In an interview with Kitco News, Mr. Nitesh Shah - Director of Commodity and Macroeconomic Research at WisdomTree - said that although both metals face volatile macroeconomic contexts, gold is in a better position than silver as a monetary asset in the coming months.
Mr. Shah believes that last month's increase was unusually speculative. "We have seen gold fluctuate more strongly than Bitcoin, which is really abnormal," he said.
Although the market may need more time to "discharge" speculative factors, Mr. Shah said gold is being supported by the increasingly large scale of buyers, including Chinese insurance companies and pension funds, central banks, as well as demand for digitized and tokenized gold.
At the same time, concerns about "fiscal dominance" - that is, the central bank's ultimate obligation to ease policies to support government overborrowing - continue to lay a solid foundation for gold prices.
Developments in the options market also reflect persistent optimism. Mr. Shah said that options bought at prices of about 10,000 USD and 15,000 USD are attracting a "significant volume of open positions", like "lotteries" that investors bet on in the context of "anything can happen".
However, although the accumulation phase of gold is assessed as positive, Mr. Shah warned that the upward momentum of silver may be more vulnerable.
Silver is a bit more complicated because it has had a very strong rally," he said, adding that considering the gold/silver ratio, the index is "much lower than the historical average", implying that silver is currently relatively expensive compared to gold.
Unlike gold, where demand mainly comes from investment and currency hoarding, silver depends heavily on industrial demand and is therefore more sensitive to prices in the real economy.
“Because silver is much more industrial, I am concerned that industrial demand may be squeezed as prices rise sharply,” Mr. Shah said.
Therefore, he believes that it will not be surprising if silver weakens relatively compared to gold in the remainder of the year. He predicts that the gold/silver ratio may return to the 60-70 zone.
However, there is still an unpredictable factor: Individual investors may continue to prefer silver simply because its absolute price is lower than gold.
Regarding the factor that could trigger a new upward momentum for gold and bring prices back to a record high last month, Mr. Shah emphasized that investors need to closely monitor global monetary policy, in which the US Federal Reserve (Fed) plays a leading role.
Currently, the US central bank maintains a relatively neutral policy stance and is not rushing to cut interest rates before the summer. However, according to Mr. Shah, monetary policy cannot be separated from fiscal reality.
Public debt is increasing everywhere. If debt cannot be controlled... then central banks will have to react in one way or another," he said.
He believes that when debt repayment costs become unsustainable and the bond market falls into chaos, central banks will be forced to take drastic action, through interest rate cuts or other forms of easing. In the current context, expanding the balance sheet may be a more acceptable political option.
Notably, this is not just a problem for the US alone. Japan under Prime Minister Sanae Takaichi is considering large-scale fiscal measures to stimulate the economy. Meanwhile, European countries are also increasing deficit spending to rebuild infrastructure and strengthen defense capabilities.
According to Mr. Shah, expanding the balance sheet globally will continue to support gold prices. In the context of prolonged global economic instability, Mr. Shah believes that the proportion allocated to gold and silver in the investment portfolio is still very low and there is still much room for growth, even though prices are already high.
He emphasized that portfolio restructuring can become a strong structural driving force for precious metals. Many institutional investors currently only hold a very small proportion, so just modest adjustments can have a major impact.
