The unprecedented rally in gold, driven by investors positioning for imminent interest rate cuts, may extend further, but analysts are signaling that silver is well-positioned to outshine the yellow metal in the second half of the year.
On Monday, spot gold prices reached $2,178 per ounce, following a settlement at their highest level since 1979 last Thursday. Meanwhile, spot silver prices rose 0.2% to $24.36 per ounce, maintaining momentum after a 5% increase the previous week, settling at its highest level since late December.
The surge in precious metal prices is attributed to growing expectations of U.S. interest rate cuts. Federal Reserve Chair Jerome Powell’s statement last Thursday indicated that inflation is “not far” from the point where the central bank might consider rate cuts.
Gold, often considered a “safe haven” asset during financial uncertainty, has experienced a rally despite high interest rates and a robust U.S. dollar. Marcus Garvey, Head of Commodities Strategy at Macquarie, emphasized that gold’s performance is linked to expectations of rate cuts, which are considered risk-positive.
Garvey noted that near-term U.S. jobs and inflation data will play a crucial role in determining the trajectory of gold prices, currently described as “incredibly resilient.” The range for gold prices could extend to $2,300 or retract to around $2,100 based on these upcoming economic indicators.
Regarding silver, Garvey suggested that surpassing the $24 level would provide room for further upward movement, emphasizing silver’s potential to transition from a relative underperformer to gold to a relative outperformer in the third and fourth quarters of the year.
Traditionally, gold and silver prices exhibit a strong positive correlation, but silver is often referred to as the “poorer cousin” of gold. The Silver Institute’s forecast for global silver demand reaching 1.2 billion ounces in 2024, its second-highest level on record, hints at a promising year for silver.
Randy Smallwood, CEO of Wheaton Precious Metals, highlighted silver’s tendency to follow gold’s lead with a slight delay, often outperforming in the later stages of a rally. With silver’s widespread use in industrial applications, including automobiles, solar panels, jewelry, and electronics, expectations for a “terrific year” are high, especially if global growth picks up in the third and fourth quarters of 2024.
