for silver had been trading lower for the year before that rally.

Prospects for an end to the Fed’s rate-hiking cycle weakened the U.S. dollar and Treasury yields, providing support for dollar-denominated gold prices — and silver along with them.

Read: Gold futures leap closer to record highs in one fell swoop

The Fed decision “put a reversal on industrial demand fears,” so the temporary pressure brought on by those fears has been removed, said Spina.

Fed Chairman Jerome Powell on Wednesday had said officials from the central bank were starting to discuss when to cut interest rates.

New York Federal Reserve President John Williams appeared to walk back on those comments, telling CNBC Friday that Fed officials weren’t really talking about cutting rates right now.

At some point, the Fed is going to have to reverse course on interest rates, said Monetary Metals’ Weiner.

“When they do, it will be a catalyst for higher gold and silver prices, “perhaps much higher,” he said. “We are in a secular bull market now — this is not the bear market of 2012-2018.”

Bullish fundamentals

Global supply of silver, meanwhile, is expected to fall short of demand this year, for a third year in a row.

The “fundamentals for the silver market are extremely bullish,” Spina said, particularly with a structural deficit continuing for silver.

The report from the Silver Institute showed that global industrial demand for silver is expected to grow by 8% to a record 632 million ounces this year, buoyed by investment in photovoltaics — used in solar technology — power grid and 5G networks, growth in consumer electronics, and rising vehicle output.

The report showed 2023 global silver supply estimated at about 1 billion ounces, while total demand is seen at a larger 1.143 billion ounces. Metals Focus said it believes the deficit will “persist in the silver market for the foreseeable future.”

“The only last big driver missing for silver prices to explode is investor interest,” said Spina.

Keep in mind that silver is a “precious green metal,” he said. It benefits from strong growth in mandated green energy demand, which will continue to “push industrial demand to fresh records.”

Meanwhile, silver inventory stocks are being “drained,” as a structural deficit for physical silver competes for remaining inventories, said Spina.

“If the gold price is moving to record price highs in the coming weeks, silver is in the perfect set-up to test $30, with a likely breakout to $50…coming in 2024.”

— Peter Spina, SilverSeek.com

He expects silver prices to “re-challenge” $30 an ounce within the coming months, “if not sooner.”

Watch gold prices for the initial direction, he said. “If the gold price is moving to record price highs in the coming weeks, silver is in the perfect set-up to test $30, with a likely breakout to $50 [and ounce] coming in 2024.”


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