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I see three factors likely to push silver prices higher in 2024. In fact, I wouldn’t be at all surprised to see silver prices hit new all-time highs sometime in 2024-2025.
Gold and Silver Post-Election Technical Analysis
Three Reasons Why Silver is Solid Gold in 2024
I see three factors likely to push silver prices higher in 2024. In fact, I wouldn’t be at all surprised to see silver prices hit new all-time highs sometime in 2024-2025. Viewing the current overall economic landscape, I’m seeing a lot of good reasons to buy silver in 2024, and no good reasons to expect silver prices to be lower at the end of the year than they are now.
So, what are the three reasons why silver is likely to prove to be a solid gold investment in 2024?
- Continuing inflation
- Increasing demand (and short supply) all across the board
- A possible short squeeze in the gold and silver market
Continuing Inflation
Just because the rate at which inflation is increasing prices has slowed down a bit from the scary pace it was setting in late 2022 and the first half of 2023, that doesn’t mean that there’s no inflation. Inflation continues, just as it has ever since the creation of our beloved Federal Reserve Bank. (Yes, you correctly detected a note of sarcasm there with the use of the word “beloved”.) Prices haven’t actually gone down. The only thing that’s gone down is the rate at which prices are continuing to go up.
In the hundred years prior to the creation of the Fed, there was virtually no inflation. It may be more than a little difficult to imagine – as we’ve only known life while in the clutches of “the creature of Jekyll Island” – but prices in 1900 were pretty much the same as they’d been in 1800. For example, in 1813, the cost of a pound of coffee was about 12 cents – and a hundred years later, in 1913, a pound of coffee still only cost about 12 cents.
However, in 2013, 100 years after a group of bankers and other notable financial criminals got together on Georgia’s Jekyll Island to create that spawn of the Devil – the Federal Reserve Bank – buying a pound of coffee would set you back about $1.37.
(“The Creature from Jekyll Island” is the title of George Edward Griffin’s book that chronicles the origin of the Federal Reserve Bank.)
Yes, ever since the creation of a central bank for the US, inflation has been eating away at the purchasing power of the US dollar. The following graphic starkly illustrates the severity of the decline in the value of a dollar in terms of what it will buy. Basically, one US dollar today has the purchasing power equal to less than a nickel in 1913.
It’s a well-known fact that gold and silver have, historically, been the most reliable investments as a hedge against inflation – one of the very few commodities whose value has kept pace with even the highest rates of inflation.
Not all investors maintain a hoard of gold and silver to protect their purchasing power, but virtually all of the ultra-wealthy do. Notable multi-millionaire/billionaire investors such as Ray Dalio, George Soros, and Stanley Druckenmiller all have significant investments in precious metals, and continue building an ever larger stockpile of gold and silver year by year.
Billionaire hedge fund manager, John Paulson, has steadily amassed a huge currency allocation in gold, and continues to urge investors to buy and hold gold and silver in preference to fiat currencies such as the US dollar. Even more telling is the fact that many of the ultra-rich have been scooping up gold and silver at a noticeably faster pace over the past couple of years.
Increasing Demand for Silver Across the Board
The supply and demand picture for silver in 2024 provides a strong argument for higher silver prices. The figures shown in the graphic below, courtesy of the Silver Institute, show a clear, ongoing pattern of the demand for silver continually outstripping the amount of silver that silver mines can supply.
All three areas of demand for silver – industrial, jewelry, and investment – are projected to continue increasing significantly in the foreseeable future.
It’s perhaps particularly worth noting that the push toward “green” energy is likely to push the industrial demand for silver substantially higher for decades to come. A study by Australia’s University of New South Wales revealed that the industrial demand for silver in solar power systems is approaching 20% of the total annual silver supply from mines.
More astonishingly bullish for the silver market is the fact that the same study projects that solar power panels’ need for silver by the year 2050 may add up to more than 95% of the world’s total global silver reserves that currently exist!! That level of industrial demand is the kind of factor that could skyrocket silver prices to previously unimagined levels.
Demand for silver jewelry is also projected to rise sharply, with market analysts forecasting a record-breaking increase in silver jewelry demand of between 5% and 10% in 2024.
The Short Squeeze to End All Short Squeezes
It’s a well-established rumor, if not a crystal-clear fact, among precious metals investors that central banks in the West have conspired for years to manipulate gold and silver prices – mainly pushing then to the downside. They’ve done this primarily by short-selling massive amounts of gold and silver futures contracts – vastly more contracts than they could deliver if ever forced to do so.
