Investing.com – prices hit record highs, hitting a new high of $2,449.89 an ounce on Monday. also hit multi-year highs earlier last week and posted solid gains as well.
Although all three prices are currently off those record highs, they remain close, with analysts expecting prices to rise over the next 12 months.
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What will drive the rise in precious and industrial metals?
With spot gold currently trading at $2,342, ANZ Bank said in a recent note that gold prices have maintained their bullish momentum amid further weakness in the US dollar and falling yields. of the US Treasury. But that's not all.
ANZ analysts wrote: “While geopolitical risks continued to drive safe-haven demand, the surprising increase in demand for gold in China in the first quarter of 2024 was a major contributor to the price rise. »
China is currently the world's largest consumer of gold, having overtaken India in 2023 to become the world's largest buyer of gold jewelry.
Data from the World Gold Council showed that Chinese consumers were at the forefront of gold buyers, purchasing 603 tonnes of gold jewelry last year, an increase of 10% from 2022. The World Gold Council s expects demand for Chinese jewelry to remain high this year, perhaps even higher than in 2023.
At the same time, analysts at UBS bank raised their gold price forecasts to $2,500 per ounce by the end of September and to $2,600 by the end of the year. The bank's bullish forecast is attributed to strong Chinese demand, as well as a series of weak U.S. data in April that prompted a revision to forecasts for lower U.S. interest rates.
High interest rates tend to put pressure on gold because they make Treasury bonds – which are also safe havens – a more attractive option for investors.
Johnny Teves, precious metals strategist at UBS, told CNBC: “We believe gold can continue to reach new record highs.”
Gold's poor cousin
Nikos Kavalis, managing director of precious metals research consultancy Metals Focus, told CNBC: “One could argue that silver has been more interesting – and ultimately seen strong rallies like gold. »
Silver soared to more than $31 an ounce, hitting its highest level in more than a decade last Wednesday, amid growing investor interest and a shortage of the precious metal. It is currently trading at $31.31 per ounce.
Teves said: “We believe that silver is actually the best precious metal to truly benefit from the rising gold price.” He emphasized that there is a very strong relationship between the two.
He added that when the Federal Reserve cuts rates, silver would be “well-positioned to really outperform gold,” especially with the metals shortage.
Daniel Hynes, senior commodities strategist at ANZ Bank, said: “Slowing mining production growth and strong industrial demand indicate that supply is falling short of demand, which will keep the market in a deficit structural. »
Silver is widely used for industrial purposes and is commonly incorporated in the automobile, solar panel, jewelry, and electronics industries.
Metals Focus' Kavalis said other precious metals like platinum, palladium and rhodium are also experiencing deficits this year and so we could see significant price increases.
Copper shines
Copper prices have also seen strong gains recently, reaching an all-time high of $10,857 per tonne last Tuesday before retreating.
ANZ Bank said copper prices were “well supported by supply shortages” this year amid growing supply constraints.
Last November, First Quantum Minerals (OTC:) halted production at its Cobre Panama copper mine, one of the world's largest copper mines, following a Supreme Court ruling and protests in nationally regarding environmental concerns. Anglo American (JO:), a major producer, announced that it would reduce its copper production in 2024 and 2025 as part of its cost-cutting efforts.
Citigroup strategists said in a note earlier this month that they expected copper prices to rise over the next three to six months, but they believed copper still had room to rise, depending on the extent of interest rate cuts in the United States and the global manufacturing recovery.
Citigroup strategists said: “We remain firmly convinced that copper is on its way to $12,000 per tonne, and $15,000 per tonne under our bullish forecast for the next 12 to 18 months. »