'We don't expect silver to catch up with the gold rally' says Goldman Sachs

New Delhi [India] May 8 : Gold will continue to outperform silver in the precious metals market, said Goldman Sachs in a recent report.

According to the report the historic relation between gold and silver prices which typically ranges between 45-80 has been "broken" for the first time since 2022, attributed to the substantial increase in gold purchases by central banks and this trend has not been followed by gold's sister metal - Silver.

"We don't expect silver to catch up with the gold rally because higher central bank gold demand has structurally lifted the gold-silver price ratio." said the report.

However, silver has been supported by the China's solar boom, but this industrial demand is not enough to offset strong buying of gold by central bank.

Gold's appeal to central banks is attributed to its physical properties, making it more suitable for reserve management. Gold is scarcer, more valuable per ounce, and denser than silver, simplifying storage, transport, and security.

The report suggests that even with a slowdown in Chinese solar production and persistent recession risks, central bank gold buying is expected to remain robust in 2025, further supporting gold's strong performance.

"Given the high correlation in flows, renewed demand for gold in 2025 is likely to lift silver as well. This was already evident in the 1Q25-rally, when ETF inflows and speculative buying supported both gold and silver." Goldman Sachs said.

Goldman Sachs remains bullish for gold with a base case of USD 3,700/toz by year-end and of USD 4,000 by mid-2026. Adding "concerns about US governance and institutional credibility, a flight to safety, and sharper Fed rate cuts are likely to push gold prices well above our already bullish base case in a potential US policy-driven recession."

While, "if a recession occurs, we estimate that the acceleration in ETF inflows would lift the gold price to $3,880 by year-end. In extreme tail scenarios where market focus on the risks of Fed subordination or of changes in US reserve policy was to grow, we estimate that gold could plausibly trade near $4,500/toz by end-2025,", as per report.

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