Seeing Early Signs of Silver Outperforming Gold: Citi's Layton

Watch Seeing Early Signs of Silver Outperforming Gold: Citi's Layton - Bloomberg on Dailymotion

Transcript

00:00When you look at gold's price action today, gold futures are lower for the first time it feels like

00:04in about five or six days. The dollar is stronger and there seems to be a shift in tone on the U.S.

00:10dollar. Can the dollar and gold continue to move higher at the same time if there is this

00:15sea change and more conviction in dollar strength going forward?

00:20Well, that's a great question. I think that speaks to our preference. So we prefer silver

00:26at the moment over gold. Around a week and a half ago, we upgraded our silver forecast to $55 an

00:31ounce and said, as we get up to $4,000, we think silver is going to really start to outperform.

00:36And I think we're just seeing the early signs of that. And part of that is that silver is a bit more

00:42of a growthy commodity. So we're seeing, I wouldn't say rotation out of gold, we're seeing buying of

00:48both. But we are seeing more of the white metals being demanded, as well as copper and aluminium

00:53just in recent weeks. And that speaks to the prospect of, you know, what equity markets,

01:00what credit markets are kind of telling you, which is the growth will probably end up being

01:04fine over the next 12 to 18 months. OK, I like the way that you tied it back to

01:08the macro outlook. Silver, we know, is an industrial metal, too. So in addition to being a precious metal

01:15and kind of an investment asset, it plays a big role in the industrialization of our economy.

01:20What is the breakdown for demand when it comes to silver right now? Is it kind of like a 50-50

01:25split between industrial use and investment? Or is it more lopsided, more tilting towards an

01:29investment? Sure. Yeah, I mean, in the last couple of years, solar demand has taken a much larger share

01:36and overall industrial has moved to around 80 percent of the silver market. Now, at the same time

01:42as that industrial demand has been quite strong, you've added investor demand to that over the last six

01:48to nine months in particular. And, you know, the market is I mentioned the gold is small compared

01:54to household wealth, even a fraction of household wealth. Silver is a fraction of the gold market. It

01:59is a tiny little 40 even at today's kind of 50 year record high price. This is a 50 billion dollar

02:06market, which is less than a tenth of the gold annual flow. So it's a tiny little market. You've got

02:12investors competing against industrial users and you're seeing the results of that with the price

02:18action. Very quickly, Max, before I let you go, do you have a price forecast for gold and silver right

02:23now? Yes. So silver is 55 short term. And, you know, it's quite plausible you get there very short

02:30term in the next couple of weeks. It's also exposed to potential headlines towards the end of this month

02:36of the APEC meeting between or pre APEC meeting between President Trump and President Xi on the

02:41growth side. And on the gold side, we have been essentially recommending clients be long with

02:47a trailing stop because it's quite hard to put a value on exactly what it's worth.