Citigroup forecasts that spot silver prices will reach a record $150 per ounce within three months, as the metal extends a historic rally that has seen its price surge nearly 50% in January alone. Analysts at the bank, including Max Layton, believe strong purchasing momentum from China will persist, suggesting higher prices are needed to incentivize existing holders to sell.
Analysts wrote in a Tuesday report, "Silver is performing like 'gold-squared' or 'gold on leverage.' We think this could continue until silver appears expensive relative to gold by historical standards." Silver prices hit a record high of $117.71 on Monday, with intraday gains soaring as much as 14%, marking the largest single-day increase since the 2008 global financial crisis.
This rally is supported by robust physical demand and speculative interest in a relatively illiquid market, with indications that Chinese buyers are leading the trend. Citigroup analysts stated that if the gold-to-silver price ratio reverts to its 2011 low of 32:1, it could imply silver trading as high as $170 per ounce.
Citigroup added that silver prices have advanced despite facing several bearish factors. These include outflows from silver exchange-traded funds (ETFs), selling by speculators in the futures market, and declining inventories in U.S. warehouses—which enhances supply availability in other regions.
Nevertheless, the unusual speed and volatility of silver's rebound since December have raised alarms among many traders and analysts. Heraeus precious metals trader Mark Lofthouse wrote in a report, "Historical experience suggests this rally is closer to its end than its beginning. The gold-silver ratio has been lower than current levels many times in the past, but such massive volatility in such a short period is rare."
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