Silver Price Forecast For 2024: Rate Cuts May Push Silver Towards $30

Key Insights

• Silver was range-bound in 2023 as rising yields and fluctuations in gold/silver ratio hurt market sentiment. 
• The beginning of the rate cut cycle in 2024 may trigger a rally in precious metals and push silver to new highs. 
• A move above the $26.00 level may push silver towards the next significant resistance level at $30.00.

2023 Market Review

Silver spent the whole year 2023 in the $20 – $26 range. Silver was moving inside a triangle and did not have a real trend as Treasury yields were rising until October, which was bearish for precious metals.

It should be noted that silver made several attempts to settle above the $26.00 level but faced strong resistance. These unsuccessful attempts were followed by sell-offs, so the resistance at $26.00 is the key level for silver.

Gold/silver ratio has also spent the year in a range. Wild swings in gold/silver ratio provided trading opportunities, but there was no strong trend. On the upside, the key resistance for gold/silver ratio is at 88.00. A move above this level will likely push gold/silver ratio towards 92.00, which would be bearish for silver. On the support side, gold/silver ratio has strong support near 78.50. If gold/silver ratio moves closer to this level, it will have a good chance to develop upside momentum.

Economic Outlook

At the start of 2023, many investors feared that recession was around the corner. However, these fears have not materialized, and it looks that most central banks will be able to orchestrate a soft landing. Europe is the only real problem due to the weakness of its manufacturing sector. Europe lost access to cheap energy from Russia and is forced to use more expensive sources, so its energy costs have increased for the foreseable future.

IMF expects that global growth would slow down from 3.0% in 2023 to 2.9% in 2024. Advanced economies are projected to slow down to the growth of 1.4% in the next year. FedWatch Tool indicates that Fed will likely start cutting rates in March 2024. Lower interest rates are bullish for silver that pays no interest, and the start of the rate cut cycle may provide additional support to silver prices.

Other central banks may also start cutting rates in 2024. ECB many be among the first ones to cut rates as EU inflation is slowing down at a rapid pace. Put simply, money is expected to get cheaper in the developed world, which may serve as a trigger for a precious metals rally.

Geopolitical Factors

In geopolitics, the year 2024 will be driven by current conflicts and the presidential election in the U.S. Traditionally, precious metals serve as safe-haven assets at times of geopolitical uncertainty. However, it should be noted that markets got somewhat accustomed to conflicts and do not always show a strong reaction to the news.

As conflicts drag on, sanctions have become a part of international life. As a result, non-Western countries have started to look for potential diversification of their reserves so that they could not be blocked in case their relations with the West sour for some reason. Silver is not included in central bank reserves, but rising demand for gold also provides support to silver prices.

Technological and Industrial Trends

According to Silver Institute, silver mine production has been mostly falling since 2016, when it reached a peak of 899.8 million ounces. For 2023, silver production is estimated at 842.1 million ounces.

The key driver for the decline in silver production was the inefficiency of silver miners. Many of these companies took debt to finance large projects that were not successful. As a result, the stocks of public silver miners have been a long-term disappointment for investors. In this light, there’s no queue to finance silver mines, which leads to problems with production growth.

The growth in recycling helped balance the market at a time when mine production was falling. Recycling brought 145.6 million ounces in 2016, increasing to an estimated 181.1 million in 2023.

Meanwhile, demand has been growing since 2016. Silver demand increased from 979.7 million ounces to an estimated 1,167 million ounces in 2023. Industrial demand has been steadily growing over this period, while physical investment and jewelry demand were rather volatile. Not surprisingly, photography demand was in constant decline as people switched to digital photos.

Overall, 2023 demand of 1,167 million ounces is expected to exceed demand of 1,024.9 million ounces, highlighting the strong fundamentals of silver market. As noted above, the world economy is expected to keep growing despite recession fears, so demand for silver will likely increase in 2024 and beyond.

Market Risks and Volatility

Gold/silver ratio is the key unknown for silver markets in 2024. Traders should note that fluctuations of gold/silver ratio have a significant impact on silver’s performance. For example, gold/silver ratio touched a low at 31.70 back in 2011, when the price of silver was at historic highs. During the Covid crisis, gold/silver ratio increased to 126.43 at its peak. At that time, silver traded near the $12.00 level.

It should be noted that the general trend in gold/silver ratio since 2011 was bullish, which is not good news for silver bulls. However, taking a look at the 100-year chart of gold/silver ratio, it is located at the high end of the historical range, which signals that silver has plenty of room for upside in the long term.

In general, silver is not too volatile for most of the time. However, silver is able to develop strong momentum when it has strong catalysts. At such times, silver traders should be prepared for fast moves.

TA Forecast for 2024

From the techical point of view, silver spent the whole year inside a triangle. Each pullback was bought at higher levels, which is a bullish sign.

The recent rally was stopped at the high end of the triangle, so silver needs to climb above the $26.00 level to have a chance to develop sustainable upside momentum.

RSI is in the moderate territory, so there is plenty of room to gain momentum in case the right catalysts emerge. Traders should note that silver’s RSI has easily climbed above the 80 level back in 2020, so silver can develop strong momentum if a strong trend emerges.

As Fed is about to start cutting rates, precious metals will likely enjoy solid demand in 2024. A move above the $26.00 level may push silver towards the $30.00 level.

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