The impact of Covid on investment in precious metals
As the risk of further peaks in the case of Covid-19 continues to weigh heavily on the global economy, some assets continue to experience a significant boom in the market.
Take precious metals, for example, with gold and silver recently reaching their highest price points since 2011 and 2014 respectively. Incredibly, the rise in silver prices has peaked at around 80% since the explosion
of the global pandemic in March, which left much of the world in a state of containment and economic activity.
We’ll explore this in more detail in the article below, while also considering what the future may hold for precious metal prices and investors in the months to come.
Why have gold and silver soared lately?
What is more impressive after their recent price spikes is that gold and silver have been able to hold onto their significant gains.
To that end, bullion hit $ 1,865 an ounce late last week, seeing further gains of just over 1% in the process. This extended the gold rally to its highest level since 2011, as the world still recovered from the impact of the Great Recession.
At the same time, analyst Jeffrey Halley of Oanda reported that silver had exploded by 7% in the morning of July 22 alone, continuing an aggressive rally that recently hit the precious metals market as a whole.
The question that remains, of course, is why have precious metals seen such exponential price growth lately? Fundamentally, gold and silver have both benefited from favorable winds created by negative yields across the spectrum of the U.S. yield curve, as the global recovery remains mired in uncertainty in the middle. of the current Covid-19 crisis.
In the case of silver, this asset has seen more pronounced gains due to its main industrial and practical applications, which play a central role in multiple industries and have directly benefited from the return of production and economic activity. worldwide.
Changes in the price of silver always tend to be more pronounced than those of gold, thanks to the asset’s innate liquidity in the market.
What’s next for silver and gold?
Simply put, economic growth affects the price of silver much more than gold, which is a much more stable asset that is considered a safe store of wealth in times of economic austerity.
Much of the demand for silver is based on industrial uses, especially in popular products such as batteries, solder alloys, dentistry, medicine, and LED chips.
Some of the apps are included as part of high growth markets, while the end of recent lockdowns has given the global economy a huge boost and the demand for silver in the process has skyrocketed.
While this trend is likely to continue for some time before silver corrects its course, the future of this precious metal is relatively uncertain and incredibly vulnerable to further lockdowns and the impact this will have on the market. global economic output.
Conversely, the price of gold is expected to remain relatively stable, while continuing to make incremental gains and investors are looking for safe haven assets in a volatile and shrinking economy.
Keep in mind that barely 10% of gold demand comes from industrial use, so its price will remain largely unchanged by the economic peaks and troughs that will follow in the months to come.