(Kitco News) - While the gold market takes a break and consolidates its recent record-high gains of around $2,350, there is still plenty of potential within the precious metals market, as analysts recommend traders look at the potential value of silver and PGMs.
Silver has started to attract attention after pushing to a three-year high at $28.655 an ounce. At the same time, the gold/silver ratio is trading around 83 points, down sharply from 90 points seen a month ago.
Because of its industrial demand, some analysts have noted that silver could be a better inflation hedge as it remains stubbornly elevated.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, said that along with higher gold prices, silver is also benefiting from surging momentum in copper.
He added that although silver has seen a significant move, it still has plenty of potential to run higher.
“The metal trades up by around 9% in the last week, after the break above USD 26 finally helped get the ball rolling, and while support has been established in the USD 27 area, the metal has yet to make a decisive break above USD 28 on route to the May 2021 high at USD 28.75,”
As to silver’s potential, technical analysts at Bank of America see prices above $30 an ounce.
“Bullish continuation patterns and trend line breakouts suggest that silver prices are positioning to catch up to the gold rally by rallying to the 2021 highs just above $30/oz with additional upside potential of the 61.8% retracement at $35.23/oz,” the analysts said a recent report. “While gold's RSI momentum is already considered high or stretched, silver momentum is only starting to trend higher with room to trend higher with price.”
Christopher Lewis, market analyst at FXempire, said although silver looks strong, it could see some consolidation as it has been unable to break resistance at the $28.50 level.
“Certainly, it looks like a market that could use a bit of a pullback. I wouldn’t advocate shorting here, regardless of the setup, just simply because of the momentum,” Lewis said in a note Wednesday. “In general, this is a market that looks very much like a buy on the dips, but we have to ask questions about whether or not we can keep up this momentum. I doubt it. I think what we need is some simple consolidation in this area for everybody to get used to these higher prices.”
However, silver is not the only precious metal to watch; some analysts note that platinum is attracting new attention as prices test resistance at $1,000 an ounce.
However, commodity analysts at TD Securities said that platinum might have to break long-term resistance at $1,080 before momentum kicks into higher gear.
“Unlike the rest of the commodities complex, price action in platinum markets continues to point to algo supremacy, with a strikingly elevated correlation between flat prices and our estimates of CTA flows, suggesting few other speculative cohorts are currently active,” the analysts at TDS said in the note. “While CTAs still have substantial dry-powder to buy, prices will now need to break north of $1080/oz before the next buying program is catalyzed.”
Although platinum’s price action has turned more friendly this week, Ole Hansen said it still faces some hurdles as it tries to attract some investor attention.
“The platinum market is expected to see a widening deficit in 2024, but until we see inventories that built up in recent years being consumed, the market will likely struggle to attract much needed demand from investors in ETFs who have kept a near-unchanged holding around 2.9 million ounces since November, down from a record 4 million ounces in July 2021,” he said in a note Wednesday.
Carsten Fritsch, precious metals analyst at Commerzbank, highlighted that the price premium between gold and platinum hit a record high on Friday with gold 2.5X pricier than platinum. At the same time, the German bank is also modestly bullish on palladium.
“We consider the price weakness in platinum and palladium to be unwarranted. There is catch-up potential for both precious metals, as indicated by yesterday's price increase of just under 4% for platinum and 4.3% for palladium. The low price level is likely to lead to further production cuts and thus tighten supply. Demand is likely to be boosted by the looming interest rate cuts and the economic recovery we expect,” Fritsch said in a note.
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