Silver (XAG/USD) price has experienced a good run in 2024, with gains in three out of the first five months of the year. After losing about 10.5 percent of its value between December 2023 and February 2024, the commodity rose steadily in March, gaining 8.8 percent. In addition, silver prices rose by 8.20 percent in April. However, the highlight of its performance was May’s gain of 22 percent, during which the price crossed the $30 per ounce mark on May 17. Following its scintillating run, silver has gained 32.2 percent in 2024, outperforming gold’s 14.7 percent.
The latest gains by silver are attributed to the weakening of the US dollar resulting from soft economic data. Also, tension in the Middle East between Israel and Hamas has returned to the fore, with Israel intensifying its attacks in Rafah. That has added a risk premium to safe-haven assets, including silver.
Nonetheless, high inflation in the US will continue to be a key factor, with the Fed expected to keep interest rates high until September at the earliest. This will put a lid on gains by precious metals like silver and gold. That said, many investors have been diversifying their portfolios with silver and gold as a hedge against inflation, which could help support prices. Also, silver’s use in industrial processes gives it an edge over gold, and rising industrial activities in China, Europe, and the United States are likely to provide a stable growth path. As a result, the outlook for silver prices in 2024 remains bullish.
Silver belongs to a category of metals considered very precious due to its wide range of uses and its preference as a store of value. Human civilizations have used Gold and Silver as primary means to exchange and store value for thousands of years. Furthermore, silver is used in several industrial processes. As a result, the price of silver has always remained tied to economic activity worldwide.
The XAG/USD tracks the price of Silver in terms of the United States dollar. Therefore, the pair generally shows an inverse correlation to the strength or weakness of the greenback.
Silver reached its highest level in nearly 12 years, at $32.52, underlining a good run in May. On May 1, the Federal Reserve maintained interest rates at the 5.25%-5.50% range. Still, there is increasing pressure to lower rates in the year’s second half after a series of weaker-than-expected macroeconomic data. In June 2024, silver prices experienced a significant decline, dropping nearly 5% due to disappointing global manufacturing data. The market sentiment became bullish in July 2024, with analysts suggesting that the metal prices had stabilised.
In the latest signal that the US economy could be facing headwinds, the August nonfarm payroll figures came in at 142k, lower than the forecast 160k. In addition, the unemployment rate rose to 4.2 percent. This has increased the appeal of safe haven metals like silver and gold and could propel their prices higher.
According to the Silver Institute, the demand for silver is expected to reach 1.2 billion ounces, the second-highest on record. This will likely support a price hike, potentially going towards the $30 per ounce territory. Notably, the commodity hasn’t been able to reach that mark since its 2013 meltdown.
While Fed interest rate policy is expected to play a part in determining the commodity’s price, much will also depend on industrial demand. The outlook for the global economy is generally positive. In its latest forecast, the IMF projected a “slow but steady” global economic growth, with real GDP growth revised upwards in April by 0.1% to 3.2%.
Furthermore, China reported a better-than-expected GDP growth of 5.3% in Q1 of 2024, beating the forecast 4.8%. The country expects the economy to grow by about 5% in 2024. The world’s second-largest economy also recently reported a growth in industrial activity for the first time in six months. These statistics are good news for silver prices as they could translate to increased demand and higher prices, thanks to silver’s use as both a luxury and industrial metal.
However, US economic data will play a greater role in defining the price trajectory. As inflation rate remains stubbornly above the target 2 percent, high interest rates will continue to be the single biggest influence on silver prices. The US released its latest monthly and quarterly Personal Consumption Expenditure (PCE) figures, on September 2, 2024, where the headline print rose 0.2 percent monthly and 2.5% annually. A rise in the figures will increase the pressure on silver prices and vice versa.
The following price chart shows the Silver price history since 1930s.
The following XAG/USD chart reveals that Silver prices per ounce have generally been strong since September last year. The price bottomed out at around $20.68 in October 2023, but rose strongly in November, followed by a loss of 10.6% between December 2023 and February 2024. Through the ups and downs during that period, the price of Silver has risen by 36.21%.
The XAG/USD chart above reveals that silver price per ounce has been on the upward trajectory for the most part in 2024. The silver price hit a high of $32.52 in May and then pulled back in June before heading higher in July. However, the rally from early July hit resistance around $31.75, then pulled back again. The price dropped significantly to a low of $26.47 in early August before embarking on a rally higher, leading to its recent high of $31.31. The metal seems ready to challenge its May highs.
I predicted this drop in precious metal prices in my last Silver price forecast. I also regularly update the price targets on my Twitter, where you are welcome to follow me.
Silver is likely to experience increased demand, especially from the electric vehicle (EV) market, as many governments prioritise transition to renewable energy. Also, the US economy could slow down due to higher-for-longer interest rates. If this really happens, then the Silver and Gold price may increase as they are the preferred store of value across the world. A simple pitchfork analysis gives us a silver price forecast for 2025 between $34 and $50.
A lot can happen in the world till 2030. Considering the current state of the global economy and the inflation worldwide, I’d be surprised if Silver doesn’t make a new all-time high within the next seven years. Therefore, XAG/USD may break above its 2011 all-time high of $50. However, close attention must still be given to the changing global macroeconomic scenario.
While the Silver price prediction for 2040 is anybody’s guess, we can still consider a few different scenarios. If the US dollar remains the global reserve currency within the next two decades, Silver can comfortably trade above $50 by 2040. Technical analysis also gives a price range of $78-$138.
You can buy silver on brokers like ATFX, IG, TD Ameritrade, Interactive Brokers, Capital.com, Exness, etc. These brokers allow you to trade the XAG/USD pair by adding minimal margin. However, you must learn risk management before taking leveraged positions on any asset.
Nowadays, there are various ways to gain exposure to the volatility in precious metals. Holding silver physically involves additional costs. Therefore, investing in Silver CFDs or futures contracts is best via an online broker like eToro, Exness, TD Ameritrade, etc.
As the name suggests, the Silver spot price is the price of bullion coins for immediate delivery. The current spot price is $30.83, but it is very volatile as it trades almost 24 hours a day worldwide wherever the markets are open. The biggest trading volume comes from the US, UK, Japan, Hong Kong, etc.
Investing in precious metals like Gold and Silver is always worth considering, as they are a time-tested store of values with plenty of uses across the modern industry. However, the biggest factor is evaluating your investment objectives and time horizon. If you don’t want exponential returns and simply want to hedge against inflation, Gold and Silver could be great options.
This post was last modified on Sep 19, 2024, 21:05 BST 21:05