Why gold and silver are in the best environment for gains in a decade, according to Citi’s commodities research chief

Gold and silver are on a hot streak, but the metals still have room to run, according to Citi’s head of commodities research, Max Layton.

Layton says the best bull markets for gold and silver are typically when markets in the US and Europe are weakening, and as China looks poised to strengthen.

That’s the setup now as Western economies slow and stimulus measures set to boost China’s growth trajectory. He says it’s the best positioning for the precious metals in a decade.

“I am bullish on gold and silver over the next couple of months,” Layton told CNBC in a Friday interview, explaining that the best bull markets for gold and silver in the last 20 years have happened when developed markets are weak or weakening and when China is easing and potentially set to strengthen.

“This is the best setup for gold and silver, certainly for a decade,” he added.

Layton’s comments come amid a gold and silver rally, with the price of gold up 2.4% in the last month to trade at $2,749.10, and that of silver up 6.5% to $34.01.

Last week, gold climbed to a record high, surpassing $2,700 for the first time, after Israel killed Hamas leader Yahya Sinwar and fears escalated over further tensions with Iran.

Investors have piled into gold this year as geopolitics, a shifting economic landscape, and ongoing inflation concerns spark fears of volatility in other assets.

Even Treasurys are looking riskier amid rising debt levels in the US, leaving gold as the last safe haven, Bank of America said in a note last week.

Layton says the rally is particularly impressive given factors like higher interest rates, stronger payrolls, and weak Chinese imports — all of which are typically bearish signs for metals.

“Quite frankly, gold and silver have gone up despite a number of things going against them. Variables that have been strongly correlated with gold and silver have gone against them over the last couple of months,” he said, adding, “And yet they’ve been marching higher.”

Layton is one of many analysts bullish on metals. Strategists at Bank of America see gold hitting $3,000 an ounce by the end of next year, implying over 8% upside.

“Gold looks to be the last ‘safe haven’ asset standing, incentivising traders including central banks to increase exposure,” the strategists said in a note last week.