Silver Price Forecast – October 2024

Key Takeaways

• Silver has benefitted from markets discounting global reflation
• Investor demand for silver is currently giving mixed signals
• Silver is currently negotiating key resistance levels 

Silver Surges on Reflation Hopes

As suggested in last month’s Silver Forecast, we are now starting to see a wave of monetary easing from global central banks and silver has responded by anticipating this will support higher growth and industrial activity. The expected 0.25% cut in the ECB’s policy rate on 12 September did indeed prove to be the initial catalyst, followed by the US Federal Reserve on 18 September (as detailed in this month’s Gold Forecast), the South African Reserve Bank on 19 September and the Central Bank of the Philippines on 20 September. More will follow as ongoing rate cuts from the Federal Reserve strengthen local currencies and give other central banks more room to maneuver. The response of the People’s Bank of China will be important in maintaining positive momentum – the Chinese Yuan is now at its highest level against the US Dollar since May 2023. 

While this consolidating support of the real global economy is welcome for silver investors, it is important to note that it is also necessary. Incoming industrial, growth and manufacturing data remains weak and on balance disappointing. The Bank of England’s most recent outlook suggested that the risk to Chinese growth remains to the downside. Will lower rates win the race to reflate? It remains to be seen. 

Investor Demand 

Commitments of Traders (CoT) reports from the CFTC suggests that speculative silver net long futures positions surged in the latter half of September, with the most recent report published on 20 September showing net speculative longs returning to an eight-week high (4). As with gold, this uptick has been largely attributable to an increase in ‘managed money’ which has now reached a four-month high. Overall, silver futures net longs have remained quite consistently strong for the past six months, despite significant silver price volatility.As has frequently been the case in recent months, silver ETF/ETC flows have reflected little of the strength evidenced in futures, or indeed similar gold products. Recent price appreciation appears to have prompted profit-taking, with apparent price sensitivity above $29/toz (6).

It can certainly be argued that silver ETFs/ETCs are primarily silver trading vehicles, rather than indicative of longer-term investment. Nevertheless, it is likely to gauge short-term momentum.

Technical Analysis

Silver began September on a declining trend and weak momentum. However, a move below $28/toz revealed bargain-hunters and ultimately the confluence of weak descending oblique support and the 61.8 % Fibonacci Retracement of the 8-23 August uptrend around $27.8/toz proved supportive. Like gold, the breakout materialized on 12 September, piercing both the 20-day and 50-day Simple Moving Averages and completing the potential Golden Cross seen in prior trading. Minor descending oblique resistance at $29.9/toz was easily overcome in subsequent trading on13 September and recent trading suggests that minor ascending oblique resistance now at $30.84/toz has also been negotiated. A sustained move above major descending oblique resistance now at $30.84/toz is required to exceed the 11 July high at $31.75/toz, while proximate support is present by minor descending oblique at $29.76/toz and the rising 20-day Simple Moving Average at $29.51/toz.  

Key Drivers Ahead

Upcoming events for silver investors include:

• August US Durable Goods Orders and ECB Economic Bulletin, both on 26 September
• September China Caixin and NBS Manufacturing PMI
• September ISM Manufacturing PMI 1 October
• Q3 Japan Large Manufacturers Index 2 October
• September US Labour Market Data 4 October
• September China New Yuan Loans October 13
• October Eurozone ZEW Economic Sentiment Index and August Eurozone Industrial Production 15 October
• September China Industrial Production and Retail Sales and Q3 China GDP Growth Rate 18 October
• October Eurozone Manufacturing Flash PMI 24 October
• October Germany IFO Business Climate 25 October

Citations

4. https://www.cftc.gov/dea/options/other_lof.htm