Silver prices saw a strong sell-off as markets opened this week, continuing an ongoing decline for the alternative precious metal. After hitting a three-month low yesterday however, silver saw a price bounce-back that could suggest a bottom was hit.

230124 USD Silver Chart

Silver has seen prices falling steadily in the new year, hitting a three-month low yesterday.

2023 was a volatile year for silver, with some significant price swings as the year went on, but 2024 has so far seen weakness for the metal. After hitting $24/€21.87 on January 2nd, silver has fallen to $22.30/€20.46 at the time of writing, a decline of 7% in both currencies.

Next week will see the first round of interest decisions from the likes of the Fed and BoE, and no change is expected. At the end of 2023 markets had expected to see cuts in March, but hawkish comments from Fed officials, and stronger inflation and economic data from the US has seen this revised, with cuts now expected in the summer. This has seen the dollar strengthen and put pressure on all precious metals.

Unlike gold however which has largely managed to hold steady, silver has seen further selling pressure over fears of falling industrial demand. The economies of China and Germany suggest that industrial output is falling, and the delays to shipping due to conflict in the Middle East will only exacerbate the worries that demand for core metals like silver is going to lessen for the next few weeks/months.

At its worst yesterday, silver dropped as low as $21.94/€20.14, a three-month low. $22 was touted as a key support level for the metal and for a short period it looked like this may have been broken with more selling pressure to come. It seemed that buyers were happy to rush in at this level however, and silver soon rallied back above $22 which it has held so far since.

With gold still so close to all-time high territory, silver is looking an increasingly attractive buy for many investors. The gold-silver ratio, used by some as a measure for how undervalued silver is, has breached 91, meaning 91 ounces of silver could be bought for the cost of a single ounce of gold. The ratio hit a high of 92.1 yesterday when silver slipped below $22, and this would be the highest ratio since September 2022.

Although gold and silver could see some further weakness in H1 as markets react to interest rate decisions, there is still plenty of support for gold that is keeping it above $2,000, and for the ratio to come back down to more normal levels it is more likely for silver to rise than gold to fall in any significant way.