The silver price saw significant gains through the first half of 2024, hitting levels not seen in over a decade.
After starting the year trading in the US$22 per ounce range, the price of silver saw little change until March, when the white metal began to gain momentum following a US Federal Reserve meeting.
While the Fed left interest rates steady at that time, dovish language provided critical support for silver as investors pushed the price above US$25. Silver continued its upward trend through April and into May, when it climbed above US$32 for the first time since November 2012 and set a year-to-date high of US$32.07 on May 27.
A number of factors have been driving the price of silver upward in 2024.
Even though rate cuts from the Fed have yet to materialize, softening interest rates and slowing economic growth have led to greater speculation that at least one reduction will come in the second half of the year.
Silver was initially followed gold higher in the March to May period. However, the gains in silver have outpaced gold nearly two to one in 2024. To date, silver has risen nearly 30 percent, while gold has only gained 15 percent.
In an email to the Investing News Network (INN), Silver Institute President and CEO Michael DiRienzo said that the close link between silver and gold has led some investors to use it as a leverage play to gain exposure to gold.
“In addition, silver’s low unit cost and lower entry level have also made it more attractive to retail investors with a limited investment budget,” DiRienzo explained.
“That market dynamic has changed, and it’s moving more strongly with gold again as a monetary metal should … I think it’s fantastic news for silver — and long-suffering silver bulls out there,” he said.
Improved sentiment has coincided with heightened industrial demand, particularly in the Indian market. Overall, silver demand is projected to grow by 2 percent in 2024, with the Silver Institute forecasting that industrial demand will increase by 9 percent — photovoltaics alone are expected to see a 20 percent gain.
DiRienzo said that while the primary silver demand in India continues to be from the production of jewelry, the precious metal has also benefited from “firmer electrical & electronics demand, thanks to the continued strength in India’s real estate market and rising investment in local infrastructure construction.”
Additionally, he noted that Indian manufacturing of solar cells received additional support as companies reduced their reliance on Chinese manufacturing and diversified their supply lines for solar panels.
Last year, a flagging Chinese economy not only put base metals under pressure, but dragged on silver as well. According to DiRienzo, fiscal stimulus measures implemented by the Chinese government have provided crucial support.
“Expectations on further fiscal stimulus for the Chinese economy led to a sharp rebound in base metal prices during 2024-to-date, which has benefited silver,” he said.
While both retail and industrial demand is growing, it’s not just demand driving prices.
According to the Silver Institute, Mexico and Argentina had steep output declines in 2023, with production falling by 10.9 million ounces and 4.9 million ounces, respectively. The Silver Institute predicts that global production will fall further in 2024 to 823.5 million ounces due to the closure of several mines in Peru.
While it isn’t expected to eclipse these declines, new silver supply is coming online from various sources this year.
Despite these new and expanded mining operations bringing significant new silver supply to the market, it’s still a far cry from meeting the more than 200 million ounce deficit.
While gold tends to garner more of the media attention, silver has already been a stronger performer in 2024. Since its move began this year, a variety of experts have suggested the white metal has further to go.
“We still have the gold-to-silver ratio somewhere around 75; it’s averaged about 55 or 60 over the last few decades, so just on that basis if gold were to stay put, silver has a lot higher to go,” Krauth said.
“Typically when you get the ratio running down, both metals do well, but silver continues to do even better … so look for this to be a really tremendous run over the next months and years,” he added.
While this might not be good news for manufacturers that require silver and consumers who buy their products, it’s positive news for existing silver investors and new market participants who are looking for opportunities for a safe-haven investment that doesn’t come with the high entry point of gold.
Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
Affiliate Disclosure: The Investing News Network may earn commission from qualifying purchases or actions made through the links or advertisements on this page.
Leave a Reply