(Kitco News) - All eyes are on gold as its price continues an unprecedented rally above $3,000 an ounce. However, investors should not overlook silver, as it trades near a key resistance level, with one bank announcing a significant increase in its year-end target.
In his latest precious metals report, Carsten Fritsch, a commodity analyst at Commerzbank, stated that he is raising his year-end silver target to $35 an ounce, up from his initial forecast of $33.
This bullish outlook comes as silver prices hit a new four-month high, testing resistance at $34 an ounce. Spot silver last traded at $33.99 an ounce, up 0.49% on the day. The precious metal is experiencing modest profit-taking after briefly surpassing $34 an ounce overnight.
Fritsch said he expects it is only a matter of time before silver consistently moves above $34 an ounce.
“It is just about one dollar shy of the 12-year high reached nearly five months ago. This level is likely to be reached soon, given gold’s ongoing rally,” he said.
Fritsch has also increased his year-end gold price target to $2,850 an ounce, up from his initial estimate of $2,650 an ounce.
“Silver would thus gain some ground relative to gold, and the gold/silver ratio would fall to 81, aligning with the five-year average,” he said.
Along with gold’s momentum, Fritsch noted that silver remains well supported due to strong industrial demand.
“The silver market has been undersupplied for four years due to record-high industrial demand and, according to the Silver Institute, is likely to face a significant supply deficit again this year,” he said.
Although gold is seeing substantial momentum, Fritsch cautioned investors that it may be rising too quickly. He pointed out that gold has taken less than five years to rally $1,000 into record territory, whereas it took the market 12 years to climb above $2,000 after surpassing the $1,000 level in March 2008.
“We therefore continue to expect the gold price to decline over the course of the year,” he said. “This assumption is based on the expectation that the Fed will likely cut interest rates less than the market currently anticipates. Additionally, record-high gold prices are expected to dampen physical demand, as already reflected in data from China and India.”
“However, the risk remains that gold prices will continue rising, at least in the short term, as more ETF investors and possibly speculative traders jump back in,” Fritsch added. “If the Fed cuts interest rates more aggressively despite increased inflation risks, gold prices would likely continue to climb.”
