Silver Investment Guide: Opportunities and Strategies for 2024

Why Invest in Silver Today

Silver presents an attractive alternative to diversify portfolios beyond traditional investments like stocks and bonds. Its significance as an investment instrument is supported by two fundamental pillars:

Industrial Demand: Approximately 55% of global silver demand comes from industrial applications, particularly in solar energy and electric vehicles sectors. With crude oil prices experiencing significant increases (light crude futures rose 33.9% since June, trading at $90.50 per barrel), investments in alternative energies will continue gaining traction, benefiting silver demand.

Safe-Haven Asset Function: With 22% of demand attributable to this factor, silver attracts investors in macroeconomic uncertainty contexts. There is an evident inverse correlation between silver prices and the US dollar, suggesting opportunities when a weakening of the US currency is anticipated after possible interest rate cuts in 2024.

Global Silver Market Overview

What is silver and why does it matter?

Silver is a precious metal with scarce presence in the Earth’s crust, characterized by its bright white color, excellent thermal and electrical conductivity, and notable ductility. Historically used in jewelry and coinage, today it is an essential component in computers, mobile phones, appliances, and renewable energy systems.

Market size and projections

Specialized research projects that silver demand will reach 1.196 billion ounces by 2026, representing an annual growth rate of 2.97% during 2022-2026. Supply is estimated at 1.061 billion ounces with a growth rate of 1.24% annually. This divergence between supply and demand suggests upward price pressure in the medium term.

Production geography

Mexico leads global production with 5,600 metric tons of silver in 2021, followed by Peru (3,400 tons) and China (3,000 tons). Any disruption in these mining operations would have immediate global repercussions on prices.

Macroeconomic Factors Influencing Prices

Correlation with gold

Gold acts as a benchmark for the precious metals market. Movements in its price generally replicate in silver with some lag, providing early signals about future investment directions in metals.

Interest rates

There is an inverse relationship between interest rate levels and precious metal prices. In low-rate environments, precious metals tend to appreciate due to lower opportunity costs. Conversely, high rates favor fixed-income assets over commodities.

US dollar strength

The inverse correlation between the dollar and silver is partial but significant. Periods of dollar weakness historically coincide with strength in silver prices, especially when international buyers require fewer dollars to acquire the metal.

Energy prices

Increases in oil prices elevate the relative attractiveness of alternative energy sources, directly benefiting demand for silver used in photovoltaic panels and related technologies.

Investment Instruments for Silver

Direct Investment

Physical silver: Bars, official coins, medals, and storage certificates represent traditional forms. This modality preserves intrinsic value regardless of short-term price fluctuations.

Derivatives: Futures and options traded on regulated exchanges (COMEX, LME, MCX) with standard sizes of 5,000 troy ounces offer greater flexibility and liquidity than holding physical silver.

Indirect Investment

Mining stocks: Companies like Silvercorp Metals Inc. (SVM), with operations concentrated in China and valued at $437.86 million, allow exposure to the mining sector with specific corporate risks.

ETFs: Instruments like iShares Silver Trust (SLV), issued by BlackRock Financial Management, offer diversified exposure with easy trading.

Mutual funds: Products like Franklin Gold And Precious Metals Fund Class A (FKRCX) pool capital from multiple investors under professional management.

CFDs: Contracts for difference (CFD) allow trading price variations without acquiring the underlying, offering potential amplified returns through leverage, though with proportional risks.

Performance Comparison in 2023

Physical silver has recorded declines of 3.80% (spot market) and 2.72% (futures) during 2023, significantly lower than stock indices like NASDAQ 100 (+38.96%) and S&P 500 (+15.91%). This performance reflects the current environment of high rates and weak safe-haven demand but presents a potential entry point for long-term strategies.

Technical Analysis and Key Levels

The current price of $23.126 per ounce approaches the downward trendline from January 2021, forming a symmetrical triangle suggesting a breakout before February 2024.

Critical supports:

• $21.330 (February 2008 high): immediate key level
• $11.628 (February 2020 low): would require a significant recession
• $8.460 (March 2004 high): extreme crisis scenario

Relevant resistances:

• $29.835 (July 2020 high): probable target if current level holds
• $49.780 (March 2011 high): requires prior break of 29.835 and bullish channel confirmation

Future Price Outlook

Predominant projections for 2024-2030 are clearly bullish. Specialized analysts anticipate that silver, benefiting from expansion cycles in solar energy and electric technology, will surpass $30 per ounce in the short term, potentially approaching $50 as the expected rate cuts and dollar weakening materialize.

Three Fundamental Reasons to Consider Silver

(1) Limited supply: As a scarce mineral, restricted availability provides structural support for long-term value preservation.

(2) Growing industrial relevance: Continued demand from high-growth industries (solar energy, electric vehicles, advanced electronics) ensures sustained upward pressure on prices.

(3) Relative accessibility: With prices significantly lower than gold, silver allows investors with moderate capital to build precious metals positions with potential higher percentage returns.

Risk Considerations

Investing in silver requires prudent risk management due to its volatile behavior. Capital allocations should be limited, cautious in sizing, and aligned with medium- to long-term investment horizons. Leverage in derivative products should only be employed with strict position control and disciplined stop-loss strategies.