Key factors driving silver demand in Q4 2024
Growing demand for industrial and green energy
Silver is poised to benefit significantly from its dual role as an industrial and precious metal in the fourth quarter of 2024. One of the main drivers of this increased demand is the rapid expansion of the green energy sector. This sector is highly dependent on silver due to its high electrical conductivity and durability. The increase in renewable energy initiatives has created robust demand for silver. Furthermore, silver’s role in battery production and electric vehicle charging infrastructure will solidify its position as a crucial resource. As industrial production recovers and supply chains stabilize, increased demand from these sectors could be a crucial factor driving silver prices higher in the fourth quarter of 2024.
Central bank policy and currency dynamics
Beginning in the fourth quarter of 2024, the Federal Reserve is expected to continue its rate-cutting cycles. This action is a response to slowing economic growth and increased recession risks. Loose monetary policy exacerbates the weakening of the US dollar. The US dollar has started a recovery in the short term. However, this recovery is likely to be dampened by technical resistance as the overall trend for the US dollar remains downward. This supports the price of silver due to its inverse correlation with the dollar.
This dynamic attracts speculative interest and increases silver’s appeal as a hedge against currency devaluation. Furthermore, as industrial activity picks up, China’s continued stimulus measures will increase demand for silver. These monetary and currency factors create a favorable environment for silver. These factors make silver an attractive investment choice in the fourth quarter of 2024.
Supply constraints and market sentiment
While demand dynamics play a critical role, supply-side factors are equally important in the silver market outlook. In 2024, global silver mine production has seen a marginal decline due to several operational challenges. This contraction in supply, coupled with growing industrial demand, sets the stage for a potential supply shortage. Market sentiment also plays a role, as lower mining production increases the perception of scarcity. This dynamic pushes investors towards silver as a safe haven.
Moreover, the gold-silver ratio (XAU-XAG) has fallen due to long-term resistance. Historically, a decline in this ratio indicates a period of silver outperformance, indicating that investors are shifting their preference to silver in anticipation of stronger price gains. The long-term continuation of this decline signals further bullish momentum for silver. Overall, these supply constraints and favorable market sentiment will likely result in silver’s strength in the fourth quarter of 2024.