Why invest in Silver in 2024

There are strange rumors going around about silver in these first weeks of 2024.
For silver – at least in the foreign finance articles I've been reading from December to today – a "fantastic year" is predicted, during which the metal could even outperform the gold reaching a 10-year high.
This could therefore – according to some analysts – be a banner year for silver, with prices possibly reaching a ten-year high of $30 per ounce.
This estimate is based on the law of supply and demand, as in all financial markets.
In fact, global silver demand is expected to reach 1.2 billion ounces in 2024, which would mark the second highest level on record, the Silver Institute, an authoritative independent research center, said in a recent report (Global Silver Demand Forecasted to Rise to 1.2 Billion Ounces in 2024).
“Heavy industrial withdrawal is the main catalyst for growing global demand for the white metal, and the sector is expected to reach a new annual high this year,” said the institute, which – I repeat – is an international non-profit association profit that includes various members of the silver industry, and therefore worthy of consideration.
Silver is primarily used for industrial purposes and commonly incorporated into the manufacturing of automobiles, solar panels, jewelry, and electronics.
“We think silver is going to have a great year, especially in terms of demand,” Michael Di Rienzo, executive director of the Silver Institute, told CNBC in an interview.
Di Rienzo expects silver prices to reach $30 an ounce (compared to the current $22.50 an ounce), which would be a 10-year high.
According to the data displayed on the Bloomberg chart that I created specifically, a maximum price was reached in the summer of 2020 and also in 2013.
The institute expects a 9% increase in demand for silver for industrial use this year and a 6% rise in silver jewelry demand this year, with India expected to lead the jump in jewelry purchases.
An expected recovery in the consumer electronics sector is also poised to give a further boost to the silver market, the report said.
That said, the institute noted that, in the near term, a brake on silver's run could be driven by a slowing Chinese economy and a diminishing likelihood of US interest rate cuts earlier this year.
two factors that could represent an obstacle to institutional investments in silver.
But these downside risks have a marginal probability of occurring at present.
In fact, the situation could change in the second half of 2024, when most market observers believe the US Federal Reserve will start cutting rates.
Silver prices, like gold, tend to have an inverse relationship with interest rates.
A higher interest rate environment hurts speculative demand for silver and gold as precious metals pay no interest, making them less attractive compared to alternative investments such as high-yielding bonds.
The Correlation Between Silver and Gold However, silver carries the ignominious title of being the “poor cousin of gold,” but generally the two metals share a positive correlation when it comes to prices, even if silver follows the gold trend.
gold with a delay of a few weeks.
But it's not always like this.
In fact, there is another determining factor on the price: due to the vast industrial applications of silver, its prices and its trend are closely linked to the health of the general economy or the economic cycle.
In contrast, gold prices typically rise during times of economic weakness or uncertainty.
In this sense, silver is more sensitive to changes in economic trends and more volatile than gold.
It tends to outperform the yellow metal during periods of strong economic expansion, but underperforms in the event of economic stress, when gold – on the contrary – becomes a safe haven and is an alternative to Treasuries with depressed yields.
The relationship can be tracked through the gold-to-silver ratio, which tracks how many ounces of silver are needed to purchase one ounce of gold.
Currently, at February 7 prices, it takes approximately 90 ounces of silver to purchase one ounce of gold.
Silver: what to expect in 2024 Personally I think that in 2024 gold will rise first (I wrote this in my article for Money.it on December 13, 2023) and then you will see silver take off quickly.
And silver generally always outperforms gold's rally when entering a period of falling rates contemporaneous with the economic recovery.
It's just that the outperformance will come later, and some analysts add that a threshold close to $50 for silver (spring 2011 levels) is possible, but only after gold surpasses $2,200 (which currently current is a very significant resistance).
I remind you that gold prices are currently at $2,034 per ounce.
If you ask me for a "timing", I tell you that in my opinion this concomitant rally of gold and silver could happen starting from the late spring or early summer of 2024, coinciding with the start of the cuts in interest rates from the Federal Reserve.
To diversify your raw materials portfolio and invest directly in silver I therefore recommend two ETCs (not ETFs that invest in shares of extractive industries) which differ from each other in terms of exposure to exchange rate risk.
In fact, each silver ETC represents a physical quantity of silver which is quoted in US Dollars per Ounce.
From a theoretical point of view, therefore, the 2024 rally on silver could be nullified (or strengthened) by a weakening (or revaluation) of the dollar against the euro.
So: If you think that the dollar can remain in the current range against the euro and will not suffer devaluations, given the relative strength of the US economy, then I recommend an ETC without exchange risk hedging: X-TRACKERS PHISICAL SILVER NON-HEDGED (ISIN DE000A1E0HS6) If, however, you think that the dollar may depreciate against the euro following the Fed's expansive monetary policy, then I recommend an ETC with exchange rate risk hedging, which is not affected by exchange rate volatility but gives you entirely and only the price trend of the commodity under consideration: X-TRACKERS PHISICAL SILVER HEDGED (ISIN DE000A1EK0J7) These are just examples, obviously.
A further and more in-depth analysis of silver ETCs can be found in the ETF “bible” and you can find your analysis of silver ETCs here.
DISCLAIMER The information and considerations contained in this article should not be used as the sole or primary support on which to make investment decisions.
The reader maintains full freedom in his own investment choices and full responsibility in making them, since he alone knows his risk propensity and his time horizon.
The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation to public savings.