Silver prices are gradually forming a stable fluctuation zone in the range of 78–80 USD/ounce. However, one bank believes that the risk of a deep decline is still present.
In the latest report on precious metals, Ms. Thu Lan Nguyen - Head of Foreign Exchange and Commodity Research at Commerzbank said that the fair value of silver may only be around 40 USD/ounce, significantly lower than the current level.
According to her, silver prices are being more influenced by gold's upward momentum rather than fundamental factors such as bond yields or the diễn biến of the USD.
It is possible that silver prices have been strongly pulled up by gold prices and increased mainly because they were previously undervalued compared to this metal. In fact, valuation models taking into account gold price factors show that silver price trends are more suitable for actual developments," she said.
Although assessing that silver is being overvalued if considered separately, Ms. Nguyen believes that the current trend is unlikely to end soon. She emphasized that gold is still well supported thanks to its role as a safe-haven asset and risk hedging tool in the context of increasing geopolitical instability.
Commerzbank also said that the safe-haven attractiveness of gold is strengthened by strong buying demand from central banks, as this metal is considered a neutral monetary asset, not politically affected.
Although gold has had recent periods of weakening – due to being used as a source of liquidity for central banks and investors – Ms. Nguyen affirmed that the metal has not yet lost its safe haven role. At the same time, the current environment continues to support silver prices.
After the Iranian conflict broke out, our model value (excluding gold) remained relatively stable and recently only showed signs of a slight decrease compared to reality" - she said. "That shows that part of the'high valuation' situation has been adjusted, bringing silver prices closer to a reasonable level according to fundamental factors. However, the difference is still significant, consistent with the fact that gold is still being valued high. As long as this continues, silver prices are likely to continue to benefit.
Despite believing that silver shows signs of being overvalued, Commerzbank still maintains a positive stance on this precious metal. Last month, the German bank raised its gold and silver price forecast.
Accordingly, Commerzbank expects the US Federal Reserve (Fed) to cut interest rates in the second half of the year, thereby possibly bringing gold prices back above the 5,000 USD/ounce mark. The upward momentum of gold is forecast to pull silver prices up to about 90 USD/ounce.
