16.08.2020, 14:17

Gold prices made waves, but silver prices increased even more and has not stopped

(ĐTCK) In recent weeks, silver prices have continuously broken through their peaks and are currently trading at high prices since 2013.

Gold has historically been the preferred safe haven of investors, and is interested in when the bond channel does not produce attractive returns, yields signs of equality, or holds bonds. Yields are negative, and stock markets are often in tough times.

But silver has seen stronger gains than gold in recent weeks.

“It looks like silver is attracting more investors than other precious metals,” said Mobeen Tahir, deputy research director at Wisdom Tree.

Spot silver was $ 29 an ounce last week, then fell slightly to now $ 27 an ounce, according to Reuters data. This figure represents the highest level in 7 years and has increased by nearly 39% since mid-July 2020 until now, this period saw precious metals absorb cash flow and a strong breakthrough.

Meanwhile, gold is currently trading at around 1,947 USD / ounce, up 8% since mid-July until now.

Gold prices made waves, but silver prices increased even more and has not stopped

Gold (Gold) and Silver (Silver) price correlation chart

Essentially, precious metals are driven by a trio of strong motivations, says Ole Hansen, chief commodity strategist at Saxo Bank.

First, the Central Banks pumped more money into the economy, as part of an effort to help the economy get through the Covid-19 crisis. This monetary easing has created further uncertainty about the health of the financial system, fears a rising mountain of debt after the crisis needs to be resolved, which boosts demand for precious metals as a safe haven investment.

Second, the implementation of a broad easing policy also results in the real yield that the bond investor receives at or below the inflation rate. This results in assets such as gold and silver being more attractive in price when the opportunity cost of holding is low, in addition to their profit only fluctuations in price, no other source of profit, while bonds have profits equal to or lower than the inflation rate.

Third, the weakening of the dollar in recent weeks has also pushed precious metals up. Since international goods are usually traded in dollars, commodities will be relatively stronger when the USD weakens and vice versa, while gold and silver are commodities so also increase in value when the USD weakens.

As Hansen describes for silver: “Silver tends to rise higher and faster than other precious metals. Because silver has lower liquidity, it is easier to increase in price than gold, but if it falls, silver also falls more sharply.

For example, in March when markets sold off to convert to cash, silver fell 30% and was trading at $ 12 an ounce. Meanwhile, at the same time, the price of gold only decreased by 11% to 1,470 USD / ounce.

“Gold tends to be less volatile than silver because its market size outperforms silver, while the annual supply of gold is usually five times more volatile than silver,” Hansen adds. In addition, silver tends to be a byproduct of exploiting other metals, such as copper. ”

“On that basis, a sharp rise in the price of silver is less likely to attract an increased supply, while gold is entirely different, the supply can increase rapidly as miners step up mining.” Mr. Hansen said.

But the fact is that silver prices are still only half of the record high of more than 48 USD / ounce in April 2011. Meanwhile, gold has surpassed all-time peaks. As such, silver looks relatively cheaper than gold.

Guy Foster, head of research at Brewin Dolphin (Brewin Dolphin operates in asset management), said: “A more optimistic global economic outlook means higher industrial demand for silver, this is an added benefit of silver ”.

Indeed, Mobeen Tahir explains that more than half of silver’s demand for silver comes from industrial applications in electronics, medical equipment, and solar power generation.

So, aside from silver’s correlation with gold, where silver is part of the industry, investors who now want to engage in a cyclical recovery, according to the economy, can opt for silver.

Current silver is not only a defensive precious metal but also represents the recovery of the industry.

Source: tinnhanhchungkhoan.vn