Gold has traditionally been investors’ favorite safe-haven, and is somewhere to turn when bonds offer flat or negative returns and stock markets are choppy. This has certainly been the case during the coronavirus crisis, when the gold price has hit record highs.
But silver has seen even bigger percentage gains in recent weeks. “It seems like silver is going for the gold medal,” said Mobeen Tahir, associate director of research at exchange-traded product provider Wisdom Tree.
The silver spot price, it’s real-time value, reached $29 an ounce last week, according to Reuters data. It has since pulled back slightly but still stands at almost $27 an ounce. This represents a seven-year high and a gain of nearly 39% since mid-July when the precious metal rally got into full swing.
Meanwhile, gold is currently trading around $1,947 an ounce and is up nearly 8% since mid-July. Fundamentally, precious metals have been buoyed by a “trifecta of strong drivers,” Ole Hansen, Saxo Bank’s head of commodity strategy, told CNBC over the phone.
One of these is the injection of more money into the economy by central banks around the world, as part of attempts to stem the impact of the coronavirus crisis. Hansen said this monetary easing had created further uncertainty about the health of the financial system, with worries about “an increased mountain debt that needs to be addressed,” therefore boosting demand for precious metals as a safe-haven investment.
It has also resulted in real yields heading into negative territory, which means the return investors get on bonds is equal to or below the rate of inflation. It indicates less “opportunity cost” of investing in an asset that doesn’t offer a return besides the fluctuation in its price, like gold or silver.
Thirdly, the weakness in the dollar over recent weeks, has also boosted precious metals. As commodities are typically traded in dollars, a weaker greenback often translates into a stronger commodity price.