The price of silver has surged past the $34 per ounce threshold, reaching heights not seen since late October.
This upward movement comes as gold prices also experience a notable increase, suggesting a potential correlation between the two precious metals.
Various factors could be contributing to this recent price surge, including economic uncertainty, geopolitical tensions, or a shift in investor sentiment towards safe-haven assets like precious metals.
The current value is only about one US dollar below the 12-year high that was reached approximately five months ago. This indicates that the current value is nearing a significant peak, suggesting a strong upward trend in recent months.
“This is likely to be reached soon given gold’s continuing rally,” Carsten Fritsch, commodity analyst at Commerzbank AG, said in a note.
Silver price forecast
Given the evolving market dynamics and our latest analysis, Commerzbank have revised their price forecast for silver upwards.
The German bank now anticipates that the price of silver will reach $35 per ounce by the end of the year. This is an increase from the bank’s previous forecast of $33 per ounce.
At the time of writing, the most-active contract of silver on COMEX was at $34.270 per ounce, down 1.7% from the previous close.
Given the current market conditions and based on Commerzbank’s analysis, the bank anticipates that silver will appreciate in value relative to gold.
This shift in the price dynamic between the two precious metals will result in a decrease in the gold/silver ratio.
Fritsch projects that this ratio will decline to approximately 81.
This figure aligns with the average gold/silver ratio observed over the preceding five years, and potentially indicates a return to a more historically typical relationship between the prices of these two precious metals, according to the German bank.
Gold’s rise
The recently weakened US dollar, which has lost all the gains it made since Donald Trump’s US election win in early November, has partially contributed to the rise in gold prices since late February.
“The influence of the US dollar on the gold price can also be seen from the fact that gold prices in other currencies such as the euro, pound sterling,” Fritsch said in a report.
Furthermore, US equity markets have undergone a significant correction, falling below their early November levels.
This has been accompanied by a marked decrease in US bond yields since mid-February and a rise in expectations for Federal Reserve rate cuts.
“This is because Trump’s erratic tariff policy and the announced layoffs of federal employees by the Department of Government Efficiency (DOGE) led by Trump adviser Elon Musk triggered great uncertainty, which led to a deterioration in sentiment among US companies and US consumers,” Fritsch added.
“Even a US recession is no longer ruled out completely on the market.”
Inflation expectations
US import tariffs, both current and anticipated, have caused a significant increase in consumer inflation expectations.
Furthermore, US company purchasing managers reported a sharp increase in input prices, presenting the Fed with a dilemma.
The deteriorating economic outlook supports the case for additional interest rate cuts. However, mounting inflationary pressures suggest maintaining the current key interest rate.
It will therefore be interesting to see what Fed Chairman Powell has to say at the press conference after the Fed meeting on Wednesday.
“We expect fewer rate cuts than the market, which according to Fed Funds Futures currently expects 60 basis points of rate cuts by the end of the year,” according to Fritsch. However, as many as 75 basis points were even priced in last week.
Gold price forecast
Given the significant price increases and the high level of uncertainty, Commerzbank has also revised their mid-year gold price forecast upward to $3,000 per ounce from $2,700 an ounce previously.
“For the end of the year, we expect a gold price of USD 2,850 (previously USD 2,650),” Fritsch said.
He added:
Should the Fed cut interest rates more strongly despite the increased inflation risks, the price of gold would continue to rise.
Meanwhile, the bank expects silver prices to continue getting support from rising industrial demand. These include photovoltaics and electromobility.
The Silver Institute reports that the silver market is expected to experience a substantial supply deficit this year. This follows four years of undersupply caused by record-high industrial demand.
The post Silver poised to hit $35/oz as gold rallies to new highs appeared first on Invezz