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In contrast with 2021, when both gold and silver ended the year lower, gold has returned 7% and silver, 5% in 2022 (year to date). According to the Motilal Oswal Financial Services’ latest Precious Metals Quarterly Report, gold on the COMEX (The Commodity Exchange Inc.) is expected to trade in the range of USD 1,800 to USD 2,050 from a 12-month perspective. Silver prices are expected to trade higher towards USD 26.45 and USD27.15 with strong support placed at USD 24.20 and USD 23.70. With buying on dips strategy, the rally might extend over USD 30 over the next 12 months.
In 2021, Silver ETFs (exchange traded funds) saw an overall outflow of 865 tonnes. In 2022, silver ETF have seen inflows of 17,975 tonnes so far. “Demand consumption from the renewable sector could start to pick up as well. The whole story around decarbonization in COP26 and the whole ESG transition that’s taking place in the economy will push demand for green technologies," says the report. According to the Silver Institute, there could be a supply deficit for the silver market in 2022, amidst the efforts regarding the de-carbonization push and rise in overall industrial demand.
The Report also points out that the Gold/Silver Ratio which went from a high of 127 in 2020 to a low of 65 last year, has been hovering in the range of around 75-79. Technically, this has created a good picture for gold, although, if silver picks up pace the ratio could fall and gold prices could move in a sideways range.
On the domestic front, investors now have the option to invest in Silver ETFs (launched recently), which could also be a supporting factor for metal prices.
The authors of the report have this to say on gold, “there are certain levels of exhaustion creeping in, and the bullish bias might not give the similar kind of returns as in the past. The macro side resistance has already started with the Feds aggressive stance on interest rates and yield spike." On the other hand, they point out positives for gold such as, rising oil prices which signal higher inflation, rising geo-political risks and weaker growth forecasts. Any developments on the Russia-Ukraine tensions will however, keep investors on the edge. The report suggests, “following a cautious approach, booking profits at certain intervals and using bounce to exit longs for the next few quarters." On other hand, thanks to the silver’s safe haven push, along with multiple factors that will drive demand for the metal, the report maintains its positive bias for silver for the next quarter. It suggests readjusting one’s portfolio by reducing the weight of gold and increasing that of silver.
