Gold prices have recently reached record highs, with spot gold hitting $2,449.89 per ounce before stabilizing lower. Silver and copper have also experienced multi-year highs, with all three metals expected to strengthen in the next year. Factors driving this rally include a weakened U.S. dollar, retreating U.S. Treasury yields, and increased gold demand in China. Chinese consumers have been leading the way in gold jewelry purchases, with analysts predicting continued elevated demand in the coming year.
UBS strategists have raised their forecasts for gold to $2,500 per ounce by September and $2,600 by year-end. They attribute their bullish outlook to strong Chinese demand and soft U.S. data in April, leading to expectations of Federal Reserve rate cuts. Despite higher rates making gold less attractive, UBS anticipates the metal to continue making new highs. Silver, often seen as gold’s “poorer cousin,” has also seen significant gains, reaching over $31 per ounce last week. As the market becomes more confident in gold’s rally, investors are turning to silver, with both metals sharing a positive correlation in prices.
Silver’s use in industrial applications such as automobile manufacturing, solar panels, and electronics, coupled with supply challenges, has made it an attractive investment alongside gold. Other precious metals like platinum, palladium, and rhodium are also facing deficits this year, further supporting their prices. Copper, while also experiencing a recent spike, has been impacted by supply constraints and lower production forecasts. Despite the current price consolidation, Citi strategists believe copper still has room to rally further, with a potential path to reach $12k/ton or even $15k/ton over the next 12-18 months.
The recent rally in gold, silver, and copper prices has been driven by a combination of factors such as a weakened U.S. dollar, retreating Treasury yields, increased demand in China, supply constraints, and lower production forecasts. Gold’s record highs and silver’s catch up with gold prices have led to more investor interest in these metals. Silver remains well-positioned to benefit from higher gold prices, especially with tight supply and demand fundamentals. Copper, while experiencing price consolidation, still has room to rally further depending on factors like Federal Reserve easing and global manufacturing recovery. The overall outlook for precious and industrial metals remains bullish, with potential for continued gains in the next 12-18 months.
