Why the silver and gold price rally could prove short-lived
Precious metals have rebounded in recent days after a long period of selling pressure, but analysts say gold and silver prices may face a tough time returning to the all-time highs reached earlier this year.
spot silver It traded at $59.47 per ounce in early trading Wednesday (6:33 a.m. ET); That’s up about 6.3% from $55.9 at the end of last week. spot gold It traded at $4,119.04/oz, up approximately 2.4% during the same period.
In a note published Wednesday, ING commodity strategists Warren Patterson and Ewa Manthey attributed the gains to “bargain hunting following recent weakness” rather than “a material shift in the geopolitical or macroeconomic environment.”
Gold and silver spot prices remain well below the all-time highs reached in late January.
Silver may outperform, gold may weaken
Both precious metals remain well below all-time highs achieved earlier this year, following a furious rally that extends through 2025 and beyond. Both reached all-time highs in late January, when spot gold reached $5,589.38 per ounce and silver reached $121.67 per ounce.
While high oil prices brought about by the Iran war shifted market dynamics elsewhere, high interest rates and the strengthening US dollar made precious metals lose their luster.
“Tensions in the Middle East remain supportive for precious metals, while markets weigh inflationary risks from higher energy costs against weaker US economic data,” Patterson and Manthey said.
ING analysts added that gold “will likely remain sensitive to developments in energy markets and US monetary policy expectations” but silver “could continue to outperform if strength in industrial metals continues along with safe-haven demand.”
“Silver’s performance reflects not only its safe-haven appeal but also support from the recovery in the industrial metal complex, especially copper,” they said.
By contrast, analysts at Bank of America see potential for gold prices to deteriorate further after recording their worst quarter in 13 years in the three months to the end of June.
“The death cross signal, elevated net-long positioning, and similarities with major tops increase the risk of a longer, deeper correction,” BofA said in a July 16 note.
“A”death crossA pattern occurs when a stock’s short-term moving average, usually measured over 50 days, falls below its long-term moving average, usually measured over 200 days.
Silver is not at an attractive entry point… yet
UBS is skeptical of silver’s recovery potential and warns against investors starting to build exposure to the metal.
The Swiss bank this week lowered its price target for silver, an attractive entry point, from around $55 per ounce to a range of $48-50 per ounce.
“We believe near-term headwinds for silver will likely continue as rising tensions in the Middle East, higher opportunity costs, and a strong U.S. dollar continue to weigh on investor sentiment,” UBS Strategist Dominic Schnider wrote in a July 20 note. he said. “Silver faces a top-down environment that provides investors with little impetus to increase long positions. Silver prices have yet to find a solid base as investment demand remains erratic.”
Miners say gold and silver outlook continues to brighten
But Diane Garrett, chairman and CEO of U.S.-based gold and silver developer Hycroft Mining, told CNBC’s “Squawk Box Europe” on Tuesday that the recent price declines were a “normal correction,” adding that “this is not a broken bull market.”
“Fundamentals for commodities remain extremely strong, particularly gold, as gold has overtaken U.S. Treasuries as the number one asset class and is becoming the architecture of the financial system,” he said.
“People don’t want to own hard assets backed by another country’s debt, and for 17 months we’ve seen the central bank buying. These are very compelling numbers.”
“And for silver, because silver is not just a monetary metal, it’s an industrial metal, and it’s fueling the AI revolution and supercomputers—all of which you have to have silver for, and there’s no substitute.”
— CNBC’s Joe Wilkins also contributed to this report.