Gold prices have often plunged dramatically, despite the fact that no relevant market news existed to explain the sudden price drop. Huge amounts of gold futures contracts are sold, often by some anonymous entity who doesn’t appear to have any concern at all about crashing the market. (Rather than operating openly, with transparency, central banks often have their gold and silver trading done by brokers or private bank trading desks.) But any legitimate owner of gold who wished to profitably liquidate some of their holdings would not be purposely crashing the market, as that would not be in their own best financial interest.
Thus far, the central banks have been able to get away with such market manipulation, as they’ve been able to successfully depress prices, enabling them to then close out their short positions without incurring huge losses.
However, the bull market in precious metals that has increasingly dominated the 21st century (silver started the century at about $5 an ounce), already pushing gold prices to all-time highs and silver prices close to all-time highs, indicates that the attempt to keep gold and silver prices depressed is failing over the long term. It’s also telling that recently, especially over the past year, many central banks that were previously big sellers of gold and silver have suddenly shifted to buying precious metals hand over fist.
Why the shift from selling to buying? Well, one theory often floated is that the central banks that have created incalculable mountains of debt for the major world economies might attempt to inflate their way out of debt by devaluing their currencies versus gold. Such a move would propel the prices of gold and silver through the stratosphere.
In any event, it’s gleefully predicted by many gold and silver investors that a day of reckoning is coming in the precious metals market for the central banks, in the form of a massive short squeeze - “the short squeeze to end all short squeezes”. Silver bulls envision the shiny metal having a market event similar to the famous short squeeze rally in GameStop (NYSE: GME), which shot GME’s stock price from $20 to almost $500 a share, as short sellers scrambled to cover their positions.
One thing is certain. A mega-rally in gold and silver prices can easily go parabolic, as shown by the runup in gold and silver prices that occurred in late 1979 into early 1980. Such a mega-move in precious metals prices is further enabled by the fact that gold and silver bulls have been waiting for a huge upsurge in prices for quite some time. If and when such a move appears, investors stricken with a severe case of “fear of missing out” are likely to pile into the market in record numbers, driving prices ever higher.
One Cautionary Note
Silver prices may well close out 2024 substantially higher – but that doesn’t necessarily mean that prices are going to go straight up all year long.
One reason to be wary in the silver market is seasonality. As you can see in the chart below, gold and silver have a long and well-established history of following seasonal tendencies. Typically, precious metals prices tend to decline between late February and late June – and then head to the upside for the rest of the year, topping out just in time to put some silver coins under your Christmas tree. (Note that March-April usually sees an intermediate term rally, but then prices fall lower April-June.)
However, should gold and silver diverge from that historical seasonality pattern and continue pushing higher over the next few months, I would take that as a very bullish sign for precious metals prices going forward. If such a price scenario were to unfold, then 2024 could turn out to be a massively bullish year for both silver and gold.
Three Reasons Why Silver is Solid Gold in 2024 - Summary
Both bulls and bears always have a case to make in any financial market. However, I think that those looking for higher silver prices do have an advantage in the current market, based on, if nothing else, the obviously significant increasing industrial demand for silver.
In addition, inflation is likely to remain a strong driver of higher silver prices. Fed Chairman Powell appears to have tipped his hand that avoiding a recession has replaced inflation as the Federal Reserve’s major concern – and that makes persistent inflation a more likely scenario.
Finally, should gold and silver prices start a strong, sustained move to the upside, there’s the possibility of a massive short squeeze lighting a rocket ship fuse on the price of silver.
One other thing to consider is that the gold/silver price ratio has heavily favored gold over the past several years, pushing the ratio to around 90:1, approximately double its modern-day average. If the gold/silver ratio were to return to its recent average, around 50:1, gold selling at $2,000 an ounce would see the per ounce price of silver at $40. And a contracting gold/silver ratio makes silver look even more attractive when you see many precious metals market analysts projecting gold going to $5,000 an ounce or higher.
Sources:
PUBLICATIONS | (silverinstitute.org)
https://www.macrotrends.net/2535/coffee-prices-historical-chart-data
Invest Like the Elite: One Investment They All Hoard - Benzinga
https://www.moneymetals.com/news/2021/02/18/gold-market-manipulation-2021-2-002227
https://finance.yahoo.com/news/silver-next-gamestop-retail-investors-153403423.html
https://www.zerohedge.com/news/2023-08-15/next-silver-price-short-squeeze
Seeking Alpha | Stock Market Analysis & Tools for Investors
https://www.moneymetals.com/news/2024/01/25/silver-gold-ratio-signals-silver-on-sale-002954
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