Silver Prices Surge Above $37 per Ounce: How Will Safe-Haven Assets Fare Amid the Middle East Conflict?

On Tuesday, silver prices in London surged significantly, breaking through the $37 per ounce mark with a gain of over 2%. This also marked the fifth consecutive trading day in which silver prices diverged from gold prices. Historical data shows that over the past half-century, silver and gold prices have moved in the same direction on 78.9% of trading days.

UBS analysts pointed out that despite the recent gold-to-silver and gold-to-platinum price ratios being favorable for silver and platinum prices to rise, it is difficult to determine whether market participants are truly engaging in catch-up trading.

Currently, the gold-to-silver ratio has fallen to 91, slightly above the ten-week low of 90.5 reached last Tuesday, but well below the level above 100 seen in April when Trump announced the trade war. Theoretically, when the gold-to-silver price ratio is too high, the market will start to push up silver prices to narrow the price spread between the two metals.

Gold's Logic Remains Unchanged

One point that surprised investors was that amid the ongoing Middle East conflict, gold prices fell on Tuesday, retreating from $3,400 per ounce to around $3,390.

Meanwhile, due to concerns that the Strait of Hormuz shipping lane could be blocked due to the conflict, Brent crude oil prices soared above $78 per barrel on Tuesday, reaching the highest level since late January and more than 30% above the four-year lows seen in April and May.

The movement of gold prices is clearly opposite to that of most safe-haven assets. However, UBS believes that gold's current consolidation is setting the stage for the next round of gains, as bullish sentiment towards gold remains unchanged.

Nicky Shiels, a strategist at MKS PAMP, a Swiss gold bar refining and financial group, added that gold is still expected to reach a high of $3,500, as the outbreak of conflict between Israel and Iran could be a catalyst for nuclear war or an even larger conflict. Industrial metals, particularly overbought ones like platinum, may face stress tests as traditional safe-haven assets will remain more popular.

Carsten Menke, head of research at Julius Baer Group in Switzerland, also told the media that considering the potential consequences of the conflict and the typical timidity of short-term traders in the market, gold's reaction may seem surprising at first glance. However, he emphasized that a closer look reveals that this aligns with the historical pattern where geopolitical shocks do not sustainably push up gold prices.

Notably, many analysts are waiting for the US response to the conflict between Iran and Israel. As US President Trump left the G7 summit early and expressed a reluctance to mediate the conflict, the market is concerned that the US may further support Israel. Amid these concerns, silver prices broke through on Tuesday.