Analysis of Silver and Gold Price Trends from a Trader's Perspective [SMM Silver Conference]

On May 16, the 2025 SMM (6th) Silver Industry Chain Innovation Conference, hosted by SMM Information & Technology Co., Ltd. (SMM), co-organized by Ningbo Haoshun Precious Metals Co., Ltd. and Quanda New Materials (Ningbo) Co., Ltd., and supported by sponsors including Fujian Zijin Precious Metals Materials Co., Ltd., Huizhou Yian Precious Metals Co., Ltd., Jiangsu Jiangshan Pharmaceutical Co., Ltd., Zhengzhou Jinquan Mining and Metallurgical Equipment Co., Ltd., Hunan Shengyin New Materials Co., Ltd., Zhejiang Weida Precious Metals Powder Materials Co., Ltd., Guangxi Zhongma Zhonglianjin Cross-border E-commerce Co., Ltd., Suzhou Xinghan New Materials Technology Co., Ltd., Yongxing Zhongsheng Environmental Protection Technology Co., Ltd., IKOI S.p.A, Hunan Zhengming Environmental Protection Co., Ltd., Kunshan Hongfutai Environmental Protection Technology Co., Ltd., and Shandong Humon Smelting Co., Ltd.,featured a presentation by Liang Yonghui, Deputy General Manager of Shandong Zhaojin Gold and Silver Refining Co., Ltd., on the topic "Analysis of Gold and Silver Price Trends: A Trader's Perspective."

Logic of Gold and Silver Price Analysis

The logical hierarchy of gold price drivers differs from that of commodities due to gold's financial attributes. Silver prices are increasingly influenced by copper prices.

Long-term: The macro trend of gold prices opposes paper currency credit.

Medium-term: Guided by expectations of real interest rates, with capital flows dominated by technical factors, speculation, and risk aversion.

Short-term: Market sentiment

Gold price = Real interest rate + Risk aversion + Market sentiment, etc.

Logic from 1997 to present: From 1997-2015, real interest rates and inflation; from 2016-2018, technical factors; from 2019 to present, real interest rates, risk aversion, and market sentiment.

Gold and Silver Price Analysis Framework (Mind Map)

Macro fundamentals: From the perspective of military cycles, the current period is a high-incidence era of revolutions over the past century, indicating a more severe situation than in the 1930s and 1970s.

From the Kondratieff wave (long-wave cycle) perspective, the current situation in the US resembles that of the 1970s, both experiencing high inflation during the Kondratieff depression phase.

Sunspots: A century-long solar storm tide provides long-term support for gold and silver prices.

The rise in global average temperatures will significantly increase the number of hungry people, raising uncertainty risks. Abnormal weather patterns, economic turmoil, and population growth will provide long-term bullish factors for gold and silver (carbon neutrality).

From the perspective of the US dollar index, it has fallen below 100 but is expected to remain volatile, with a bullish impact on gold and silver prices.

The purchasing power of major currencies and commodities has significantly declined relative to gold.

Historically, major currencies were pegged to gold. Following the final collapse of the US Bretton Woods system in 1971, gold was delinked from the US dollar. Since then, with a few exceptions, gold has significantly outperformed all major currencies and commodities as a medium of exchange. A key factor behind this robust performance is the slow growth in gold supply, with gold mine production increasing gradually over time—by approximately 1.7% annually over the past two decades. In contrast, fiat currencies can be printed in unlimited quantities to support monetary policies, such as the quantitative easing (QE) policies implemented after the 2008 global financial crisis and during the COVID-19 pandemic in 2020. These crises have prompted investors to turn to gold as a hedge against currency depreciation risks and to protect the purchasing power of their assets.

Currently, the US Fed's interest rate cut cycle has entered a pause phase.

A series of uncertainties are affecting the outlook for US Fed interest rate cuts.

The minutes of the US Fed's monetary policy meetings indicate that policies such as the Trump administration's tariffs have led to increased economic uncertainty and upside risks to inflation. Therefore, the US Fed will continue to pause interest rate cuts and wait for clearer inflation and economic outlooks before taking further action.

According to statistics, the term "tariffs" was mentioned 107 times in the US Fed's Beige Book report, while terms related to "uncertainty" appeared 89 times, reflecting the US Fed's concerns about the uncertain consequences arising from tariff policies.

Currently, market expectations are for an interest rate cut as early as June, with up to four cuts possible throughout the year.

