Gold to Get Support of Fundamentals, Gains Limited for Silver
After historical rallies corrections were due
Chennai: While both gold and silver prices saw sharp corrections on Friday, the trajectory might be different for the precious metals going ahead. While gold may continue to gain on geo-political and geo-economic concerns despite the short term corrections, gains could be limited for silver.
After historical rallies corrections were due. Silver has moved up from $35 to $125 an ounce in the past one year, a leap of 257 per cent. At $125 an ounce, silver can be replaced by copper for industrial purposes. Hence, the buying for industrial purposes can slacken.
Further, the gold-silver ratio is at 50 levels (50 ounces of silver for one ounce of gold). It has fallen from 107 in April to a low of 43.5 in January. Historically, gold-silver ratio remains around 72 levels and hence, prices of both metals are likely to recalibrate, leaving more room for upside to gold than silver.
This will help gold gain more in the medium term, but remain volatile in the short term.
The long-term bullish structure of precious metals is intact with most of the fundamentals, including central bank buying, geopolitical fragmentation and currency uncertainty, supporting the metals.
“Shifting from silver to gold allows investors to remain invested while significantly reducing downside risk,” finds Kedia Commodities.
