Investment Opportunities in Silver during 2024: Outlook Analysis and Strategies

Why Position in Silver in 2024

Silver represents an interesting alternative to diversify portfolios beyond conventional instruments. Two fundamental dynamics condition its attractiveness today:

The first relates to its industrial application: approximately 55% of demand comes from sectors that depend on its conductive and catalytic properties. Industries such as solar energy and electric vehicle manufacturing require this metal increasingly. With crude oil prices recovering significantly —light crude oil futures on NYMEX rose 33.9% since June, reaching $90.50 per barrel— investment in renewable energies is strengthening, which in turn boosts silver demand.

The second dimension is its role as a safe-haven asset: it accounts for around 22% of global demand. Although the US economy currently shows strength, moving away from recession risks, and equity yields dominate the market, this situation could reverse. Expectations of interest rate cuts in 2024 could weaken the dollar and reactivate interest in precious metals.

The Global Silver Market: Essential Fundamentals

Characteristics and Properties of the Metal

Silver is a scarce element in the Earth’s crust, classified among precious metals alongside gold and platinum. Its ductile, malleable nature and excellent heat and electricity conductivity make it irreplaceable in multiple modern applications. Since ancient civilizations, it has been used in jewelry, coinage, and as a store of value; today, its uses have expanded significantly into contemporary technologies.

Global Market Size

According to specialized research projections, silver demand will reach 1,196 million ounces by 2026, representing an annual growth of 2.97% during 2022-2026. Simultaneously, supply would be at 1,061 million ounces with an annual rate of 1.24%, anticipating moderate market expansion. This dynamic suggests potential price appreciation and profit opportunities.

Global Demand and Supply Chain

Demand is articulated along three axes: jewelry, industrial applications such as electrical components in computers, phones, vehicles, and appliances, and investment as a store of value.

Regarding supply, Mexico leads global production with 5,600 metric tons (2021), followed by Peru and China with 3,400 and 3,000 tons respectively. Any disruption in mining operations in these countries directly impacts global prices.

Macroeconomic Factors Influencing Prices

Gold Price as a Main Reference

Gold acts as a catalyst: its movements are subsequently mirrored in silver. As the undisputed leader among precious metals, gold’s trajectory predetermines trends in silver.

Interest Rates

There is an inverse correlation: precious metals perform better when low-rate environments prevail. The current high-rate structure has reduced the relative attractiveness of these assets.

US Dollar Strength

An inverse relationship is observed between the dollar’s exchange rate and silver. When the US dollar strengthens, silver tends to weaken, and vice versa. This dynamic will be critical if rate cuts materialize in 2024.

Energy Prices Behavior

Increases in fossil fuel prices generate capital migration toward clean energies, a sector that consumes silver significantly in photovoltaic panels and related technologies.

Comparative Performance in 2023

Until mid-September, spot silver declined 3.80%, while futures fell 3.06%. This negative performance contrasts sharply with alternative assets: NASDAQ 100 advanced 38.96%, the S&P 500 grew 15.91%, and 2-year Treasury yields increased 13.75%. The absence of recession pressure has favored equities and fixed income over precious metals. However, this scenario could be a strategic entry window considering anticipated macroeconomic changes.

Ways to Invest in Silver

Direct Access

Through purchasing physical silver — bars, official coins, medallions, or storage certificates — tangible exposure is obtained. The main benefit lies in preserving intrinsic value over the long term regardless of price fluctuations.

Alternatively, derivatives such as futures and options can be used on regulated exchanges (COMEX, LME, MCX) with standard contracts of 5,000 troy ounces.

Indirect Alternatives

Mining company stocks: Silvercorp Metals Inc. (SVM), valued at $437.86 million and listed on NYSE, exemplifies this approach. It offers liquidity but exposes the investor to operational risk of the company.

ETFs: The iShares Silver Trust (SLV) by Blackrock provides exposure to physical silver with transaction ease similar to stocks. It experienced a 4.13% decline during 2023.

Mutual funds: Instruments like Franklin Gold And Precious Metals Fund Class A allow pooled participation under professional management.

Contracts for Difference (CFD): They allow trading price variations without acquiring the underlying asset. They offer the potential for amplified gains through leverage but also increase the risk of losses. Rigorous risk management is required.

Three Pillars to Consider When Investing in Silver

Limited supply: As a scarce mineral, finite supply favors the preservation of value over time.

Growing industrial demand: Renewable energy and electronics manufacturing sectors sustain structural demand with a long-term upward trend.

Relative accessibility: With prices substantially lower than gold, investors with less capital can accumulate larger quantities, enhancing percentage returns.

Risk Assessment

The inherent volatility of the silver market requires limited allocation and careful planning. Adverse movements can quickly consume margins, especially with leverage. It is recommended not to expose more than 3-5% of capital per trade.

Technical Outlook and Price Levels

Currently trading at $23.126 per ounce, silver maintains ascending lows since February 2020 and August 2022, while testing the downward trendline from January 2021. The setup suggests forming a symmetrical triangle, with a breakout anticipated before February 2024.

Critical support levels:

• $21.330 (February 2008 high): crucial to maintain bullish viability
• $11.628 (February 2020 low): would require recession or extraordinary event
• $8.460 (2004-2008 extreme): collapse scenario

Resistance targets:

• $29.835 (July 2020 high): primary target if macroeconomic conditions evolve as expected
• $49.780 (March 2011 high): needs to surpass $29.835 and develop an upward channel

Industrial Forecasts

Consensus among analysts points toward bullish scenarios starting from 2024 and beyond. Larry Lepard, an investment manager, projects gold will surpass $2,100 reaching $3,000 with the next cycle of monetary easing. Regarding silver, he anticipates movement from $30 toward $50 and subsequent appreciation, describing it as “gold on steroids.”

Trading with Contracts for Difference: Technical Elements

( Position Sizing

A standard silver contract comprises 5,000 troy ounces. At $23.126 per ounce, it amounts to $115,630.00 of exposure. With an initial margin of 10%, $11,563.00 is required to open a position. A 1:10 leverage amplifies available capital.

) Minimum Price Fluctuations

Each movement of $0.001 per ounce results in a $5.00 variation; movements of $0.005 equal $25.00. In the previous example, if the price rises from $23.126 to $23.188, the profit would be $310.00, representing a 2.7% return on the invested initial margin.

Margin Management

The typical ###5% maintenance margin### sets a minimum threshold. Falls below trigger “margin calls” requiring additional deposits. Disciplined position management is imperative to preserve operational capital.

Summary: Is Investing in Silver in 2024 Worth It?

Current prices, depressed by high-rate environment and dollar strength, could present a strategic accumulation opportunity. Anticipated monetary policy changes during 2024-2025 suggest favorable scenarios for precious metals. The combination of sustained industrial demand and potential speculative revaluation supports selective positioning, always under rigorous risk management protocols.