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On Thursday, 23.07, stock exchanges worldwide reported record increase in the price of gold and silver. The yellow metal reached the sum of $1880 per troy ounce—its highest price since 2011. Another top performer in the precious metals market was silver, which reached $23 per troy ounce in the same day—a 6-year high.
What caused the precious metals’ prices to skyrocket?
Some experts believe that the surprising jump in the prices of gold and silver can be attributed to the establishment of the European Union-approved emergency Eurozone fund of €750 billion, the optimistic outlook regarding the planned stimulus packages in the U.S., and the expectations for a quick recovery of global industrial demand. The sharp decline of the American dollar against most currencies was yet another factor that skyrocketed gold prices.
Another reason is the increased demand for safe haven assets from investors, who now stick to safer strategies due to the rising number of people infected with the virus, as well as due to concerns surrounding the projected lower mining output in the future. According to data provided by the S&P Global Market Intelligence, 275 mines throughout the world have currently ceased operations due to the pandemic, with Mexico and Latin America bearing the brunt of thel blow. According to a study done by Silver Institute, the coronavirus’ continued spread may lead to a 7% decrease in the total precious metal output for 2020.
The repeated rise of COVID-19 cases, Citigroup experts explain, is hinting at a long and uneven global recovery ahead of us, which provides gold with the perfect opportunity to reach new highs and remain on the expensive side in the long term.
What to expect from the market in the future, according to experts
Thanks to the skyrocketing prices, on Wednesday gold’s value went up by over 0.7% to $1869 per troy ounce, while silver reached the price of $23 per troy ounce (increase of over 6%).
Source: DeltaStock
This trend is expected to be here to stay due to the increased investor interest in precious metals, as well as because of their expectations for extremely low interest rates in the sector in the long term. The Federal Reserve, on the other hand, has started liquidating markets and flooding the economy with U.S. dollars, which alone is a reason enough to stock up on the safe haven assets.
Together with the approved Eurozone recovery fund, the Federal Reserve has helped create incredibly favorable conditions for precious metal investments—conditions from which silver is expected to benefit the most. Since the start of the year, gold has increased by 19.7%, or $300 per troy ounce, with some analysts speculating that there is a 30% chance for the precious metal to reach the record high of $1921 from 2011. A potential breach of the resistance at $2000 per troy ounce is also on the table. A significant price jump is forecasted for silver as well.
“Just like gold, silver is also taking advantage of investors’ heightened demand for safe haven assets throughout the year, as well as of the falling long-term real interest rates in the U.S.”
Vivek Dhar, analyst for the Соmmоnwеаlth Ваnk оf Аuѕtrаlіа
According to data published by Citigroup, silver may be poised to reach $25 per troy ounce within the next 6 to 12 months. Should the bank’s bullish scenario be met, it expects for the precious metal to reach prices of up to $30 per troy ounce.
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