(Kitco News) - Gold will continue to outperform silver as the global economy faces unprecedented levels of uncertainty, according to one market strategist.
In her latest precious metals note, Nicky Shiels, Head of Research and Metals Strategy at MKS PAMP, revised her 2025 gold price forecast higher while downgrading her outlook for silver.
“Our ‘reflation’ base case has been pushed out significantly as this tariff announcement solidifies the uncertain environment for hedges, defense, and safety, which will keep gold in play,” she said in the note. “Silver's forecast has been downgraded (too bullish vs. change in macro & negative impact to growth & demand from tariff policies).”
Shiels now sees gold prices averaging around $2,950 an ounce for the year, up from her initial forecast of $2,750 an ounce.
Although Shiels' forecast is higher than her initial estimate, it is lower than current prices. Spot gold last traded at $3,086.10 an ounce, up more than 3% on the day.
She said that while gold prices are higher, investors should expect to see higher volatility in the current market environment. Although gold will not be immune to liquidity-driven global derisking events, Shiels said that the wealth destruction in the global economy will be bullish for the precious metal.
Shiels said that ultimately, gold prices will move higher as economic activity slows and inflation pressures rise.
“Stagflation is coming because demand destruction can’t last forever; prices will be passed on to consumers. That doesn't even take into account the fact that tariff policy uncertainty (it's not a one-and-done) drives consumer inflation expectations higher. An analysis of Precious Metal & asset class performance across four distinct macroeconomic regimes—Goldilocks, Reflation, Stagflation, and Deflation—from 2009 through 2024 highlights that gold was a top performer (+12.1%), offering consistent protection across all stagflationary episodes,” she said in her report.
Looking at silver, Shiels sees prices averaging $34.50 an ounce for the year, down from her initial forecast of $36.50.
Shiels said while silver investment demand is expected to remain strong this year, it will be overshadowed by falling industrial demand due to the slowing global economy.
“Silver's industrial demand should be pressured given the expected negative impacts of a global trade war,” she said. “Unless a new catalyst emerges, silver is relatively more comfortable in the $28-$35 range. Prospects of a strong rerating to $40/oz—hinging on gold's outperformance & strong reinvestment—are contingent on much easier Fed policies and substantial dial-back in trade war policies & rhetoric. That's only likely in the back half of 2025 if anything.”
Shiels' updated outlook comes as gold has significantly outpaced silver, with the gold:silver ratio hitting a five-year high earlier this week above 106 points.
In the last week, silver prices have dropped roughly 16% because of the global market meltdown caused by President Donald Trump’s tariff announcement. However, silver has managed to bounce off Tuesday’s lows, with spot prices last trading at $30.41 an ounce, up 2% on the day. The gold:silver ratio remains elevated above 101 points.
