24K99 News Goldman Sachs's derivatives sales and trading department said in the latest weekly report that last week, traders' interest in precious metal mining ETFs increased dramatically. The bank believes that silver is preparing for a breakthrough surge and has put forward four major signals, including that the Federal Reserve's position will be more dovish and that silver positions are lower than gold, so it will be viewed as a catch-up trade.

Well-known financial blogger ZeroHedge reports that due to the statements of “Wall Street Journal” reporter Nick Timiraos (Nick Timiraos), the Financial Times (Financial Times), and former FOMC official Bill Dudley (Bill Dudley), the market is pricing the possibility of cutting interest rates by 50 basis points this week. Although the inflation rate at the beginning of the easing cycle reached the highest and most stubborn level in 40 years, everyone is trying to start this round of easing Be prepared for cyclical and possible drastic interest rate cuts.

(Source: ZeroHedge)

There is one asset class that benefits the most. Bank of America's Michael Hartnett (Michael Hartnett) said that gold is the best asset class to hedge against another sharp rise in inflation in 2025.

However, the price of gold is not only affected by the Federal Reserve's interest rate cut, the sharp weakening of the US dollar, and rising inflation. The report points out that the central bank of China and Chinese citizens are also continuously buying gold.

Today, in addition to China, the Gold Player has another new “player”, India. According to Bloomberg, gold imports surged after the Indian government cut tariffs. According to reports, in August, in Gujarat, the main hub for gemstone and jewelry exports, gold imports increased 429% year over year.

Then, of course, there is the recent inflation of gold ETFs. As the market indicated in August, gold ETFs have finally ended the paper sell-off of the past two years and are actively increasing their holdings.

(Source: Twitter)

Indeed, the prospects for gold are very bright, and more and more people expect the price of gold to exceed $3,000.

But for the less valuable “cousin” of gold, silver, is the future brighter? The increase in silver in recent years has hardly caught up with gold.

(Source: ZeroHedge)

Bloomberg's Ven Ram (Ven Ram) said that although gold does benefit from the Federal Reserve's dovish stance, if the Fed implements the policy easing policy expected by the market in 2025, silver will be the bigger winner.

A month ago, Ram calculated that if US inflation slows and the labor market cools down so that the Federal Reserve can lower the benchmark interest rate by 225 basis points by May 2025, the price of gold could reach $3,229 per ounce.

(Source: ZeroHedge)

The forecast is based on an analysis of the empirical duration of the Fed's easing cycle since the beginning of 2000. The results show that generally speaking, every time the fund interest rate is lowered by 25 basis points, the price of gold rises by about 6.3%. As a result, the Federal Reserve's adoption of a more moderate easing policy will cause the price of gold to peak below the forecast above.

(Source: Bloomberg)

However, extending this model to silver indicates that the upcoming aggressive easing cycle will be equivalent to the price of silver breaking through $37 per ounce, and the spot price will rise 23%.

(Source: Bloomberg)

The ratio of gold to silver will drop from the current 85 to 81.

(Source: Bloomberg)

Finally, the reason why a silver breakthrough may indeed be imminent is that “interest in precious metals and mining ETFs surged” last week, as Goldman Sachs Derivatives Sales and Trading wrote in its latest weekly report. The bank's trading department believes that “rising silver is one of the best deals” for the following reasons:

1. Key components in artificial intelligence (AI) construction;

2. Boosted by the Federal Reserve's more dovish stance (the interest rate path is affected by beta values/the end of US exceptionalism weakens the dollar);

3. The position is lower than gold and is therefore considered a catch-up transaction;

4. Silver is about to usher in a breakthrough that will last for several months.

Goldman Sachs's trading advice is to buy a call option spread of at least two months, and it's best to act quickly.

The chart below shows that the volume of gold call options traded over 940k last Friday, the second highest in the past 3 years.

(Source: ZeroHedge)