Grégoire KOUNOWSKI, Head of Advisory by Norman K.
After suffering a historic fall since Friday (-10% for gold and -30% for silver), gold rose by more than 6% on Tuesday morning on futures contracts, while silver futures gained 12%. Shares and ETFs in international mining companies also rose at the start of trading.
Last Friday, the mood was very different. The appointment of Kevin Warsh as head of the Federal Reserve – a candidate considered less likely to bow to pressure from Trump – and the raising of margin requirements for trading precious metals in the United States and China contributed to the fall in precious metal prices. In three days, gold fell 13%, but it was silver that collapsed (-31%), while ETFs tracking gold and silver lost nearly £150 billion in value.
Have we witnessed a real structural turning point, or rather an exaggerated reaction by the markets based on short-term indicators? At first glance, the intentions of precious metal investors have not necessarily deteriorated. Despite obvious overheating in January and the sharp correction that followed, overall demand for gold is expected to remain high in the coming months. On the other hand, the high volatility of silver was to be expected, given that the market is much smaller than that for gold and retail investors play a more significant role.
However, a sharp increase in demand for silver is expected over the next 10 years. This is mainly for industrial reasons, with the democratisation of photovoltaics and the growing development of new cellular technologies. By 2030, demand is expected to be between 48,000 and 54,000 tonnes per year, while supply will only reach 34,000 tonnes. In this scenario, only 62 to 70% of demand would be met.
Although they are more wary of silver, many analysts believe that gold’s slump is only temporary, as the yellow metal remains the ultimate safe haven, particularly in the face of inflation and the uncertainties resulting from decisions taken in the United States. Its price should remain buoyed by sustained demand from central banks and investors. Thus, despite its sudden fall, the current value of gold presents new investment opportunities for investors who have not yet jumped on the bandwagon and allows them to rebalance their portfolios in an unpredictable and changing international context.
