Silver Price Forecast – June 2024

Key Takeaways

• Silver has surged to above $32/toz – a level not seen since late 2012.
• Demand drivers set to be given a further boost by China’s refocused industrial policy. 
• The silver market is expected to remain in significant deficit for the third year running in 2024.

Silver Breaches $32/toz to an 11-Year High

Silver outshone gold in April and did so again in May, surging to a more than 11-year-high at $32/toz. At time of writing, silver is on course to post its best monthly return since July 2020, supported by burgeoning industrial demand and relatively limited supply.

Global Growth and Silver Demand Forecast Remains Strong

The cyclical industrial demand drivers for silver remain very much intact, with the physical silver market still set to be in deficit for the fourth year running this year, even assuming lacklustre investment demand. Barring the US, incoming economic growth data is still exceeding raised expectations, albeit by a smaller margin than a month ago. For the US itself, it is generally felt that the most recent run of soft data is largely an aberration which partly justifies the Fed’s hesitancy to cut rates. 

Moreover, the OECD has recently raised its global growth forecasts for both 2024 and 2025, thanks in no small part to a better-than-expected performance from the US economy. Meanwhile, US GDP nowcasting, such as that published by the Atlanta Fed, suggests that the real US growth is currently running at a healthy 3.5%. The IMF also weighed in in recent days to increase its growth forecast for China. Overall, the global growth forecast remains highly supportive of silver.

China’s Industrial Pivot Now in Focus

While solid global economic growth is certainly welcome news for silver investors, it is nevertheless difficult to attribute the recent price surge to this relatively incremental progress, even if that impact is magnified by the deficit in silver’s supply/demand balance. It has also been suggested that part of the move is due to some normalisation of the gold/silver ratio – in effect, silver is ‘catching up’ to gold. However, this too is far from convincing given that at 73, this ratio is now at the lower end of the 62 to 123 range seen over the last 10 years.

This is also unconfirmed by investor activity in venues such as COMEX, which still suggests relatively weak investment demand for silver. 

A more fundamental catalyst for recent silver repricing may be due to the ongoing pivot in Chinese economic policy that is now crystalizing ahead of the Chinese Communist Party’s central committee’s Third Plenum (meeting) in July. Public statements by senior Chinese leadership, including President Xi, suggest that this gathering will formalize a refocus of Chinese industrial policy which will put even greater emphasis on areas where China is already in a leading position, such as clean energy, electric vehicles, and battery technology, but to extend this to areas such as semiconductors, computing, artificial intelligence, and robotics.

Most, if not all, of these areas imply an even greater secular consumption of silver going forward. 

Technical Analysis

Initial resistance is indicated around the most recent high at $32/toz and over the longer term at $34.6/toz. Support is indicated at the current 20-day Simple moving average of $30.0/toz and the break from the previous high at $29.8/toz. Additional support is offered at the $26.3/toz level. 

Key Drivers in June

Key data points that will impact silver’s technical position going forward include the China Caixin PMI and US Manufacturing PMI on 3 June, US Non-Farm Payrolls on 7 June, the Fed rate decision, updates to economic forecasts and ‘dot plot’ – together with US inflation data, all on 12 June and China Industrial Production on 17 June.