Amid economic uncertainties and ongoing geopolitical turmoil, international prices of gold, silver, and crude oil surged during China's Dragon Boat Festival holiday. An analyst noted that gold prices still have significant room to rise, but now might be a more opportune time to focus on silver.
Michele Schneider, Chief Market Strategist at MarketGauge, stated that gold and silver prices have been consolidating, leading her to maintain a neutral stance on both. However, if silver prices firmly break above $34 per ounce, she will seek to buy, as reaching $40 is only a matter of time.
As of press time, the latest quote for London silver was $34.106 per ounce, down over 1.7% on the day but still up over 3.4% from Friday's close. Schneider emphasized the need for patience in the silver market, as there is still some resistance in the sector, but she hopes to see sustained buying following this breakout.
She stressed that when buyers are strong, it will signal the beginning of a more significant rally in silver.
Gold and silver outperform the US dollar
Despite gold's strong performance this week, Schneider pointed out that the surge in the gold-silver ratio may indicate that silver is poised to shine. Currently, the gold-to-silver price ratio has fallen below the 50-day moving average, possibly signaling an anticipated rotation into silver.
Last month, the gold-silver ratio hit a five-year high, surging to 107, while gold prices also reached a record high of $3,500 per ounce. Schneider expressed that she sees some similarities between the ratio's peak in 2020 and current price movements. In 2020, the gold-silver ratio fell from a historical high to a six-year low, retracing 51% within a year, which also meant a significant appreciation of silver prices relative to gold.
From a fundamental perspective, Schneider expects one of the main factors supporting silver price increases is that the US Fed will cut interest rates as soon as possible, citing the slowing US economy. Lower interest rates, in turn, will support industrial demand for silver, making it a more inflation-resistant asset than gold.
However, Schneider also emphasized that gold remains an important monetary asset with significant value, as it is additionally supported by the declining status of the US dollar, a key reason for strong central bank demand for gold.
