In the realm of valuable metals, gold has long been the star player, but as we step into 2024, silver is emerging as a potential game-changer despite its rollercoaster ride in 2023.
Unpacking 2023's Rollercoaster Ride
As of December 2023, silver prices reached US$24.38 per ounce, marking a 5% increase from the previous year. Canadian investors, in particular, saw a conversion to $32.45 per ounce spot. This positive trend signals a recovery from earlier fluctuations, and having witnessed a climb to as much as $25.90 USD, or $35.20 CDN, I am more than pleased with the promise of this metal moving into 2024.
The Silver Story: Volatility
Picture this dynamic scenario: a surge in demand for silver creates a scenario where the available supply falls short by a substantial 20%. One might expect prices to skyrocket in such a situation, but surprisingly, they have not reached the anticipated heights yet. This unexpected outcome can be attributed, in part, to the prevalence of paper silver contracts in the markets, functioning essentially as promises of silver without the physical metal to substantiate them and having a detrimental short-term impact on pricing.
Now, delving deeper into the intricacies of silver's volatility, it becomes evident that the market's unpredictability is not solely rooted in demand-supply dynamics. According to Nicky Shiels, head of metals strategy at MKS PAMP, a tangible shortage of silver is underscored by a noticeable drawdown in physical stocks held in New York and London's physical hubs. This scarcity adds a layer of complexity to the market dynamics, influencing price fluctuations in unpredictable ways.
Moreover, global economic tensions cast a significant shadow on silver's stability. The United States, in particular, played a cautious game with monetary policies, introducing an element of uncertainty that reverberated across the precious metals landscape. Simultaneously, the geopolitical tensions between Russia and Ukraine and Israel and Palestine injected an additional dose of instability, with these larger-than-life issues acting as catalysts for fluctuations in the silver market.
The ongoing speculations regarding US interest rates and the U.S. dollar are added to the influencing factors. In its attempt to foresee these critical economic indicators, the market experienced ups and downs, creating a ripple effect on silver prices. This element of speculation introduces an additional layer of complexity as market participants grapple with the uncertainty surrounding the future trajectory of interest rates and the performance of the U.S. dollar.
In essence, the volatility in the silver market is a multifaceted phenomenon shaped by a combination of supply shortages, geopolitical tensions, and the intricacies of global economic dynamics. Understanding these factors is crucial for investors seeking to navigate the unpredictable terrain of the silver market in 2024 and beyond.
Knowing these factors play an “artificial” role in sometimes suppressing pricing in the silver market is the key to establishing a position of profitability. This is a market where “buy the dips” is truly an understatement, which, if applied correctly, could make an investor extremely wealthy as these situations unfold in the next 36 months.
Decoding Silver's Role
Silver isn't just a shiny metal; it's a versatile superhero in the world of metals. In 20 years of being in this business, I have witnessed silver as a sustainable and solid investment option, gaining over 300% in value in that time, not to mention its huge climb to $49 plus in 2011.
I have always emphasized silver's secure, real-world alternative for diversifying wealth strategies. Silver's limited supply, modest trading volumes, and multiple vital uses across industries make it an appealing option for diversifying.
Based only on the world’s insistence on green energy, silver is a sound investment given the number of brutal timelines G20 nations have placed on converting to EV vehicles, all of which will have gobs of silver in them.
The Silver Agenda: Investment Benefits
- Solar Industry Growth: Silver demand in the solar industry is set to soar, reaching over 20% of the world's annual supply by 2027 and a staggering 85-98% by 2050.
- Wide Industrial Use: Silver plays a crucial role in medical and technology fields, including electronics, electric vehicles (EVs), solar panels, batteries, and medical equipment.
- EV Influence: The transition from fossil fuels to EVs drives silver demand, with global EV sales nearly doubling from 2021 to 2022.
- Supply vs. Demand Dynamics: The silver supply in 2022 was 1 billion ounces, while demand reached 1.2 billion ounces, creating an imbalance favouring demand, which has been witnessed over the majority of the last 15 years. There is not enough mining happening at present, nor is there enough geography to accommodate the demand coming online for this metal in the next 20 years. Mining firms have been discouraged from exploration for silver because its relative per-ounce value is barely above the cost of production, so as a result, 80% of the silver coming out of the ground comes as a by-product of other types of mining, such as gold, copper, and zinc.
Silver Lining in 2024?
Experts remain optimistic about 2024, predicting a silver high of $30 per ounce. Citigroup analysts view the recent dip in silver prices as a strong buying opportunity, forecasting a $30/oz target within the next 6-12 months. Delta Harbour predicts a price shot towards $31.50 in 2024 and $50+ within the next 36 months, making this one of the most lucrative metals investments from a percentage growth factor.
Are you considering jumping into the precious metals scene in 2024, especially with silver shining so bright? Explore our guide for four ways to own physical silver, but remember, strategizing wisely requires a balanced approach of excitement and common sense. There is so much money on the table to be made, and we want our clients to be part of the windfall.
With all the respect and excitement, we can muster as a firm we wish all of you the most joyous holiday season. Merry Christmas, Happy Hanukkah, Happy Kwanza and anything you may or may not celebrate as the spirit of giving filters through our countries at a time when it is needed more than ever. Give to those less fortunate within your communities and take care of one another. Do not allow yourself to be divided. We are all one no matter who or where we come from and that is something to celebrate.
Yours to the penny,
Darren V. Long