Silver: The Precious Metal of the Future? An In-Depth Analysis Using Gann Techniques and the Growing Physical Scarcity

The Scarcity of Physical Silver: An In-Depth Analysis

The physical silver market is facing a growing supply shortage that could have significant repercussions on prices. According to the Silver Institute, the global silver deficit is expected to increase by 17% in 2024, reaching 215.3 million troy ounces. This increase is due to a 2% growth in demand, mainly driven by industrial consumption, and a 1% decrease in total supply (MINING.COM) (INN).

Factors Contributing to the Scarcity

1. Growing Industrial Demand: The demand for silver is constantly increasing, especially in the electronics, electric vehicles, and solar panel sectors. In 2024, industrial demand is expected to increase by 9%, reaching 710.9 million ounces, surpassing the record set in 2023 (INN).

2. Decreasing Stockpiles: Silver inventories at COMEX, the London Bullion Market Association, and the Shanghai Gold Exchange have decreased by 40% over the past three years. This depletion of stocks is contributing to rising silver prices despite the continuous deficit (INN).

3. Declining Mining Production: Total mining production is expected to decrease in 2024, with an estimated 823.5 million ounces, while the amount of recycled silver is expected to remain stable at 178.9 million ounces (INN).

Technical Analysis: Gann's Square of 144

Gann's chart is a powerful tool for the technical analysis of silver prices. Using the weekly timeframe, Gann's Square of 144 highlights that silver has completed a significant accumulation phase and broken out of a price congestion zone. Currently, silver prices are around $31.50 per ounce, with technical indications suggesting a potential rise above $40 in the near future. If the bullish breakout from the latest setup is confirmed in the coming weeks, it could lead to a sharp price acceleration, further consolidating the bullish momentum.

Key Indicators

1. Gold Price:

   • Historical Relationship: Gold and silver are closely correlated. When gold prices rise, silver tends to follow. Currently, gold prices are increasing, indicating a positive trend for silver.

   • Current Levels: Silver has already reached and surpassed $28/oz, a key level now aiming towards $34/oz. The next target is to surpass $40/oz.

2. Euro Value:

   • Correlation with the US Dollar: The euro, inversely correlated with the US dollar, affects silver prices. A weak dollar makes silver cheaper for buyers in other currencies, increasing demand.

   • Recent Stability: The stability of the dollar has kept silver prices high, providing fundamental support to the precious metal.

3. Inflation Expectations:

   • Investment during Inflation: Silver is historically a safe haven during periods of high inflation. With inflation decreasing less than expected, investors turn to silver to protect their purchasing power.

   • Trending: Geopolitical tensions could trigger a domino effect on commodities, fueling rising inflation, which could represent a strong bullish continuation signal for silver.

4. Futures Market Positioning (CoT):

   • Bullish Data: The Commitments of Traders (CoT) report shows a very bullish position on silver, indicating that investors expect prices to rise.

   • Price Support: Positive positioning in silver futures supports the forecast of rising prices, with speculators maintaining significant long positions.

Price Outlook

Based on technical analysis and key indicators, the price of silver is expected to surpass $40/oz by the end of 2024. This level would represent a significant breakout, indicating potential further growth towards historical highs.

Conclusion

The price forecasts for silver in 2024 confirm a bullish outlook. We expect silver to easily reach $34 in the short term and our bullish target of around $40 in the medium term. Any further movement above this level could indicate silver's intention to challenge historical highs.

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