LONDON (Reuters) - Lower interest rates and resurgent investor and central bank buying are expected to help gold prices cement recent gains and hold above $1,400 an ounce next year, but silver is seen struggling to catch up, a Reuters poll showed on Thursday.
Fears about the health of the global economy have sent investors flooding to bullion, traditionally seen as a safe asset to hold in troubled times.
But while gold’s status as a safe haven is accepted, silver is also widely used in industry in products such as solar panels, and slowing economies mean less will be needed, reducing demand and dragging on prices.
While gold XAU= in June shot above $1,400 for the first time since 2013, silver XAG= was slower to rise and achieved only one-year highs around $16.60 an ounce.
Gold is expected to retain its gains but not rise much further, the poll of 33 analysts and traders showed. They returned a median forecast for prices to average $1,351 an ounce this year and $1,433 in 2020. COMMODS-GOLD
Silver is also seen as unlikely to rally convincingly, the poll found, forecasting average prices of $15.50 for this year and $16.85 next year. COMMODS-SILVER
“This is the perfect environment for gold!” said Frank Schallenberger at LBBW, pointing to central banks buying gold and cutting interest rates, strong investment demand and gold’s break through strong technical resistance to reach new highs.
But silver, half of which is consumed by industry, will struggle, he added: “With global economic (growth) being not very positive, industrial silver demand should slow down in the coming months. That is the main reason why silver will continue to underperform gold.”
(GRAPHIC - Gold and silver prices: tmsnrt.rs/2yr1Bqp)
Lower interest rates help bullion by pulling down bond yields, making non-yielding gold and silver more attractive.
Rate cuts in the United States could also weaken the dollar, which would support bullion by making it more affordable for buyers with other currencies.
The gold forecasts are sharply higher than in a similar poll conducted three months ago, while the predictions for silver have become significantly more pessimistic.
They imply that silver is expevted to remain unusually cheap relative to gold, with the gold/silver ratio, which shot to a more than two-decade high above 93 last month, averaging 87.2 in 2019 and 85 in 2020 — a far cry from the average over the last two decades around 65.
Investors stormed back into both gold and silver in June and July, helping to drive up prices.
Bets on higher prices for both metals on the COMEX exchange now outnumber bets on lower prices by the largest amount since 2017, while holdings of silver in exchange traded funds tracked by Refinitiv surged to the biggest on record. 3088691MNET 3084691MNET HLDTOTALL=XAG
This explosion in speculation could, however, leave both metals vulnerable to corrections if central banks do not cut rates as fast as some expect or investors lose faith that prices can only go up and cash out of their positions, analysts said.
“We think prices are toppish here,” said Georgette Boele at ABN AMRO.
Reporting by Peter Hobson and Eileen Soreng; editing by Veronica Brown and David Evans