In recent times, the price of gold has continued to rise to a record high. Spot gold once hit a new high of 2449.89 US dollars per ounce last Monday. Furthermore, earlier last week, silver and the industrial metal copper also hit multi-year highs.

Although the prices of all three metals have declined slightly from their high levels, they are still trading near historic highs, and analysts expect these three metals to continue to strengthen over the next 12 months.

Favourable factors

ANZ said in a recent report that the price of gold maintained its upward momentum in the face of another weakening of the US dollar and falling US Treasury yields. But that's not all.

An ANZ strategist wrote: “Although geopolitical risks continue to boost safe-haven demand, the sharp increase in gold demand in China in the first quarter of 2024 largely contributed to the rise in gold prices.”

China is currently the main consumer of gold, surpassing India in 2023 to become the world's largest buyer of gold and jewellery.

According to data from the World Gold Council, Chinese consumers have also been at the forefront of buying gold. They bought 603 tons of gold jewelry last year, an increase of 10% over 2022. The World Gold Council predicts that China's jewellery demand will remain high this year, even higher than 2023.

UBS strategists raised their gold price forecast in a report last week. It is expected to reach 2,500 US dollars per ounce by the end of September and rise to 2,600 US dollars by the end of the year. The bank's optimistic outlook is due to stronger demand from China, and a series of weak data released by the US in April prompted a repricing of expectations for the Fed to cut interest rates.

Higher interest rates tend to put pressure on gold, as it makes US Treasury bonds, which are also safe-haven assets, a more attractive option for investors.

“We think the price of gold can continue to reach new highs,” said Joni Teves, a precious metals strategist at UBS.

The “poor relative” of gold

Although silver is often referred to as the “poor relative” of gold, there is a positive correlation between the two in terms of price, although there is a lag.

Nikos Kavalis, managing director of precious metals research and consulting firm Metals Focus, said: “Arguably, silver's performance was more interesting — it has finally caught up with gold.” He detailed that as the market's confidence in the bullish trend of gold grows stronger, more and more investors are turning to silver.

On Wednesday, amid rising investor interest and supply challenges, the price of silver broke through $31 per ounce, a record high of more than a decade.

Teves said, “We think [silver] is actually the precious metal that can benefit the most from rising gold prices. There is a strong correlation between the two.”

She added that when the Federal Reserve relaxes monetary policy, silver will actually perform better than gold, especially when the fundamentals of supply and demand remain tight.

Daniel Hynes, senior commodity strategist at ANZ Bank, said: “Slowing mine production growth and strong industrial demand indicate that supply is lagging behind demand, which will leave the market in a state of structural shortages.”

Silver is widely used in industrial applications, often to make automobiles, solar panels, jewelry, and electronics.

Metal Focus's Kavalis said other precious metals such as platinum, palladium, and rhodium are in short supply this year, so there should be support prices.

Copper prices are also soaring

Copper prices also recently ushered in a glorious moment. Last Tuesday, they hit an all-time high of 10,857 US dollars per ton, but then declined somewhat.

ANZ said that as supply constraints intensify, copper prices “are strongly supported by tight supply” this year. As production falls short of expectations, the International Copper Research Group (ICSG) drastically lowered its forecast for copper oversupply this year.

Last November, after a Supreme Court ruling and nationwide protests over environmental issues, First Quantum Minerals stopped production of its Cobre Panamá copper mine, one of the world's largest copper mines. Additionally, major producer Anglo-American Resources Group said it will cut copper production in 2024 and 2025 to reduce costs.

“Strong gains in industrial metals and precious metals support financial and physical inflows and bullish sentiment,” Citigroup strategists said in a report earlier this month. This is a “metal bull market,” he added.

The investment bank's current basic forecast is that copper prices will consolidate in the next three to six months, but it believes that there is still room for further increases in copper prices, depending on the degree of easing by the Federal Reserve and the recovery of the global manufacturing industry.

“We remain convinced that the price of copper will rise to $12,000 per ton over the next 12 to 18 months, and in our bullish forecast, the price of copper will rise to 15,000 US dollars per ton,” the Citigroup strategist said.