Investors aren't scared of record gold and silver prices. Wall Street's price targets are struggling to keep up.

By Myra P. Saefong

Gold and silver price pullbacks are treated as opportunities. That says a lot about investor confidence.

Gold futures have topped $5,000 an ounce, while silver has climbed above $100 an ounce

It's more expensive than ever to own gold and silver, but that hasn't kept investors from buying them.

Price pullbacks have failed to spark fears of an end to the rally and are instead treated as opportunities to buy at lower prices. That says a lot about investor confidence, and the metals' ability to serve a key part in long-term risk management. It also speaks to the lofty price targets being set by investment banks.

Read: Silver is having a meme-stock moment. Just look at these 3 charts.

"If you had asked anyone what needed to happen in order for gold to cross $5,100 and silver to cross $100, let alone $110, then most people would have probably suggested financial apocalypse," said Jan Skoyles, the U.K.-based head of marketing at precious-metals dealer GoldCore.

Yet the rally for gold has been "remarkably calm and quite methodical," Skoyles told MarketWatch. "The majority of analysts expected gold to continue rising over time, but did not expect the speed of the move."

Read: Gold now costs more than $5,000 an ounce. Here's how it got to this milestone price.

Gold futures (GC00) (GCG26) topped $5,000 an ounce for the first time last weekend. They marked a record-high settlement of $5,082.60 on Tuesday.

Silver (SI00) (SIH26) has also rallied, ending Monday at a record high of $115.504 an ounce. Prices - which surged through the key $100 mark for the first time ever Friday - declined by 8.3% on Tuesday to finish at $105.96.

Read: Silver finally hits $100 an ounce - and some experts say that's just the beginning

Still, the overall advance in precious-metal prices is "convincing" because of how the market has reacted when prices actually fall, said Skoyles.

"Time and again, gold drops sharply, finds buyers quickly and then rebuilds from a higher base," she said. That is the behavior of "long-term allocation, not speculative excess."

Higher price forecasts

Wall Street hasn't been rattled by the surge - and even continues to bet on higher prices.

Deutsche Bank on Tuesday set a $6,000 target on gold for the end of the year - a 28% increase from its previous forecast. That matched forecasts from Societe Generale.

Read: Here's the lesson Deutsche Bank learned from previous gold rallies as it lifts target to $6,000

Morgan Stanley this week said gold could climb to $5,700 in the second half of this year, while Goldman Sachs sees gold at $5,400 in December, up from a prior forecast of $4,900.

Silver is being driven by capital allocation, and it is 'behaving like "gold squared" or "gold on steroids."'Citi analysts led by Maximilian Layton

A team of Citi analysts led by Maximilian Layton said in a note Tuesday that silver is being driven by capital allocation, and it is "behaving like 'gold squared' or gold on steroids.'"

Citi lifted its zero- to three-month forecast for silver to $150 an ounce, from $100.

Fueling the rally

Usually, big moves in asset values happen as a result of some major headline, noted GoldCore's Skoyles.

"Just one headline from recent weeks a few years ago would have been a major feature of one financial year," said Skoyles. "Now they just keep coming every week. And that is what gold and silver are reacting to - life."

Demand is fed now by "diversification away from a system where fiscal discipline and geopolitical restraint feels optional and monetary credibility is constantly being tested," Skoyles said.

And in terms of investor portfolios, gold has taken on a "larger strategic role" as stocks and bonds start behaving "less like diversifiers and more like correlated risks," she added.

Silver, meanwhile, is sitting at the "intersection of finance and industry," said Skoyles, and responding to the same monetary and policy concerns that drive gold. It is also constrained by physical supply and industrial demand, leading to sharper moves and more volatility.

Still, pullbacks haven't shaken anyone's confidence in gold and silver, she said. That suggests that gold, and silver to a large extent, are being seen as a "long-term hedge."

-Myra P. Saefong

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