According to Kitco, the Q2 precious metal outlook report of financial brokerage firm Sucden Financial (UK) shows that gold and silver prices still maintain a positive support base in the long term. However, the market currently lacks a catalyst strong enough to bring precious metal prices to a clear breakthrough.
Sucden Financial believes that high US bond yields and the strength of the USD continue to be factors putting pressure on gold prices. Meanwhile, geopolitical tensions and stable physical demand only play the role of a price support buffer, instead of creating momentum for a new strong rally.
For gold prices to increase significantly, the market needs to see real yields decrease and the USD weaken" - the analysis group said.
Notably, analysts believe that gold has not clearly shown its role as a traditional safe haven asset in recent times, although the geopolitical situation in the Middle East is still tense. The reason is that recent escalations of conflict have caused oil prices to rise sharply, leading to expectations of inflation and US bond yields to rise. This increases the opportunity cost for non-performing assets such as gold.
According to Sucden Financial, gold prices are unlikely to increase sharply if the market does not begin to expect more clearly from the Fed's monetary policy easing, the weakening USD or a sharp drop in real yields.
However, this company still assesses the long-term outlook for gold as relatively positive. Gold holdings through ETFs remain at a historical high despite price fluctuations, showing that institutional capital has not withdrawn significantly from the market.
In the short term, Sucden Financial forecasts that gold prices may continue to fluctuate in a narrow range, with a support zone around 4,500 USD/ounce. To reach the 4,800 USD/ounce mark, the market may need more weaker economic data or clear peaceful signals from the Fed.
For silver, Sucden Financial believes that this metal is benefiting from a prolonged supply shortage and speculative positions on the COMEX exchange are still relatively low after a period of strong correction before.
However, similar to gold, the silver market currently also lacks large enough investment cash flow to form a sustainable rally.
Silver will continue to be supported in the second quarter thanks to supply shortages and speculative positions not being too high. However, for prices to rise more strongly, the market needs to witness ETF cash flow returning along with a more favorable macroeconomic environment" - Sucden Financial said.
The company also noted that silver is more sensitive to economic developments because industrial demand accounts for a large proportion. In the "soft landing" scenario, when inflation cools down and the Fed eases policy without causing the economy to fall into recession, silver may outperform gold thanks to maintained industrial demand.
Conversely, if the economy weakens sharply, reduced industrial demand may cause silver to fluctuate more strongly and be under greater pressure than gold.
