Is silver a solid investment option going ahead in 2024?
In the world of precious metals, gold has long reigned supreme.
However, as we approach 2024, you might want to turn your gaze to silver, a commodity that, despite its 2023 volatility, may hold promising prospects.
A turbulent 2023: Setting the stage for silver
As of December 2023, the price of silver stood at US$24.38 per ounce or US$783 per kilogram. For Aussie investors, this converts to $36.05 per ounce or US$1,158 per kilogram.
The hike in price marks a more than 5% increase from the previous year and a 3.5% increase from the previous month. This upward trend signifies a recovery from earlier fluctuations within the year.
But let's look into these so-called fluctuations.
Factors adding to silver's price volatility
Imagine this: there are a lot more people wanting silver than there is silver being dug up and produced. We're talking about a 20% gap between what's needed and what's available.
Now, you'd think prices would skyrocket, right? But here's the twist – it didn't go up as much as you'd expect.
Part of the reason is all these paper silver contracts in the markets. They're like promises of silver without the actual silver being there, which can skew things.
"Silver is in a shortage… and there is a notable drawdown in the available physical stocks held in New York and London's physical hubs, more so than seen in gold," said Nicky Shiels, head of metals strategy at precious metals company MKS PAMP to CNBC.
Then there's the whole global drama scene.
The US was playing it tight with money policies, and tension between Russia and Ukraine was added to the mix. These big-picture issues have a sneaky way of shaking up the precious metals world, silver included.
Also, the market's been trying to guess what's going to happen with US interest rates and the dollar, and that's been causing some ups and downs too.
And don't forget, silver's not just for hoarding or jewellery – it's got industrial uses, so those demands shift around and add to the whole rollercoaster.
Understanding the role of silver
Silver isn't just your regular shiny metal; it's got a double life, sort of like a superhero in the world of metals.
According to Rush, an Australian fintech metals investment platform, silver possesses several benefits to act as a sustainable and solid investment option.
Co-founder and director of Rush Mark Pey said silver offers a secure, real-world alternative for those looking to diversify their investment portfolios and seize opportunities for the coming decades.
"Silver, as a finite and precious metal, serves multiple vital purposes in various industries, often being consumed upon usage. Its limited supply and modest trading volumes make it appealing as a promising investment."
According to Rush, silver offers several benefits:
Solar industry growth
- Silver demand in the solar industry is skyrocketing
- By 2027: Over 20% of the world's annual silver supply is needed
- By 2050: A staggering 85-98% of the annual supply required
- Key role: Vital for renewable technology's growth
Wide industrial use
- Used extensively in medical and technology fields
- Increasingly important in solar and automotive industries
- Key applications: Electronics, EVs, solar panels, batteries, medical equipment
- Critical for sustainable product development
Electric vehicles (EVs) influence
- Transition from fossil fuels boosts reliance on EVs
- EV demand drives silver need: Global sales of EVs nearly doubled from 2021 to 2022 (3.75 million to 6.75 million)
Supply vs. Demand dynamics
- Silver supply in 2022: 1,004.7 million ounces
- Silver demand in 2022: 1,242.2 million ounces
- Imbalance: Demand outpaces supply
Demand breakdown
- Industry: 44% (includes electronics, solar PV cells, EVs) – up 5% in 2022
- Physical investment: 26% – up 20% in 2022
- Jewellery and silverware: 26% – up 38% in 2022
Rush co-founder and director Jodi Stanton highlights the increasing customer interest in silver on its multi-asset platform. She notes the growing prominence of silver in the investment landscape, attributing it to its scarcity amid surging demand.
"We believe its pivotal role in sustainable manufacturing, coupled with the expansion of renewable technologies such as solar, electric vehicles, large-scale batteries, and industrial and medical applications, positions silver as an undervalued asset today."
Silver linings?
Experts remain optimistic, predicting a high of $30 per ounce. For instance, analysts at Citigroup assert that the recent dip in silver prices this year "offers a strong dip-buying opportunity," and they reiterate their forecast of silver reaching $30/oz in the next 6-12 months.
So, are you thinking of hopping onto the precious metals bandwagon in 2024, especially with silver shining so bright?
Our guide expands on four different ways to invest in silver.
But remember to invest smartly. It's all about balancing the thrill of the chase with some good old common sense.
Silver's got its sparkle, for sure, but like any investment, it needs a thoughtful approach.
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