The silver price has seen impressive gains in 2024, with the bulk of its move coming during the first half of the year, when it jumped from US$22 per ounce to over US$32 for the first time since 2012.
The white metal remained elevated during Q3, but traded below the US$30 mark for much of the three months. Toward the end of the period it moved up as the US Federal Reserve made a long-awaited interest rate cut.
Read on to learn more about silver’s Q3 performance and what experts think is next.
How did the silver price perform in Q3?
Silver started the third quarter at US$29.46 on July 1 and had surged above US$31 by the middle of the month.
The precious metal’s increase came alongside renewed speculation that the Fed would cut rates in July. However, backed by another strong US jobs report, the central bank left rates unchanged.
Against that backdrop, the price of silver began to fall and by July 30 had reached US$29.04.
The silver price sank to a quarterly low of US$26.65 on August 7, even as speculation about a rate cut in September took hold among market participants. The retreat, which mirrored a dip in the gold price as investors looked to take profits, was short-lived, and by mid-month the white metal was once again trading above the US$29 mark.
Silver price, Q3 2024.
Chart via Trading Economics.
Silver reached US$30.14 on August 27 after remarks from Fed Chair Jerome Powell at his annual address at the Jackson Hole Economic Symposium. His dovish statements were the clearest indication yet of an upcoming rate cut.
September started with silver in a slide. It bottomed out on September 6 at US$27.93, but saw a reversal after August’s US jobs report fell short of expectations and boosted expectations of a larger rate cut.
This provided tailwinds for silver, which broke through the US$30 level before the Fed slashed rates by 50 basis points at its September meeting. Silver climbed to its quarterly high of US$32.15 on September 24.
Industrial demand still a key silver price driver
Silver is valued as a precious metal, but is also driven by industrial demand, particularly photovoltaics.
According to the Silver Institute, silver demand for solar power has more than doubled in the past five years, rising from 74.9 million ounces in 2019 to a forecast 232 million ounces by the end of this year.
India in particular has become a major factor in global photovoltaics market, and has been one of the largest silver consumers in 2024. The country reportedly imported 4,554 metric tons of silver during the first half of the year, putting it on pace to double the 3,625 metric tons of silver it imported in 2023.
In April, India reintroduced a requirement for major photovoltaics projects in the country to use domestically sourced panels. The requirements were put on hold for the 2023 fiscal year due to insufficient domestic manufacturing. Their return has led to a ramp up in Indian photovoltaics production and an increased need for silver.
Additionally, TopCon cells, which have higher efficiency, but require 50 percent more silver content, have begun to dominate the photovoltaics market, contributing to an increasing strain on the supply of silver.
“One important development was when India decided to reduce import duties on gold and silver from 15 percent to 6 percent. That led to a second surge of imports into that country,” he said.
Overall, the silver market remains in a deficit. The Silver Institute is forecasting that demand from all sectors will rise to 1.22 billion ounces in 2024, while mine supply will reach just over 1 billion ounces.
Given that difference, why hasn’t the silver price seen a bigger run?
Part of the reason is that aboveground reserves are being drawn down. However, Krauth believes market participants are only just realizing that the deficit situation isn’t going away any time soon.
“Supply has been flat for a decade. Mine supply peaked eight years ago. Demand has grown to 20 percent above annual supply since 2020. The main reason prices haven’t exploded is that silver consumers have been able to tap stockpiles of ‘secondary inventories’ at major futures exchanges and exchange-traded funds,’ he explained.
‘That may have 12 to 18 months before running out.’
M&A activity increasing as silver price rises
As the silver price rises higher, M&A activity in the sector is strengthening.
First Majestic Silver (TSX:AG,NYSE:AG) announced on September 5 that it plans to purchase all of the issued and outstanding shares of Gatos Silver (TSX:GATO,NYSE:GATO) in a US$970 million transaction.
The deal will provide First Majestic with a 70 percent stake in the Cerro Los Gatos mine in Northern Mexico. The combined entity’s anticipated annual production is 30 million to 32 million silver equivalent ounces.
On October 4, Coeur Mining (NYSE:CDE) agreed to acquire SilverCrest Metals (TSX:SIL,NYSE:SILV) for US$1.7 billion. The deal will create one of the largest silver producers in the world, with output of 21 million ounces projected by 2025.
The deal gives Coeur 100 percent ownership of the recently opened Las Chispas mine in Sonora, Mexico, which is projected to sell 9.8 million to 10.2 million silver equivalent ounces this year.
Krauth said M&A involving smaller companies may follow as the silver price moves higher.
“Current silver prices are positive for profits, but replacing reserves is a big challenge. I think silver crossing the US$35 mark and sustaining it will give miners confidence that high silver prices are here to stay. With that, they are likely to start moving down the food chain to developers and explorers,” he said.
Investor takeaway
Both Krauth and Mind Money CEO Julia Khandoshko see significant gains ahead for silver.
“Although silver is less popular than gold, traders might consider it to diversify their investment portfolios, valuing the possibility of using silver as a hedge during periods of uncertainty and high inflation,” she added.
Krauth was similarly positive about silver’s prospects. “We are near a crucial level of US$32. Once silver stays consistently above that level, I think it can continue to US$35, which I would expect by the end of this year. Beyond that, I think silver will continue to rise and is likely to reach US$40 at some point in 2025,’ he said.
However, he expressed a degree of caution, saying there are near-term factors that could pose challenges for investors. He’s primarily concerned that a rally in the US dollar could lead to a retreat in precious metal prices.
“In my view, the approach in Q4 should be mostly the same for both metals and equity investors. I’m still cautious that we will see a price pullback in silver, which will bleed into the equities. For that reason, I’d only be adding on weakness in either the metal or the miners,” Krauth said.
Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.