The ups and downs of geopolitical instability continue to create unprecedented volatility in the precious metals market. Escalating tensions in the Middle East have pushed gold prices above 5,200 USD/ounce and silver prices above 86 USD/ounce.
However, a fund manager warned investors to ignore "noise" from news and focus on the fundamental factors that are driving the long-term upward trend.
Jen Bawden - founder and CEO of Bawden Capital - said she sees US President Donald Trump's statements against Iran as part of a broader negotiation tactic and believes that the possibility of escalation is low.
Even as tensions escalate, US and Iranian negotiators are expected to meet in Geneva on Thursday to find a solution to avoid military conflict.
If there is a handshake in Geneva or a breakthrough in the Middle East, "safe haven" transactions will reverse sharply. But this is the important thing: When the fear of war subsides and the political risk compensation pulls gold and silver prices down, the market will face the cold reality of physical supply and demand.
Even in a peaceful world, the amount of silver is not enough to meet the demand from AI data centers, global solar energy deployment and the new generation defense industry" - Ms. Bawden said.
Ms. Bawden predicts that after the adjustment related to Iran, silver prices may fall back to 50 USD/ounce.
I will not chase after turmoil or panic because of news. I patiently wait for a deep correction, because I believe that large buying power is waiting in the international market" - she said.
According to her, many fundamental factors continue to support the price of precious metals. First of all, material deficiencies are still an important structural driving force, as the world has consumed silver exceeding mining output for 6 consecutive years.
Along with that, the US public debt/GDP ratio continues to expand, while both political parties have not shown determination to tighten fiscal policy, making inflation - like a form of "hidden tax" - an easy scenario to happen.
She also believes that silver demand will be driven by the rapid expansion of AI infrastructure and high voltage data centers - areas that require large amounts of silver thanks to superior electrical conductivity, along with uranium to power energy-consuming systems.
Increased pressure in the financial system, especially when commercial real estate loans are adjusted and regional banks face the risk of asset revaluation, may raise the risk of "credit tightening", thereby pulling cash flow back to hard assets without risk of partnership.
In the opposite direction, Ms. Bawden predicts that shares of small-scale silver exploration companies (junior explorers) may adjust 40%. In this period, she prioritizes seeking opportunities in projects in North America.
In the group of major manufacturers, she said she holds Wheaton Precious Metals (NYSE: WPM; TSX: WPM), Hecla Mining (NYSE: HL), First Majestic Silver (NYSE: AG) and Silvercorp Metals (NYSE: SVM; TSX: SVM).
She also expects demand from Asia to increase again as Chinese investors return to the market after the Lunar New Year holiday.
However, if the conflict in the Middle East spreads, she believes that gold prices could quickly rise to 5,500 USD/ounce and silver prices would return to the peak of last month around 120 USD/ounce. In this scenario, she will take profits.
