2024 has been a big year for precious metals. Gold has eclipsed the $2,500 threshold amid growing geopolitical and monetary policy uncertainty. Silver has also performed well, posting nearly 25% gains since 1 January.
Q4 2024 is set to be a pivotal time for metals. Although silver has been bullish, it continues to lag gold. Will Q4 be golden for silver? Several issues will determine silver’s fate ahead of New Year’s Eve: the US elections, conflict in the Middle East, the Russia/Ukraine War, and the gold/silver market dynamic.
Election 2024
5 November 2024 is Election Day in the United States. On this day, voters will decide which party is to control the US House Of Representatives, Senate, and Presidency.
Without question, 2024 has been one of the hottest election cycles in US history. In Congress, the Republicans hold a slight margin in the US House of Representatives; the Democrats hold a tight majority in the Senate. This split is positioned to change on Election Day. The Senate has ten toss-up races, while the Republican House majority is projected to tighten or flip to Democrat control.
The presidential race pits Democrat nominee Kamala Harris against Republican nominee Donald Trump. Current polling data indicates an extremely tight race, especially in battleground states. Betting markets have the odds at near 50/50 for the Trump/Harris matchup — essentially a dead heat.
Harris and Trump have two very different agendas, and each will have a profound impact on Silver. A Harris administration is likely to bring extensive government spending, which may potentially boost inflation. Growth in social services, health care, and military aid budgets are all but assured. Also, a transition to green energy could send fossil fuel pricing north. In total, these economic tenets will position inflation to move higher.
On the other hand, a Trump administration will promote energy independence and an exit from extensive foreign aid spending. The US State Department has acknowledged sending more than $55.5 billion in aid to Ukraine since 24 February 2022; a Trump victory would significantly reduce or eliminate future contributions to the region. Also, the mantra of “drill baby drill” has been a staple of the Trump campaign. Accordingly, US oil and natural gas production growth could reduce energy pricing and slow down inflation.
Election 2024 will have a tremendous impact on Q4 silver prices, as well as gold prices. If Harris and the Democrats are victorious, perceived future government spending will likely fuel inflation. This is a bullish scenario for silver. If Trump and the Republicans win, silver may retrace due to energy-based disinflation and tighter defense budgets.
Will Global Conflict Drive Silver Higher?
The modern geopolitical environment features two kinetic wars: Israel/Hamas and Russia/Ukraine. Accordingly, the impact on silver is multifold and bullish.
During times of conflict or war, precious metals values typically rise. Investors seeking insulation from geopolitical uncertainty have historically purchased gold, silver, and platinum. This has been the case throughout 2024, as market participants have bid metals to hedge the risk presented by conflict. Silver has significantly benefitted from this safe-haven play, up 24% year-to-date.
However, silver stands to extend gains due to another market driver: silver supply. Russia is one of the world leaders in silver output, producing 1,200 million ounces in 2023. Further economic sanctions against Russia or war escalation may take this supply offline and send silver higher.
Following the supply-side logic, China is another potential concern. China is the second-largest silver producer in the world, cultivating 3,400 million ounces last year. Many military analysts believe that China is poised to invade Taiwan. If these estimates are accurate, this supply will likely come off global markets, creating a degree of scarcity and increasing global silver demand.
In short, geopolitics will be a huge market driver for the precious metal in Q4. Commodity pricing is largely dependent on what traders and investors believe is going to happen in the future. If Q4 brings talk of war escalation, not to mention a new China/Taiwan front, a silver rally is highly probable.
Spot Silver Price Prediction (XAG/USD): Technical Analysis
As seen in the silver price chart below, the XAG/USD is on a steady upward trend in the daily time frame. From the lows of 8 August, values are up more than 11%. Still, there is considerable room for the upside. 2024’s high (32.517, May) is on the distant horizon but is within reach for a Q4 test.
XAG/USD has a few key numbers to be aware of. First, the big round number of 30.000 has played a huge role in this year’s trade. It’s an important area where buyers and sellers collide; it seems that everyone has an opinion on silver at 30.000 per ounce. There’s a high probability that a period of consolidation around 30.000 develops before a large bullish or bearish move.
As of this writing, the daily bullish trendline is intact. If this support zone is violated, then a significant pullback is likely. However, the Q4 topside targets offer traders a solid upside opportunity. Upon a break over 30.000, a test of 31.757 (July’s Swing High) and the Yearly High (32.517) is highly likely by the end of the year.
The Gold/Silver Ratio (GSR)
The gold to silver ratio, or GSR, is a vital indicator for metals traders. It illustrates the relationship between gold and silver values. Traditionally, traders who use the Gold/Silver ratio trading strategy look to buy silver when the GSR is high and sell silver when it’s low. Why? Value. A high GSR suggests that gold is overbought, and silver is positioned to close this gap. The opposite is also true, with a low GSR indicating that silver may be overbought and a selling opportunity.
At press time, the GSR is near 85. This means that one ounce of gold is worth 85 times an ounce of silver. So, is the current GSR low or high? Is silver a buy or sell?
Over the past 25 years, the GSR has posted a range of approximately 46 to 86. For this period, times of economic strife have seen the GSR fall; boom periods have seen it rise. The current figure of 85 suggests that silver is positioned to gain value relative to gold. This may happen in two ways: a gold sell-off or a silver rally. In either case, silver at least holds its value and likely posts gains.
Many metals analysts point to the Financial Crisis of 2008-12 as being a premier example of silver’s potential upside. From 2008 to 2010, the GSR crashed from 77 to 46. For this period, silver posted three-fold returns, spiking from $11 to above $30. If history repeats itself, a GSR of 85 is a strong buy signal for silver.
The Bottom Line
Politics, geopolitics, supply, and the GSR all point to a bullish silver price forecast for Q4. Of course, there are two sides to every trade! An end to the Russia/Ukraine and Israel/Hamas wars, the onset of a solid disinflationary cycle, the increasing industrial demand for silver, and eliminating US election uncertainty could certainly stifle silver’s upside prospects. However, a culmination of these events before 2025 is highly unlikely.
The bottom line: the Q4 outlook for silver is bullish, with new highs for 2024 being established.
Risk Disclosure: The information provided in this article is not intended to give financial advice, recommend investments, guarantee profits, or shield you from losses. Our content is only for informational purposes and to help you understand the risks and complexity of these markets by providing objective analysis. Before trading, carefully consider your experience, financial goals, and risk tolerance. Trading involves significant potential for financial loss and isn't suitable for everyone.
