Precious metals have seen a technical rebound recently, but most analysts believe this rally is unlikely to last, with gold's path back to historical highs remaining difficult. Meanwhile, silver is gaining additional support from its industrial attributes, leading some institutions to believe its performance could continue to surpass that of gold.
This week, spot silver rose over 6% from last weekend to $58.89 per ounce, while spot gold reached a high of $4119.04 per ounce. ING commodity strategists Warren Patterson and Ewa Manthey attributed this rally in a Wednesday report to "bargain hunting following recent weakness," rather than a "substantial shift in geopolitical or macroeconomic backdrop."
Both metals remain well below the historic peaks set in late January this year—spot gold then touched $5589.38 per ounce, while silver reached $121.67 per ounce. A stronger US dollar, high interest rates, and a shift in market dynamics driven by the Iran war pushing up oil prices have collectively suppressed upward momentum for precious metals.
Gold's Rebound in Doubt, Facing Dual Technical and Fundamental Pressure
Latest research reports from HSBC and JPMorgan point to the same conclusion: this rally appears more like a technical recovery from an oversold condition rather than a trend reversal, with limited upside potential remaining.
According to HSBC's analysis, this gold price surge has lacked a clear fundamental driver throughout. US private sector employment data (ADP) declined for the fourth consecutive week to a net addition of 16.5 thousand jobs, but the impact of this weak signal on gold prices is difficult to quantify. HSBC believes the market has already priced in monetary policy tightening expectations to a considerable extent, allowing gold prices to continue rising gradually. However, geopolitical risks—particularly escalation in the Middle East and further oil price increases—remain the greatest threat.
JPMorgan technical strategist Jason Hunter issued a warning from a technical perspective. He noted that gold is currently merely seeking support around $4074 (the 38.2% Fibonacci retracement level from August 2022). The emergence of a momentum divergence buy signal suggests the market may enter a more prolonged consolidation phase. However, the medium-term bearish structure for gold has not changed until the cluster of trendline resistance between $4197 and $4264 is decisively broken.
Bank of America's assessment is more pessimistic. In a July 16th report, the bank noted that gold just recorded its worst quarterly performance in 13 years. "The death cross signal, elevated net long positioning, and similarities to historically significant tops all increase the risk of a longer and deeper correction for gold prices." The so-called "death cross" is a bearish technical pattern formed when a short-term moving average (typically the 50-day) falls below a long-term moving average (typically the 200-day).
Silver's Industrial Nature Offers Additional Support
Despite the overall pressured environment, silver's nature as an industrial metal provides it with differentiated support, leading some analysts to believe silver could continue outperforming gold.
ING strategists stated that silver's performance reflects not only its safe-haven appeal but also benefits from an overall improvement in sentiment for the industrial metals sector, particularly the spillover effect from stronger copper prices. They pointed out, "If industrial metals strength persists alongside safe-haven demand, silver could continue outperforming gold." Against the backdrop of accelerating AI infrastructure construction, the demand outlook for silver as a critical industrial raw material is drawing market attention. This structural factor is seen as a medium-to-long-term logic supporting silver's relative performance.
ING also emphasized that gold "may remain sensitive to energy market dynamics and US monetary policy expectations." While Middle East tensions provide overall support for precious metals, the market is weighing the interplay between weakening US economic data and inflationary risks from rising energy costs.
UBS Lowers Attractive Entry Point for Silver
Despite a relatively more optimistic outlook for silver compared to gold, UBS remains cautious about investors building positions in silver at this stage.
UBS this week lowered its target for an attractive silver entry price from around $55 per ounce to a range of $48 to $50 per ounce. UBS strategist Dominic Schnider wrote in a July 20th report: "We believe the headwinds facing silver recently may persist. Escalation in the Middle East, high opportunity costs, and a strong US dollar will continue to weigh on investor sentiment. The macro backdrop for silver hardly provides motivation for investors to increase long positions. Due to patchy investment demand, silver prices have yet to find a firm bottom."
Mining Executives: Bull Market Logic Remains Intact
In contrast to the cautious stance of institutional analysts, mining company executives remain optimistic about the long-term prospects for precious metals.
Diane Garrett, Executive Chairman and CEO of US gold and silver developer Hycroft Mining, stated in an interview with CNBC that the recent price pullback is a "normal correction" and "this is not a broken bull market." She pointed out that gold has surpassed US Treasuries to become the top asset class and is becoming foundational to the financial system. Simultaneously, central banks have been net buyers of gold for 17 consecutive months, indicating that fundamental support remains strong.
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