Gold and silver bars of various sizes are stored in a safe on the table of precious metals dealer Pro Aurum.
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Gold prices have been rising to record highs, with spot gold hitting a new high of $2,449.89 an ounce on Monday. Silver and industrial metal copper also hit multi-year highs earlier last week.
While all three are now off their highs, they are still trading near all-time highs, with analysts expecting prices to strengthen over the next 12 months.
What will drive gains in precious and industrial metals?
spot gold It is currently trading at $2,351.3. ANZ Bank said in a recent report that gold prices maintained their upward momentum amid renewed weakness in the U.S. dollar and a pullback in U.S. Treasury yields. But that’s not all.
“While geopolitical risks continue to boost safe-haven demand, a sharp increase in China’s gold demand in the first quarter of 2024 has largely driven gold prices higher,” ANZ strategists wrote.
China is currently the leader in consumer demand for gold and will overtake India in 2023 to become the world’s largest buyer of gold jewelry.
Chinese consumers also lead the way in gold purchases, purchasing 603 tons of gold jewelry last year, a 10% increase from 2022. Data from the World Gold Council shows. The World Gold Council predicts that China’s jewelry demand will remain at a high level this year, even higher than in 2023.
UBS strategists raised their gold price forecasts in a report last week to $2,500 an ounce by the end of September and $2,600 an ounce by the end of the year. The bank’s bullish outlook comes as strong demand from China, coupled with a series of weak U.S. data in April, has fueled a repricing of expectations for a rate cut from the Federal Reserve.
Higher interest rates tend to put pressure on gold because they make U.S. Treasuries, also a safe-haven asset, more attractive to investors.
“We think gold may continue to hit new highs,” Joni Teves, precious metals strategist at UBS, told CNBC’s “Street Signs Asia” on Monday.
Gold’s “Poor Cousin”
What about gold’s close relative, silver? While silver often plays second fiddle to the yellow metal, the two have one thing in common Positive correlation In terms of price, though, the price of silver is lagging.
Nikos Kavalis, managing director of precious metals research consultancy Metals Focus, told CNBC via email: “Silver is arguably more interesting, and ultimately it managed to catch up with gold.” He elaborated that as the market becomes more comfortable and believes in gold, With the bullish trend, more investors are starting to turn to silver.
Silver prices rose above $31 an ounce last Wednesday, reaching a more than decade high, amid heightened investor interest and supply challenges. It is currently trading at $31.6 per ounce.
Large collection of new Ford Fiesta cars at the Ford Motor Company factory in Germany. Silver is widely used for industrial purposes, often in the manufacture of cars, solar panels, jewelry and electronics.
Alex Krause | Bloomberg | Getty Images
“We think (silver) is actually the precious metal that will really benefit the most from rising gold prices. There’s a very strong correlation between the two,” Teves said.
She added that silver is “well-positioned to really outperform gold” when the Fed eases monetary policy, especially as supply and demand fundamentals remain tight.
“Slower mine production growth and strong industrial demand suggest supply is lagging demand, which will push the market into a structural deficit,” said Daniel Hynes, senior commodities strategist at ANZ.
Silver is widely used Industrial applications Commonly used in the manufacturing of automobiles, solar panels, jewelry and electronics.
Metal Focus’ Kavalis said other precious metals such as platinum, palladium and rhodium have all experienced shortages this year, so prices should be supported.
Copper climbs, then crawls
Copper has also had its moment of glory recently, hitting a record high of $10,857 a ton last Tuesday before gradually falling back. The current trading price is US$10,256 per ton.
ANZ said prices for the red metal have been “strongly supported by tight supply” this year as supply tightness intensifies. this International Copper Study Group (ICSG) The company lowered its forecast for a metal supply glut this year due to lower-than-expected output.
Last November, First Quantum Minerals halted production at its Cobre Panamá copper mine, one of the largest copper mines in the world. According to the Supreme Court’s decision and nationwide protests over environmental issues. Anglo American plc, a major producer, Says it will cut copper production In 2024 and 2025, it seeks to cut costs.
We remain confident that copper prices will rise to $12,000/tonne over the next 12-18 months, and to $15,000/tonne in our bull case.
“Strong earnings industrial metal and precious metals “Complexity is supporting financial and physical inflows and bullish sentiment,” Citi strategists said in a note earlier this month, adding that it was a “bullish world for metals.”
The investment’s current base case is for copper prices to consolidate over the next three to six months, but it believes there is still room for further gains in copper prices, depending on the extent of the Fed’s easing and the recovery of global manufacturing.
Citi strategists said: “We remain confident that copper prices will rise to $12,000/ton over the next 12-18 months, and to $15,000/ton in our bull case forecast.”
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