Silver Price Forecast – July 2024

Key Takeaways

• Silver declined by almost 5% in June from May’s 11-Year High
• Recent macroeconomic drivers have been less price-supportive.
• Despite a more challenging market, investor demand for silver seems resilient.

Silver Retreats as Manufacturing Data Disappoints   

Silver suffered a sharp reversal in June, declining almost 5% having reached 11-year highs in May and allowing the gold/silver ratio to rise from 76 to 80. While the mild tailwind from US rates that have supported gold is also of some marginal benefit to silver, real economic indicators, particularly in respect to industrial and manufacturing production are arguably of greater importance. 

While much of 2024 has seen growth exceeding expectations, momentum has fallen significantly in recent weeks. Aggregate global economic data are now starting to disappoint, as indicated by negative ‘surprise’ indices. While some areas of unexpected strength, such as the US labour market, remain, China’s industrial production, US ISM Manufacturing PMI, Eurozone Manufacturing PMI, and Japan’s Manufacturing PMI all disappointed in June. Attention should now be paid to China’s 3rd Plenum which has just been confirmed for 15-18 July. This event has the potential to realign global industrial activity in the years ahead. For further details, please refer to last month’s Silver Price Forecast.

Investment Demand Weathering the Downturn?

Given that recent macroeconomic drivers and price performance of silver have disappointed, it is worth considering the degree to which silver remains supported by the investment community. While gold has a long – and we would suggest growing – place in many portfolios, currently other precious metals are usually considered niche investments. As such they are typically more sensitive to drawdowns in more challenging market conditions. So how does silver currently stack up?

Although not conclusive, available data suggests that recent silver demand by investors has remained resilient. Data on ETF/ETC flows suggests that physical silver vehicles have seen cumulative month-to-date net inflows of over $700m in June. In parallel, the most recent data from the Commodity Futures Trading Commission (CFTC) Commitments of Traders (COTs) Report suggests that although speculative positions have been trimmed from May highs, they remain at elevated net long levels.

Ultimately it seems likely investor demand will be primarily driven by two long-term factors: 1) strong secular demand growth met with limited additional primary supply and 2) institutional investors’ increasing appetite for embracing alternative assets as a means of optimising portfolios. 

Technical Analysis

In recent weeks silver had been trading in a bearish channel bounded by the 29 May and 7 June highs and the 23 May, 7 June and 13 June lows. However, the upper boundary was briefly breached on 20 June suggesting that this bearish channel is now compromised and vulnerable to further breaches. To the extent that the channel remains intact, it is currently bounded in a range of $27.5/toz to $29.9/toz.

Silver is currently testing support around the 7 June and 13 June lows of $$28.6/toz and appears to be consolidating. A breach of this might bring the lower boundary of the residual channel into play at $27.5/toz.

Key Drivers in July

Upcoming events for silver investors include June China Caixin Manufacturing PMI and US Manufacturing PMI on 1 July, FOMC Minutes on 3 July, June US employment data on 5 July, Fed Chair Powell Testimony to Congress on 9 July, June US CPI data on 11 July, Q2 China GDP data, June China Industrial Production and June China Retail Sales on 15 July, China 3rd Plenum 15-18 July, June US Retail Sales on 16 July, July Eurozone ZEW Economic Sentiment Index on 16 July, ECB interest rate decision on 18 July, July Eurozone Flash PMI on 24 July, June US Core PCE Inflation on 26 June, Q2 Euro Zone GDP on 30 July and US Federal Reserve rate decision on 31 July

• https://www.etfcentral.com/fund/SLV 
• https://www.cftc.gov/dea/options/other_lof.htm 
• https://commitmentsoftraders.org/wp-content/uploads/Static/SI_OPT.png