Key Takeaways
- Global economic momentum brightens as IMF upgrades global GDP forecast
- Industrial demand for silver expected to increase by 9% this year, led by photovoltaic growth
- Silver market expected to remain in significant deficit for the fourth year running in 2024
- Deutsche Bank forecast silver prices to rebound to $28.00
Silver Soars to a near Five-Year High
While gold has taken most of the precious metal limelight in recent months, silver enjoyed a stellar month in April, gaining over 9% and reaching a near five-year high above $28/toz intramonth.
Although momentum slowed in the second half of the month, this still constituted the biggest monthly gain since April 2023.
Global Growth Outlook is Improving
While silver faces headwinds due to the successive postponement of interest rate cuts by the US Federal Reserve, it is typically less sensitive to the interest rate environment than gold, due to silver’s applications as an industrial metal. Accordingly, higher global growth is generally considered to be a positive for silver demand and price performance if interest rates remain moderate.
Data this year has been very supportive of such an economic ‘soft landing’, despite rates being higher than expected. Indeed, economic data in the Eurozone started to outperform expectations in February, while the only remaining underperforming region – Latin America – has outperformed since March.
This trend has prompted the IMF to raise its full-year global growth forecast in April, with a likely positive impact on silver demand and pricing.
Supply & Demand Balance Remains Highly Favourable
According to The Silver Institute, the physical silver market was in substantial supply deficit for the third year running in 2023, despite lackluster demand for investment, jewelry, and silverware.
Moreover, it is forecast to remain so in 2024 against stagnant mined supply and healthy demand growth in industrial applications. Photovoltaics demand is expected to be particularly dynamic, forecasted to see growth of 20% this year.
Meanwhile, combined LBMA and COMEX stocks of physical silver have barely risen from the multi-year low recorded in February, indicative of a tight market. Indeed, current forecasts imply that even if net investment demand was zero – it is typically the equivalent of at least 20% of total supply – the silver market would still be in deficit.
Has Silver Investment Demand Turned a Corner?
While silver has struggled to regain traction among some investors following the ‘meme silver squeezes’ of 2021, there are tentative signs that a more durable recovery might be underway. Recent data suggests that net monthly investment into physical silver investment products in April was at their highest level since January 2023, with net buying even at relatively high price levels.
Technical Analysis
Silver is currently consolidating around the Fibonacci 78.6% retracement of the 2021-2022 decline at $27.40/toz with further congestion around the recent high at $28.40/toz. The former appears to be offering resistance, absent a positive catalyst, with further support highlighted at the coincidence of the 50-day simple moving average and the 61.8% Fibonacci retracement at $23.50/toz.
Key Drivers in May
Key data during May which will be vital in determining silver price action around its current technical position. This includes the FOMC meeting and press conference on 1 May and inflation data on 15 May – as per gold.
In addition, US April Non-Farm Payrolls, other labour market data and ISM Service PMI, all on 3 May, might yield further clues to the health of the real US economy. Any significant revision to the second print of US Q1 GDP on 30 May would be a surprise, particularly in the event of an upwards revision from the weak flash estimate.
Analysts at Deutsche Bank forecast silver prices to rebound to $28.00 by the fourth quarter.
Mike is a market strategist and media commentator with 30 years of experience analysing precious metals markets. He developed his expertise working as an investment banker in emerging markets such as South Africa, Russia and Chile. His focus on precious metals was extended through subsequent work within private wealth management and his own research consultancy. During this time, he covered the gold, silver, platinum and palladium markets.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.
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