According to the US Fed's interest rate forecast dot plot, a report based on individual members' predictions of future target interest rates released by the Federal Open Market Committee (FOMC): Looking ahead to the US Fed's future interest rate cut path, the prerequisites for future US Fed interest rate cuts are sustained declines in inflation or significant weakness in the labour market. Trump has repeatedly pressured Powell to cut interest rates, but Fed Chairman Powell has clearly stated that the current stance is to remain on the sidelines. Currently, influenced by the continued weakening of the labour market, market expectations for US Fed interest rate cuts this year have risen to 100 basis points, with a total of four cuts expected.

The ongoing global de-dollarization is causing cracks in the US dollar system, reshaping the world order. With no alternative to gold emerging yet, this supports gold prices.

The macroeconomic cycle influences medium and long-term fluctuations in gold prices. US economic recession cycles often correspond with rising gold prices and falling silver prices.

The risk of economic recession has significantly increased, which is bullish for gold and bearish for silver.

From the perspective of real interest rates, the current static gold price is $1,850.

►Silver Supply and Demand

The latest report released by the Silver Institute predicts that the global silver deficit will narrow to 117.6 million ounces in 2025, a decrease of 21%. This change stems from the combined effects of a 1% decline in demand and a 2% increase in total supply. Silver, as a crucial material for jewelry, electronics, EVs, and solar panels, and with investment value, has experienced a structural market shortage for five consecutive years. It is expected to remain stable in 2025, while demand for jewelry and silverware is anticipated to decline. The report specifically mentions that adjustments to the US tariff policy pose a major risk factor for silver demand this year, and changes in this policy may profoundly impact the supply-demand balance in the global silver market.

Both the total global silver supply and silver mine production have slowed down.

Total demand has weakened somewhat, while industrial silver demand continues to grow, and PV demand growth is limited.

It also elaborates on the narrowing of the silver supply-demand gap; the low level of domestic and overseas silver inventories; the historically high levels of silver CFTC open interest, bulls, and net long positions; the rise in silver investment demand; and the increase in silver ETF holdings.

►Gold-silver price ratio: The ratio of silver to gold is an important indicator for measuring their relative value.

Due to the impact of safe-haven and investment demand, gold surged significantly in April, while silver, lacking safe-haven attributes, saw limited gains, leading to a rapid widening of the gold-silver ratio to 107. After the release of the overheated sentiment in the gold market, gold bulls reduced their positions in stages and exited the market. Meanwhile, silver remained unusually resilient, and the gold-silver ratio once fell below 100.

The long-term upward logic for gold remains unchanged, while silver currently lacks the conditions for a long-term rally. Despite the already high gold-silver ratio, as the correction in gold concludes, bullish capital is expected to return to the market, and the gold-silver ratio may continue to rise in the future.

From the perspective of the Kondratieff depression phase, considering excess premium or a macro bull market, gold has risen, and the excess premium has been realized. Will there be a macro bull market? Bearish in the medium term.

From the perspective of the gold-to-metal and gold-to-agricultural product ratios during the depression, gold is at a high level with excess premium, which is bearish.

From the perspective of central banks' gold buying and selling, central banks' purchases have been on an upward trend in recent years, which is bearish in peaceful times and bullish during war cycles.

From the perspective of capital flow—open interest, a unilateral trend can be maintained.

Exchange rates will reduce volatility:

From the perspective of the silver bull-bear cycle, with eight operational phases, it is bearish.

However, silver's application in PV at 3,000 mt per year is bullish in the long term (due to major industrial technological breakthroughs).

►Key factors

Some thoughts:

1. Gold's correction is similar to that in December 2009.

Most non-ferrous metals have seen their prices halved, while gold has continuously hit new highs, and silver's performance resembles that of copper in the 1980s.

3. Prices tend to rise during interest rate hike cycles, and there is a high probability of rising during interest rate cut cycles as well.

4. The global macro cycle suggests a chaotic world in the future. Under this macro cycle, gold prices may exceed expectations. Could silver reach $49?

5. Opportunities arise from the scarcity of gold, silver, platinum, tin, gallium, germanium, and major industrial technological breakthroughs.

6. Digital currencies represent the greatest uncertainty in weakening the financial attributes of gold and silver.

Gold has the foundation for a major bull market, and silver's long-term target is close to its previous high.

►Forecast:

Its long-term attributes resemble those of copper, with a new cycle trend emerging after March 2024. In the near term, prices are expected to range from $27 to $38, with an overall fluctuating upward trend based on weekly adjustments.

Gold: Is there a foundation for a long-term bull market at $5,000?

Risk warnings: (In the VUCA era)

1. Uncertainty of war and conflicts.

2. Uncertainty of technological revolutions.

3. Uncertainty between the East and the West.

4. Uncertainty of exchange rates.

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