Gold prices above $4,400 appear expensive, while silver around $66 remains relatively cheap, according to Monarch PMS, which sees a clear divergence in the valuation of the two precious metals.
The brokerage's valuation framework suggests that gold has already moved back towards its fair-value zone after a sharp speculative overshoot earlier this year. Silver, meanwhile, has corrected its relative excess against gold and is now trading below Monarch PMS' estimated fair value.
Monarch PMS has modelled a fair-value range of $3,248 to $4,595 an ounce for gold, with a midpoint of $3,922. As of September 8, gold was trading at around $4,355 an ounce, which was about 8% above the model's midpoint but still roughly 8% below the upper end of the estimated range.
The January peak of $5,589, however, was 22% above the upper ceiling of the entire modelled range. Monarch PMS describes this as an "overshoot," suggesting that the January high was driven more by speculative factors than fundamental valuation.
Gold subsequently corrected sharply and touched $3,985 in June, a level that was within 2% of the model's $3,922 midpoint.