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Asset Watch
Thursday, October 3, 2024
An October fright fest struck the financial markets, as the bulls began the fourth quarter on the defensive. With geopolitical tensions rising, and uncertainty over future rate cuts and corporate earnings lingering, the bearish cocktail sunk risk-on assets.
However, precious metals benefit from global turmoil, so could a storm surge jolt silver to $35 in the months ahead?
On Sep. 30, Goldman Sachs analysts raised their early-2025 gold price target to $2,900, telling clients, “We reiterate our long gold recommendation due to the gradual boost from lower global interest rates, structurally higher central bank demand, and gold’s hedging benefits against geopolitical, financial, and recessionary risks.”
While gold has set numerous record highs in 2024, silver is still a long way from its 2011 peak. Both precious metals normally move in the same direction, meaning silver could offer more upside if the bull market persists.
Exhibiting an interesting pattern on the monthly chart, silver ended September above the 50% Fibonacci retracement level, which had been resistance. As a result, the breakout should have bullish implications.
After closing above the 61.8% Fibonacci retracement level in 2020, silver came within ~50 cents of touching the 50% level. In other words, after closing above one Fibonacci retracement level, silver typically makes a run toward the next one.
If a similar development unfolds in 2024/2025, a rally to the 38.2% Fibonacci retracement level implies a silver price near $35.
Not far behind the 50% Fibonacci retracement level, the 5-month moving average (the blue line) provides additional support near $30. The level has been a key trend indicator during previous silver bull markets and should offer solid support when combined with the 50% Fibonacci retracement level.
If $30 is silver’s new floor and $35 is the next resistance target, the white metal has roughly $4 of upside and $1 of downside based on rounding the current price down to $31. The positive risk-reward outlook is constructive for the silver bulls.
Consequently, aggressive traders may prefer to enter a position immediately, while a lower-risk strategy could be to wait for a pullback near $30 and enter once the price stabilises.
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