As we bid farewell to 2023, a year marked by its ups and downs for silver, investors eagerly await to uncover the unfolding story of the white metal in 2024. Despite an optimistic outlook fueled by a tight supply/demand narrative, the precious metal faced challenges from high interest rates and a robust US dollar throughout the past year, ultimately resulting in a flat performance.
The early indicators for 2024 suggest that silver is poised to continue grappling with headwinds. A substantial deficit in 2023, combined with the US Federal Reserve’s commitment to maintaining higher interest rates, sets the stage for a potentially challenging year ahead. To delve deeper into the silver forecast for 2024, we turn to insights from experts in the field.
Supply and Demand Dynamics: What to Expect in 2024?
Silver, renowned for its status as a precious metal, has seen increasing demand driven not only by its intrinsic value but also by its crucial roles in photovoltaics, electronics, and various industrial applications. The Silver Institute anticipates industrial demand to reach 632 million ounces in 2023, constituting a substantial portion of the total demand of 1.14 billion ounces.
With the jewelry, silverware, photography, and physical investment sectors accounting for the remainder, the overall demand is expected to surpass the projected supply of just over 1 billion ounces. This imbalance leads to a projected deficit of 141 million ounces for 2023, marking the third consecutive year of deficits.
Despite ongoing projects such as Aya& Silver’s Zgounder mine expansion and Endeavour Silver’s Terronera mine, industry experts like Peter Krauth express skepticism about significant growth in silver production through 2024. Research from Bank of America suggests that mined silver supply may not surpass the peak reached in 2016 for the foreseeable future.
Michael DiRienzo of the Silver Institute highlights that the current silver price doesn’t incentivize greenfield exploration, with much of the focus on brownfield exploration to extend mine life. Changes in mining laws in Mexico, such as reduced concession length and the possibility of cancellation without timely work completion, could further impact silver production.
Protests in Latin America, a region contributing significantly to global silver output, pose additional challenges to supply. Recent unrest in Panama over First Quantum Minerals’ Cobre Panama copper mine serves as a reminder of the potential disruptions faced by mining operations.
Factors Influencing the Silver Market in 2024
Beyond supply and demand dynamics, the silver market is intricately tied to economic and geopolitical factors, mirroring its counterpart, gold. Chief among these factors is the influence of interest rates, a key determinant for precious metals.
Inflation, spurred by the aftermath of COVID-19, has led the Federal Reserve to aim for a return to the 2 percent inflation level. However, recent data shows inflation still exceeding that target. Despite Chair Jerome Powell’s indication of a temporary halt to rate hikes, further increases remain a possibility, contingent on economic developments.
Institutional behavior, shaped by the Federal Reserve’s decisions, is expected to play a pivotal role in determining silver prices in 2024. While market expectations lean towards a dovish interest rate policy, experts like DiRienzo anticipate the Fed maintaining a more hawkish stance, potentially leading to investor liquidations and downward pressure on silver prices.
On a more positive note, Krauth points to favorable conditions for a silver rally in 2024. The market’s perception of the Fed ceasing rate hikes and the expectation of rate cuts later in the year could contribute to silver’s upward trajectory. Comparisons to the gold market and the outperformance of silver stocks add to the bullish sentiment. Krauth envisions silver nearing the US$30 mark in the latter half of 2024.
Silver’s evolving role as both an industrial metal and a counterpart to gold positions it uniquely in the investment landscape. As we navigate through 2024, investors will need to closely monitor supply and demand dynamics, economic trends, and geopolitical forces to make informed decisions regarding their silver holdings. The metal’s intrinsic value and versatility continue to make it a compelling asset, making the silver market one to watch in the coming year.
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