A recent physical silver market research report suggests silver to hit $30 in 2024. This seems a very low silver price target considering a silver supply deficit, bullish secular silver chart, silver relative to gold undervaluation.
Should the price of silver not be closer to $50 given the supply deficit?
Silver supply/demand research
The Silver Institute released its latest physical silver market report, about a week ago.
In summary, while silver demand is forecasted to remain robust, supply is expected to increase slightly, leading to a physical silver market shortage.
- Demand Forecast: Global silver demand is projected to reach 1.2 billion ounces in 2024, potentially the second-highest level ever recorded. This growth is driven by stronger industrial offtake and is expected to hit a new annual high, propelled by increased industrial end-uses and a recovery in jewelry and silverware demand.
- Industrial Fabrication: Silver industrial fabrication is forecasted to rise by 4 percent in 2024, reaching a record 690 million ounces. Key drivers include the photovoltaics and automotive industries, with technological advancements contributing to higher silver offtake.
- Jewelry and Silverware Demand: Jewelry demand is expected to increase by 6 percent, led by growth in India. Recovery in jewelry consumption and normalization of demand levels are anticipated, alongside a rise in silverware fabrication by 9 percent.
- Silver Investment Projections: Silver physical investment is projected to decrease by 6 percent, with economic growth and gains in the U.S. stock market driving weaker investor interest. However, a modest recovery is expected in India and Europe.
- Supply Forecast: Total global silver supply is forecasted to grow by 3 percent in 2024, reaching an eight-year high of 1.02 billion ounces, driven primarily by a recovery in mine output. Silver recycling is expected to decline, with lower jewelry and silverware scrap supply accounting for most of the losses.
Market Deficit and Investment Outlook: The silver market is expected to remain in a deficit for the fourth consecutive year. Market expectations of U.S. interest rate cuts and a stronger U.S. dollar could temporarily affect silver investment, but silver’s positive fundamentals should encourage renewed interest once the Fed begins to cut rates.
Silver forecast
What’s certainly interesting is that the report by The Silver Institute did not mention the word ‘silver shortage’ nor did it mention a forecasted silver price of $30.
We brought up all those points in our analysis: Silver Market Anomaly – Silver Demand Outpaces Supply With A Flat Silver Price.
In an interview with CNBC, however, executive director of The Silver Institute brought up the $30 silver target:
“We think silver will have a terrific year, especially in terms of demand,” Michael DiRienzo, executive director of the Silver Institute told CNBC. He expects silver prices to reach $30 per ounce, which would be a 10-year high, according to data from LSEG.
It is unclear why this $30 silver price target for 2024 did not appear in the report itself but was only given in an interview.
More importantly, why ‘only’ $30? Consider the following:
- Most commodities, if not all of them, exceeded their 2008-2012 peak.
- Silver is the only commodity that did not even come close to hitting its 2011 peak.
- At the time of writing, the price of silver is more than 50% below its 2011 highs.
- All this is occurring while there is a silver supply shortage.
Any rational analysis of the silver market, based on the data points at hand, comes with one and only one conclusion: HUGE UNDERVALUATION.
Silver price chart
In the meantime, the silver price chart continues to test its 13-year falling trendline.
As seen on below chart, the silver price is essentially flat for 3.5 years now.
More importantly, silver is working on an uptrend when looking at it from a secular perspective (the last 20 years).
Whenever the 24-26 area is broken to the upside, the price of silver will move to our $34.70 target. Sooner or later, silver is expected to hit $50.
According to the chart, the silver price target of $30 given by The Silver Institute does not make any sense. There is no reason why the price of silver would stop rising at $30 once past $26.
The silver chart that really matters
Moreover, the one chart that truly matters, is the gold to silver price ratio.
Below is the gold to silver ratio over 50 years.
We have mentioned in the past that the secular gold to silver price ratio can act as a ‘stretch indicator.’ This ratio tends to suggest when the price of silver is undervalued vs. overvalued compared to gold’s price.
Take a look at the horizontal green line. Any time, in history, when the gold/silver ratio achieved 92:1, it pushed the price of silver much higher. In some cases it took a few years, in other cases a few months, before silver became explosive.
Silver price momentum?
The data points don’t lie: silver is a screaming buy, widely undervalued. There is a silver supply shortage, historical undervaluation of silver compared to gold, a secular rising channel on the silver price chart.
Against the backdrop of phenomenally bullish data points, we observe lack of momentum in the silver market. Note, however, that this is partially true:
- On the one hand, the price of silver is flat. Investors seem very focused on trading AI & Robotics stocks. Highflyers in AI semis, AI ops, AI tech, are catching the attention. Most, if not all commodities, are simply not part of this current momentum cycle.
- On the other hand, the largest traders net short on the silver COMEX market hold historically low short positions. This is the pre-requisite for much higher prices to develop over time.
As noted by Ted Butler, commercials on the silver COMEX market have the ability to prevent the silver price from rising. The lack of momentum, in a way, is also the result of silver COMEX trading dynamics.
Conclusion
We conclude, based on the data at hand, that silver is a screaming buy:
- The gold to silver price ratio over 50 years.
- The physical silver supply deficit.
- The secular silver price chart exhibits a long term rising trend channel. Sooner or later, the secular rising trend will turn the 3.5 year consolidation into a bull run.
The mentioned silver price target of $30 does not make sense to us, we see two bullish targets: $34.70 and $50.00. The former ATH may not be the end point for silver.
With all this in mind, why is silver not trading at a much higher level?
The answer is very simple: momentum is lacking.
At this point in time, markets prefer to focus on AI & Robotics stocks. Note, at as well, that market rotation , currently dominating market dynamics, is epic. There is no widespread bullish momentum, across all markets. Momentum, in this current market cycle, is narrow and focused on only AI & Robotics.
This really means that, once the current cycle ends and a new cycle starts, silver is likely going to be among the assets that will get a bid. It might move up, fast and high, responding to the ‘naysayers’ but also those with conservative price targets which simply do not correspond to the epic undervaluation of the silver price.
