According to John LaForge, head of asset strategy at Wells Fargo, the silver market is signaling that the yellow metal’s weakness is temporary after the recent gold price surge.
“When silver starts beating gold, the bull market is near”
Spot silver closes the year at around $24, up 3.6%. Meanwhile, gold is trading above $1,800. But gold is still catching up, down nearly 0.4% since the start of the year. LaForge underlines the following points in his statement:
I’m a little more positive about silver as we’re back at $23. This is high beta game. Silver is showing signs that the weakness we see in gold is likely to be short-lived. When silver begins to beat gold, it is closer to a bull market in precious metals compared to the other direction.
cryptocoin.comAs you can follow, the markets seem exhausted with only a few days left until 2023. “Stocks were in a flat decline,” LaForge said. “Bullion takes cues from risky assets like stocks rather than reacting to the Fed.” Additionally, LaForge explains:
Although gold followed risky assets, it reacted moderately. You can feel that gold wants to go higher next year. Gold had a tough two and a half years.
Wells Fargo’s 2023 gold forecast: $1,900 – $2,000 range
Gold is already starting to rise as the Federal Reserve pauses. And then a final pivot will follow. In the past few months, with all the talk about the Fed’s return, the yellow metal has started to rise. Next year, both gold and silver will do well. LaForge notes that silver will likely do even better. Wells Fargo sees gold between $1,900 and $2,000 next year. “If we can achieve this, my priority will be to increase these goals,” LaForge says.
But meanwhile, the shiny metal is still in proving mode. This is because commodities have performed well over the past few years, but gold has been stuck. “I need confirmation via price that gold is starting to move,” LaForge said. If so, it is possible that it could even go above $1,900-2,000.”
“Silver will outperform gold next year”
According to LaForge, silver has a chance to outperform gold next year. Because it has a high beta game and is known to be more volatile than yellow metal. Adding to the performance of gold and silver, LaForge says:
This is what happened in the last cycle between 1999 and 2011. This is typical. It is even possible for silver to reach new record highs above $48 in this super cycle. But that may still be five years away. New highs aren’t typical until the back half of the new supercycle. Even if these new peaks in silver are to occur, it will be another five years. We are only in the third year of this bull super cycle.
Top 3 drivers for gold and silver
The expected Fed pivot will be the main trigger behind higher gold and silver prices next year. But that may not arrive until the middle of the year. “But the yellow metal is already reacting positively to the markets that are pricing it,” LaForge says. It also makes the following statement:
The second driver is the underlying fundamentals, especially from a supply-growth perspective. You don’t have much growth there. Therefore, there is only a need to pull some demand.
The third driver will be gold as an outlier game. The precious metal has underperformed other commodities over the past two years. This is a signal for some investors to start rebalancing their gains and losses and pouring more money into gold while it’s still cheap. Based on this, LaForge makes the following assessment:
You will keep investors returning to some of these outlier games. When a bull is in a super cycle, more assets under management start to move towards commodities. This tends to lift the whole group up. And gold hasn’t gotten that yet. Typically, at the end of the year, you buy the losers and get rid of the winners. That’s what will happen with gold. He has been suspended for 2.5 years. It looks very cheap compared to other goods.
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