In the last couple of weeks, the silver price has been on the rise. Investors have been turning to silver in greater numbers than before. What has been driving the price of silver?
While a lot of people have had their eye on gold which has had a magnificent run, people are beginning to notice that the same factors that are driving the rally of the gold price are also driving silver.
Silver and gold have been seen as safe-haven investments. The price of gold and silver to some degree turn when bonds offer negative returns as they have been doing recently.
Silver has made impressive gains in the last weeks promoting silver buyers to unload the silver investments they have made over the years. Precious metal dealers are beginning to show an increasing interest in buying silver products.
In August, the spot price of silver reached $30 an ounce. Even when it pulled back slightly to $27 an ounce, it was still the highest it has been in seven years. Between mid-July and the end of August, silver gained almost 39%.
Gold, silver, and other precious metals have been lifted by a number of drivers.
The first one is the money that central banks have been pumping into the economy to stem the effects of the Coronavirus pandemic on the global economy. This has created uncertainty of the financial system post coronavirus as worries about how the mounting debt will be addressed. This has also resulted in real yields being negative which means that people who invested in bonds will get returns that are below inflation.
The most obvious driver has been the dollar which has been weak I. The last couple of months. Since commodities like silver and gold are traded in U.S dollars when the dollar is low the silver price and gold get stronger.
Silver tends to rally faster and higher than gold. It may be cheaper, but you can turn a high return on your silver. However, the trick with silver is that you have to seize the opportunity and sell as soon as goes high because it can really knock you out when it self-corrects. This happened in March when investors were dashing to liquidate their gold and silver investments. Silver got hammered and fell below 30% and ended up trading at $12/oz. Gold also got blighted but only slipped 11%.
Since then, the price has been steadily going up. It is currently halfway to the highest price it has ever been of $48/oz. reached in April 2011. Gold on the other hand has already broken past multiple record highs but this is helping shift the focus to silver.
The other factor shifting the focus on silver is the growing industrial demand for the gray metal. Silver makes a unique combination for people who want to take advantage of the by the local recovery of the economic recovery of companies of industrial businesses who use silver. Investing in silver makes for a great defensive hedge against economic risks.
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