Gold Holds Firm Despite High Yields, Silver Faces Oversupply, Copper Poised for Gains

Daniel Ghali, head of metals research at Deutsche Bank, believes gold has been resilient despite high bond yields and other challenging market conditions. According to him, gold prices have not printed a new low since July, which is remarkable given the current economic outlook.

Ghali notes that official sector purchases are running at more than double the pace seen in 2021, when gold positioning was also bearish. He attributes this increased demand to growing institutional investment and expanding reserve pools available for allocation. Despite being oversold and underowned, Ghali views the setup as strong looking ahead to next year.

In contrast, the silver market has shifted towards oversupply, with London inventories rising back to their highest level since November 2024. Higher prices have led to fast-paced demand destruction in Chinese industrial applications, potentially resulting in a physical primary market surplus in the coming year. Ghali believes that this fundamental setup argues for silver underperforming gold and experiencing less volatility.

For investors seeking potential gains, Ghali recommends copper as the most interesting metal due to an increasingly convex reaction function tied to its critically scarce environment. He expects prices to rise as a result of dual stockpiling by major players in the United States and China.