Will the Price of Silver Rise to $50?

Silver has seen remarkable growth this year, surging by 33% and capturing the attention of investors worldwide. This precious metal is essential in modern technology, driving increasing industrial demand, and serves as an effective hedge against currency devaluation.

Analyst Alan Hibbard recently outlined several factors that could drive silver prices even higher. Currently, demand spans a wide range of investors, from private individuals to institutional entities. Consequently, Hibbard anticipates that silver will outperform gold at a ratio of 2:1 in the near term.

Silver Price Dynamics

Silver has enjoyed an impressive year, with its market price increasing by approximately 33%, drawing significant attention from investors. Historically, silver holds great significance, arguably even more than gold. For nearly 5,000 years, it has been a reliable medium of exchange, maintaining its stable value over the long term.

However, there are additional reasons to consider adding silver to your investment portfolio. Below are some of the key benefits of investing in silver.

To see the silver price chart, click here.

Benefits of Investing in Silver

Industrial Demand

Silver ranks just behind oil as the most widely used industrial commodity. Its unique properties, including high conductivity and reflectivity, make it indispensable in various applications.

The growing adoption of green technologies, such as electric vehicles, solar panels, and advanced electronics, is expected to substantially boost the demand for silver.

For instance, each electric car contains up to 50 grams of silver, while solar panels use approximately 20 grams per unit.

Protection Against Inflation

As a physical asset, silver exists “outside the system,” making it an excellent hedge against currency devaluation. During periods of sustained inflation, like the 1970s, silver prices soared dramatically, increasing nearly 35-fold from $1.40 per ounce in 1971 to an intraday high of over $50 per ounce in 1980.

Additionally, silver has a low correlation with other asset classes on the stock market, enhancing its value within a diversified multi-asset portfolio.

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Availability

Not everyone can afford to buy an ounce of gold, with the price of gold often costing several thousand euros, but silver is within reach for everyone!

With a significantly lower price than other precious metals, silver is affordable and an excellent starting point for new investors entering the precious metals market. Currently, the price of a 1-ounce silver coin is less than 50 euros, which is a fraction of the cost of an ounce of gold, which reached new all time highs earlier in 2024.

Silver Potential

In 2023, analyst Tomas Andrieu forecasted a rapid recovery in silver prices for 2023 and 2024. He predicted that the average price of silver would slightly decrease in 2023 to $21.30 per ounce.

Technically, silver remained bullish despite facing numerous resistances.

Additionally, the London Bullion Market favoured gold over silver. Andrieu suggested that a sustained move above the $26 per ounce level would provide strong upside potential. As we can see now, that is precisely what has happened.

In 2024, with nearly one in five ounces of silver being used in the solar industry, the silver market faces increasing pressure. Rising demand and limited production capacity have resulted in a short supply of silver. Additionally, production costs have significantly increased.

For the third consecutive year, silver demand has outstripped supply

This market imbalance was evident in 2022 when 20% of total demand went unmet. Although the deficit decreased in 2023, it remained substantial at 184 million ounces. This shortfall equates to over 5,900 tonnes of undelivered silver, or 15.5% of total silver demand in 2023.

Given this context, the fundamentals of the silver market remain favourable. However, the ongoing supply shortfall highlights the market’s inability to adjust prices effectively to address production gaps.

It is important to note that silver is primarily a by-product, obtained during the production of other metals such as gold, zinc, and copper. This makes the market particularly sensitive to potential supply shortages.

This strong demand outlook is promising for the price of silver. Although the $26 per ounce price level has been breached, an analysis of various market players’ behaviour suggests that signals remain slow at this stage. The Silver Institute’s report underscores the relationship between manufacturing demand (including jewellery, silverware, photography, and industrial uses) and silver prices. In fact, silver mine production that exceeds demand can lower silver prices, and vice versa.

What is the outlook for silver in 2024?

The silver market has experienced a supply shortage for several years.

In 2023, 15% of overall silver demand was unmet

This gap between supply and demand is widening, primarily driven by increased industrial demand, especially from the photovoltaic industry. Additionally, silver mining companies are seeing decreased profitability and significantly higher production costs, which have risen by 25% up to 2023.

In this context, silver seems to be testing its 2020 highs. The Silver Institute forecasts that a potential easing of U.S. monetary policy could lead to a significant increase in precious metal prices in 2024, although short-term downside risks remain.

A sustained hold of silver at $30 per ounce, followed by $33.50 per ounce, could pave the way for a return to the 2011 highs of $40-41 per ounce. Achieving this target quickly would require consistent interest from market participants. Regardless, the silver price trend is evident, and the May bull market appears to be a fundamental correction in silver’s price.

However, it’s crucial to note that a sustained rally in silver prices will only be possible with a steady recovery in demand for investments, silverware, and jewellery. If this happens, the price of silver could steadily approach the $33-40 per ounce range.