The sharp rise and fall in precious metal prices has affected the nerves of the market.
After nearly a month of adjustment, precious metals, which had risen like a rainbow before, once again ushered in a moment of highlight. The latest data show that the spot gold price in London hit as high as 2422.Baccaratdiamond.709 US dollars per ounce, approaching the all-time high of 2431.78 US dollars per ounce set on April 12; the spot silver price in London exceeded 30 US dollars per ounce for the first time in more than a decade, reaching a peak of 31.592 US dollars per ounce.
Analysts said that in this round of precious metals market recovery, gold prices continue to set an all-time high, so gold has attracted more market attention. Despite its impressive performance, silver has not yet surpassed its all-time peak of $49.79 an ounce hit in 2011. However, supported by potential factors such as a widening gap between supply and demand, silver may be at the forefront of the strongest upward cycle in history.
Silver has hit a ten-year high.
After entering May, after a brief consolidation, precious metal prices have risen steadily again.
Spot gold prices in London hit a peak of $2422.709 an ounce on May 18, local time, approaching the all-time high of $2431.78 on April 12, while spot silver prices in London peaked at $31.592 an ounce, the highest level since mid-February 2013, and rose more than 6 per cent on the day, according to Wind.
Spot gold in London since the beginning of this year
Silver price trend chart
So far this year, spot gold and silver prices in London have risen 17.06% and 32.43% respectively.
The rise in market expectations for the Fed's interest rate cut is an important boost to the sharp rise in precious metal prices. Shen Enxian, chief strategist at Galaxy Futures, said: "the US April CPI data was weaker than expected, the superimposed economic data was weak again, market expectations for Fed interest rate cuts increased, market sentiment improved, and precious metal prices performed strongly in the short term."
Gong Ming, an analyst at Jinrui Futures, said that in the future, if US inflation data are weaker at the same time and economic employment is still lower than expected, the Fed may cut interest rates earlier and further push up precious metal prices. At present, the United States is at the end of the policy tightening cycle and is under pressure from a sustained economic downturn. It is expected that the long-term allocation value of precious metals will continue to appear under the expectation of interest rate cut and the ferment of risk aversion. "
Judging from the historical impact of Fed interest rate cuts on precious metal prices, Gong Ming said that the two rounds of interest rate cuts in 1995 and 2019 were implemented against a background of little downward pressure on the economy. These two rounds of interest rate cuts are preventive interest rate cuts, and the Federal Reserve will stop after two or three interest rate cuts.BaccaratdiamondCut interest rates.
On the performance of gold prices at that time, Gong Ming said: "Gold prices performed better in the early stages of interest rate cuts, and there is still a certain upward momentum after the formal start of interest rate cuts." Compared with the current Fed monetary policy cycle, the rate cut trading in precious metals may not be over yet. "
Silver is structurally in short supply
Silver has not performed as brightly as gold in this precious metal rally.
Liu Guangyuan, an analyst at Huaan Futures, said: "in this round of precious metals market recovery, gold prices continue to set an all-time high, so the gold market has attracted more attention." Although silver has performed well, the price has not yet exceeded the historical peak of $49.79 / oz reached in 2011. "
Mr Liu also said that although the silver market had been mediocre over the past few years, there were a number of potential factors suggesting that silver could be at the forefront of one of the strongest upward cycles in history.
Silver is well known for its applications in jewelry manufacturing, silverware production, coin casting and gold and silver souvenirs, but these traditional uses are not the main source of silver demand. In fact, the industrial sector is the biggest driver of silver demand.
Liu Guangyuan said that the industrial demand for silver covers a number of key areas, from high-tech electronic products to renewable energy to health care. The combined effect of these needs makes the silver market diversified and highly complex. With the progress of science and technology and the development of emerging markets, it is expected that the industrial application prospect of silver will be broader. "with the continuous progress of technology and the steady growth of the global economy, the versatility of silver, especially in electronics, photovoltaic and a variety of emerging industrial applications, makes its demand continue to rise."
However, there has been a shortage of silver in recent years because supply falls short of demand. Between 2020 and 2023, silver supply grew by only 0.3 per cent, while demand grew by 5.2 per cent, and cumulative inventories fell by 540 million ounces in just three years, Mr Liu said. In 2023, global mineral silver supply fell 6.3 million ounces to 830 million ounces, down 0.7 per cent from a year earlier.
At present, the global supply of silver is relatively stable, but the production of silver mines is experiencing a decline. This phenomenon is in sharp contrast to the rapid development of new energy and photovoltaic industry. With the technological progress and market expansion in these areas, the demand for silver is increasing day by day, resulting in a structural shortage of supply in the market. It is expected that this imbalance between supply and demand may be difficult to alleviate in the short term, and may even be further aggravated. " Liu Guangyuan said.
The organization is optimistic about the future performance.
Although precious metal prices have risen sharply so far this year, industry insiders are still optimistic about their future performance.
As far as gold is concerned, Goldman Sachs pointed out in a recent report that the "gold rush" of central banks, especially in emerging markets, has supported higher gold prices for a long time, and that future geographical conditions and financial shocks will continue to drive central bank demand for gold. With strong demand from emerging market central banks, Asian households and expectations that the Fed is expected to cut interest rates, the gold rally may only have just begun, and gold is expected to rise to $2700 an ounce by the end of the year.
Xiong Yuan, chief economist of Guosheng Securities, also said that in the future, under the influence of factors such as currency overissue and geographical situation, the central bank's purchase of gold may still be a major trend. Although there may be a correction risk in short-term gold prices under the disturbance of trading factors, the overall view of gold is still on the high side during the year.
Regarding silver, Liu Guangyuan said that although there is uncertainty in the market, the fundamentals of silver are still strong. In particular, it is necessary to pay close attention to changes in incremental demand in the industrial sector, especially the photovoltaic industry, which will be a key factor affecting the future trend of the silver market. As the global emphasis on clean energy and sustainable development continues to increase, the market demand for silver, as a key material in the photovoltaic industry, is expected to further increase, thus bringing new growth opportunities to the silver market. "There is reason to believe that the silver market may be on the verge of a bull market." Liu Guangyuan said.
As precious metals prices have reached near previous highs, caution is also needed when operating. Shen Enxian warned that one or two months later, U.S. inflation data may increase more than expected again due to loose expectations of financial conditions, and efforts to control inflation will be weakened, which in turn will delay expectations of interest rate cuts, thus suppressing the market. In addition, the precious metals market is seriously "rushing". After periodic speculation, before the Federal Reserve's interest rate cut was delayed and the market was overbought, the possibility of price adjustments increased.
Review: Xu Zhao
Editor: Ya Wenhui