Silver Bull Run May Be Coming, Aided by Robust Fundamentals and Russian Central Bank Buying

Since the beginning of this year, silver prices have surged by over 30%, outperforming gold, as investors have sought to expand their exposure to safe-haven assets amid the backdrop of the global trade war.

However, analysts believe that there is still room for silver prices to rise, driven by tight physical supply and growing investment demand. Citi Group forecast in a report on Wednesday that silver prices would rise to $40 per ounce in the next three months, further adjusting upward from the previous target price of $38.

Citi analysts pointed out that the rise in silver prices is not just a catch-up with gold prices but also a reflection of strong silver fundamentals. Additionally, silver prices are expected to benefit from expectations for US Fed interest rate cuts.

Tim Treadgold, a senior mining journalist in Australia, revealed another factor, stating that there are signs that the Russian Central Bank is buying silver in large quantities, which will affect silver prices. He did not provide evidence of the Russian Central Bank's purchases but noted that since the bank announced its purchase of silver as reserves in September last year, silver prices have consistently outperformed gold.

Has a big buyer emerged?
Treadgold said that gold has been the star of the commodity sector over the past three years. However, there are also signs that investors have paused their gold investments. Since 2022, gold prices have more than doubled, initially driven by central bank purchases and later joined by private investors entering the market.

He added that the rise in silver prices has been relatively slow, mainly due to the lack of big buyers like central banks. However, if the Russian Central Bank is quietly building up its silver reserves, other central banks in countries with good relations with Russia may follow suit.

On September 30, 2024, the Russian government revealed plans to invest up to 51 billion rubles ($535.5 million) over the next three years to increase its precious metal reserves. According to its draft federal budget, in addition to gold, Russia also seeks to expand the scope of its precious metal reserves to include silver and platinum group metals.

The draft budget does not include details about potential purchase plans, but some analysts believe that including silver in central bank foreign exchange reserves may attract new investor interest and re-establish it as an official monetary metal.

Willem Middelkoop, founder of the Commodity Discovery Fund, is one of the first to pay attention to the Russian Central Bank's move. He said that although 60% of silver demand comes from industrial applications, investors should not completely overlook silver's role as a monetary asset.

Meanwhile, Citi also predicts that gold will enter a plateau phase relative to silver. Analysts said that the market may have already seen the peak in gold prices, which was $3,500 per ounce set in April. The reason for the pullback in gold prices is weakening investment demand and an improved economic outlook.

Please note that this news is sourced from https://www.cls.cn/detail/2087936 and translated by SMM.