Silver Prices May Be Down, But They Are Not Out Bank of America Sees Potential In 2024

(January 23, 2024 - Neils Christensen)

(Kitco News) - The silver market has managed to hold critical support above $22 an ounce; although the market has recovered, lackluster investment demand could keep a lid on prices in the near term, according to recent comments from Bank of America.

In a report published last week, commodity analysts at the second largest bank in the U.S. noted that silver has struggled to make new highs since the start of the new year as broad-based lackluster investment demand has weighed on the market. March silver futures last traded at $22.46 an ounce, up 0.74% on the day.

“We see a lack of interest among assets under management at physically backed ETFs, CME net non-commercial positions, trading volumes on Shanghai Gold Exchange/Shanghai Futures Exchange and US coin purchases,” the analysts said.

At the same time, the analysts noted that growing economic concerns are also weighing on the precious metal as unease over the health of China’s economy continues to grow.

Bank of America noted that weak industrial demand is one key reason gold has outperformed silver. As silver prices dropped Monday, the gold-silver ratio pushed above 91 points, hitting its highest level since September 2022.

Despite the headwinds since the start of the year, Bank of America remains optimistic that silver prices can regain their luster later in the year. The bank sees silver prices averaging around $23.30 an ounce in 2024, roughly steady compared to the average price seen last year.

“A bottoming out of the global economy in the coming months would support the silver market. Already now, we note that silver imports from Japan and the US are off the lows and could trend higher from here. Similarly, China was a net exporter of silver early last year, but those shipments had subsided by end-2023. Accompanying this, silver on China's domestic market is no longer trading at a discount,” the analysts said.

Despite the optimism, the timing of silver’s recovery remains unanswered. Last month, the bank’s precious metals analyst, Michael Widmer, said in his 2024 outlook presentation that he doesn’t expect precious metals to rally until the market sees the Federal Reserve cutting rates.

Silver has struggled in part as markets have started to pare back their expectations for rate cuts this year. The CME FedWatch Tool shows markets see a less than 50% chance of a rate cut in March, down compared to the previous week, which priced in an 80% chance.