It seems that the price of silver has found a comfortable range between $78 and $80 per ounce. However, one bank believes that silver faces a potential risk of significant decline.

Tü Lan Nguyen, head of the currency and commodities research department at Commerzbank, noted in the latest precious metals report that the fair value of silver appears to be closer to $40 per ounce than to current quotes.

She explained that currently, the main driver for silver is the dynamics of gold, rather than fundamental economic factors such as bond yields and the dollar.

“The price of silver largely moves in tandem with a strong rise in gold, with the increase explained by the fact that silver was previously undervalued compared to gold. In fact, an assessment of the fair value of silver that directly considers the gold price aligns better with the actual market dynamics,” she said.

Although Commerzbank considers silver overvalued based on its own fundamental factors, Tü Lan Nguyen notes that she does not expect the current trend to end soon. She adds that gold still enjoys good support as a safe-haven asset and a tool for hedging geopolitical uncertainty.

Commerzbank points out that the attractiveness of gold as a protective asset is explained by high demand from central banks, as gold is considered a neutral, non-political currency asset.

Although gold has been experiencing difficulties in recent weeks, as it serves as a liquidity source for central banks and investors, Tü Lan Nguyen states that gold has not lost its appeal as a protective instrument. Meanwhile, such a situation will also support demand for silver.

“Interestingly, since the start of the Iran war, our (valuation of silver excluding gold) has remained relatively stable, and the latest downward correction was much smaller than the actual movement,” she notes.

“Thus, with the start of the Iran war, part of the ‘overvaluation’ was eliminated, and the silver price has again approached its fundamentally justified level. Nevertheless, the gap between them persists, which corresponds to the situation with the prolonged overvaluation of gold. As long as this continues, silver can also benefit,”