2023 Market Review
Silver prices remained within a relatively narrow range for most of 2023. It is on track to end the year almost flat. As of late trading on Friday, December 29th, silver was trading around $23.82. This represents a yearly decline in silver of $0.09 or 0.4%. The high-to-low trading range was established relatively early in 2023. By May, it reached a low of $19.76 and a high of $26.12. Volatility reduced for the remainder of 2023, and subsequent price movements remained within established price ranges. The lowest price this year was $19.76 on March 9th, with silver down 17.5% (4.16 points). On the upside, the stock rose by up to 9.2% from its year-to-date high of $26.12 on May 5th.
A possible recession in 2023 could slow demand for precious metals and other products.
However, changes in expectations for interest rate cuts by the US Federal Reserve and other central banks should have a positive impact not only on the prices of precious metals but also on other commodities. Lower interest rates make non-income producing assets more attractive. Additionally, conflicts are occurring in Ukraine and Israel. These conflicts could escalate, spark new conflicts, and lead to the outflow of refuge assets such as silver.
demand for silver
Silver supply is influenced by the fact that silver is a precious metal and is used in both industrial and consumer applications. Silver demand is driven by mining supply, industrial demand, green technology demand, and investment uses. Analysts expect mine supply to remain weak (below all-time highs) and below historic levels in 2024, as investment in capital expenditures has declined in recent years. Increasing mine production requires increased capital investment.
Increases in industrial demand are generally due to faster economic growth. Stock markets appear to be expecting improved economic growth in 2024 as well. As the solar power and battery electric vehicle markets continue to grow, industrial demand for silver should increase. Sales of battery electric vehicles in the United States will exceed 1 million units in 2023. CarGurus predicts that by 2030, 50% of new car sales could be electric vehicles. This is an increase from his 8% in 2023. The lower bound of the prediction is 23%. By 2030.
Investment demand is supported by physically backed ETFs. These provide an easy mechanism to invest in silver and silver producing companies. Roughly 88% of the silver held in LBMA facilities is held in these ETFs and similar structures, according to a recent report from Bank of America. This equates to approximately 748 million ounces of silver.
Technical Analysis: 2024 target high price is $34.43
Although silver prices stabilized in 2023, we expect a shift from a stable environment to a trending environment in 2024. The bigger picture shows that the big bull market first broke out in April 2023. However, resistance quickly materialized, leading to a stabilization of the situation for much of the rest of the year. Then in October, the lower rising trend line was tested as support and the price reversed and moved higher.
Recently, there was a successful test of support at the top of a declining channel. In late November 2023, a second, much smaller correctional channel breakout triggered a spike in volatility. This indicates that prices are rising, which could further increase demand and cause prices to rise.
Price compression is generally followed by price or trend expansion. There are currently three moving averages converging on both the daily and weekly time frames: 20 (red), 50 (orange), and 200 (blue). This behavior represents price compression.
This flag pattern progressed with a massive rally of $18.61 or 165.8% to an August 2020 high of $29.83. It happened in just 20 weeks. Calculating the bull flag measurement target yields two potential targets. One is 40.60 and the other is 42.75. The first is adding to the flag the amount of dollars advanced by the pole to reach the goal, and the second is from the percentage calculation. But even if those goals are eventually achieved, it is unlikely that they will be achieved in 2024.
My highest silver target for 2024 is $34.43. This price level completes the ABCD pattern extended by the 161.8% Fibonacci ratio and approaches the 61.8% retracement of silver’s full downtrend that began from the 2011 high of $49.78.