Silver Price Forecast – September 2024

Key Takeaways

• The imminent US rate cut heralds a wave of growth-supportive global stimulus.
• Investor silver demand has weakened but remains elevated and stable relative to historic norms
• Silver has now overcome major horizontal resistance at $29.77/toz

US Rate Cut Heralds Global Stimulus

While movements in US rates markets are typically considered to be of lesser importance to silver than gold, the current dynamic is likely to be an exception. The imminent and long-awaited down-leg of the US rate cycle should clear the way for easier global monetary policy, particularly in respect of emerging markets where capital flows and currency management are often constraining factors. Accordingly, the US rate cut should be considered both a precursor and catalyst of measures supportive of global growth and industrial silver consumption. While this will directly take the form lower rates, the resultant reduced cost of sovereign debt servicing might also increase the scope for fiscal stimulus. Although such measures typically act with significant lags, markets also discount forward, so should be considered supportive of silver prices. An early indicator of a cascade of monetary easing might be the ECB rate decision on 12 September, where markets are now assigning a 90% probability of a rate cut. Such stimulus is certainly needed following a string of disappointing economic data over recent months. 

Investor Demand Softer but Relatively Stable

Commitments of Traders (CoT) reports from the CFTC suggests that speculative silver net long futures positions were trimmed during August, with the most recent report published on 23 August seeing net speculative longs down almost 20% from a month earlier. (4) However, this July base was itself a 55-month high and the latest reading remains broadly consistent with the elevated speculative long demand evidenced since March. Indeed, from an historical perspective, demand has also been relatively consistent, perhaps providing further evidence of silver’s maturing profile as an investment product, as we suggested some months ago. Physical silver ETF/ETC aggregate flows have also been positive, though somewhat volatile in August (6) with the bulk of inflows registered early in the month at lower prices, again suggesting some price sensitivity.

Technical Analysis

Silver has very much had a month of two halves with an incipient recovery towards the end of July, quickly crushed by a growth scare outlined in our Gold Price Forecast. However, silver bottomed out on 5 August with major horizontal support at $26.20/toz intact. Subsequently, silver overcame minor oblique resistance and the 20-day Simple Moving Average at $27.91/toz and $28.10/toz respectively on 15 August and the 50-day Simple Moving Average at $29.20/toz on 19 August. At time of writing, silver has now penetrated major horizontal resistance at $29.77/toz and is now trading comfortably above $30/toz (6).

If this breakout holds, then the next hurdle is major descending oblique resistance currently at $31.22/toz. Beyond that lies major horizontal resistance at $32.06/toz. To the downside lie the 50-day and 20-day Simple Moving Averages currently at $29.22/toz and $28.42/toz respectively. Further down, we see descending minor oblique support currently at $27.78/toz and major horizontal support at $26.20/toz and $22.03/toz. (1)

Key Drivers Ahead

Upcoming events for silver investors include August China NBS Manufacturing PMI 31 August, August China Caixin Manufacturing PMI 2 September, August US ISM Manufacturing PMI 3 September, ECB interest rate decision and press conference 12 September, August China Industrial Production 14 September, August China Retail Sales 14 September, September Eurozone ZEW economic sentiment Index 17 September – with particular attention to German subcomponent, US Fed rate decision and press conference and FOMC economic projections 18 September, September Flash Germany HCOB manufacturing PMI 23 September, October German GfK Consumer Confidence 26 September, August US Durable Goods Orders 26 September.

Citations

1. 1 https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2024
2. 2 https://www.lbma.org.uk/prices-and-data/precious-metal-prices#/table 
3. 3 https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
4. 4 https://www.cftc.gov/dea/options/other_lof.htm
5. 5 https://www.gold.org/goldhub/data/gold-etfs-holdings-and-flows
6. 6 https://www.trackinsight.com/en/compare-etfs/PHAG,SSLV,OXA6,SLV,SIVR