Silver Price Outlook – January 2024

“Silver Price Outlook
Silver prices are forecast to rise marginally on an annual average basis during 2024. The forecast annual average price for silver for 2024 is $23.69, up 0.6% from 2023.

Unlike in the case of gold, which is projected to have a fifth consecutive year of record annual average prices, silver’s projected annual average would be the fifth highest annual average price on record.

Silver has been underperforming relative to gold for some time now and this is not uncommon. Silver typically lags gold in a bull market. That said, once on the move it often goes onto outperform gold for a time. This year, 2024, is not likely to be the year in which silver outperforms gold, however. It is more likely to be 2025, with a stronger upward movement in silver starting to emerge possibly late this year. While CPM Group continues to forecast gold prices to rise in 2025 and reach yet another record annual average price, it expects gold prices to rise 8.9% compared with a 25.5% gain in the annual average price of silver in 2025.

If CPM Group’s expectation for a recession in late 2024 or in 2025 materializes it would provide the much needed boost to silver prices. While fabrication demand is likely to struggle in a recessionary environment, investment demand typically rises sufficiently to offset any loss in fabrication demand. On the fabrication demand side too, while many of silver’s uses would suffer if a recession were to arrive, silver’s demand from the solar panel industry is expected to continue rising. This use which is now the third largest use of the metal is expected to see growth in part due to new technologies that use more silver than the existing panel technologies and in part because governments of late have been using green technologies to help economies recover from adverse economic conditions.

Over the next few months, silver prices are expected to soften. The rate cut mania that had gripped the financial markets during the last quarter of 2023 is being unwound at the start of this year as more positive economic data raise questions about how much and how quickly the Fed will cut rates. An uptick in bond yields and strength in the U.S. dollar are expected to weigh on silver prices, while seasonal strength helps to offer some support to prices. Silver prices have some initial support at $22.80, but a test of $22.20 cannot be ruled out.

Platinum Price Outlook
Platinum prices are forecast to fall slightly on an annual average basis during 2024. Prices are projected to average $962.40 during 2024, down 0.9% from 2023 levels. While prices are expected to fall on an annual basis, they are expected to rise from the end of 2023 to the end of 2024.

While some aspects of platinum fabrication demand will remain supportive of platinum prices, much of the support for platinum this year is likely to come from the supply side. The use of platinum in place of palladium in gasoline auto catalysts is expected to remain the main supportive factor for platinum fabrication demand this year. Commercial vehicle demand is likely to face headwinds if projections for weaker global economic growth during 2024 materialize, however, offsetting any positive demand effect for platinum.

On the supply side, most South African mines are presently financially underwater due to the weakness in the platinum group metal (PGM) basket price over the past year. This is expected to, at least initially, result in some of the higher cost production going offline. Labor cuts have been announced by some mining companies and others are planning such cuts. Elections in South Africa could prevent further cuts, but this will compound the pain for South African mining companies, possibly resulting in more labor and production cuts in the future. Expectations of future cuts in output should provide some support to the PGMs. Additionally, the electricity short
age issue in South Africa remains unresolved and the ongoing risk of losing electricity supply should continue to provide support to platinum prices.

Platinum, like several other assets, is expected to undergo some correction in the near term, following the sharp run up in prices during the fourth quarter of 2023. As markets recalibrate their rate expectations from those of around 150 basis points (bps) in cuts to those that are closer in line with the 75 bps that the Fed is considering, platinum prices are likely to be under pressure. While some of this correction has already occurred, a decline toward $900 still is possible in the near term. Given that this is a seasonally strong period for prices, platinum may not decline much further than that during the first quarter of this year. But if it does break $900 forcefully a slide to around $880 cannot be ruled out.”