This week, the price of gold expressed in US dollars has risen to its highest level in nine years, exceeding USD 1820 per ounce. Silver, in turn, for the first time since 2016, exceeded USD 20 per ounce. The price rally of metals continues, although now industrial metals are more popular than precious metals.
It seems that gold is becoming more expensive due to another economic stimulus plan in the United States. Its introduction may, on the one hand, lead to the weakening of the national currency in which bullion is listed, and on the other hand, to the emergence of higher inflation expectations and, consequently, higher prices, which also seems to protect gold ownership. The fact that a special fund worth EUR 750 billion has also been created in Europe, as part of the European Union budget, to rescue the common economy after the pandemic crisis may be not without significance.
The prices of precious metals may also be affected by the growing number of coronavirus cases in the United States and other countries. This increases doubts about global economic recovery, driving capital flows to safe assets and helping gold to gain over 20% this year.
The total number of identified COVID-19 cases is approaching 15 million worldwide. In the United States, the number of new cases increased by 64.5 thousand, to almost 4 million. In the last 24 hours, Brazil reported 41,000 new cases and India over 39,000.
Silver, meanwhile, seems to be more expensive because it is partly the cheaper brother of gold, i.e. a precious metal and somehow a safe asset, but it also belongs to industrial metals. The recovery in this sector seems to be quite noticeable, which may significantly increase the demand for silver. Because this market is not very big, it seems to translate into price increases quite quickly.
It is also worth noting the gold/silver ratio that has been rapidly returning from its highest level in 50 years, and thanks to this, silver prices can rise faster than gold prices. This seems to be the case right now.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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