Citigroup reaffirmed its strong bullish outlook on silver on Wednesday, projecting that prices could rise to $90 per ounce over the next 6 to 12 months.
This potential surge is driven by investment demand stepping in to replace weakening industrial uses, provided that the Hormuz Strait crisis de-escalates and the Federal Reserve adopts a dovish stance. In a research note, the bank stated, "We expect silver to continue tracking gold, with high beta characteristics that make it an ideal upside play under a scenario of a rapid resolution to the Hormuz Strait issue."
Citigroup emphasized that investment fund flows will dominate silver price trends, as solar installation demand faces structural slowdowns. This is due to cell thinning reducing silver usage, along with the accelerated adoption of back-contact battery technology, which further lowers unit silver consumption. Despite recent macroeconomic headwinds for silver, including rising real yields and a strong US dollar, the bank's base case is that geopolitical tensions will gradually ease, with a potential timeframe "as early as September to December."
The bank also forecasts that the global silver market will remain in a supply-demand deficit through 2027, supported by rigid demand from artificial intelligence, 5G infrastructure, and electric vehicles. Meanwhile, back-contact batteries are expected to become the dominant solar technology by 2028, a shift that will profoundly reshape silver's industrial demand structure.
On Wednesday, gold and silver futures both rallied, driven by tame US inflation data for July. The Labor Department reported that the consumer price index rose 3.4% year-over-year in July, with a monthly increase of 0.1%, both in line with expectations. This followed a 0.4% monthly decline in the CPI for June. The data reduced market bets on a September rate hike.
Edward Meir, an analyst at Marex, commented in a report, "The CPI data is encouraging. While the monthly figure is higher than last month, it aligns with expectations, and combined with a weaker dollar and technical support, gold has found a path higher." The CME FedWatch tool showed that traders now price in a 40% probability of a September rate hike, down from 46% before the data release.
In terms of specific pricing, the near-month gold futures contract on the New York Mercantile Exchange settled 0.6% higher at $4,408.90 per ounce, marking a fourth consecutive daily gain and its highest settlement since June 4. The near-month silver futures contract rose 1.2% to settle at $65.555 per ounce, marking its eighth gain in the last 11 trading days and its best settlement level since June 18.
Overall, Citigroup believes that silver combines gold's safe-haven appeal with higher price elasticity. If the geopolitical and monetary policy environment improves as expected, silver prices could stage a standalone rally. However, investors should also be wary of the potential impact of solar technology changes on long-term demand structure.