Silver hit its highest price in seven years and gold surged close to an all-time record as investors bought up the commodities in anticipation of yet more economic stimulus from the world’s biggest economies.
Silver rose as much as seven per cent to around $22.80 per ounce in morning trading. However, it then slipped back slightly to stand at roughly $22.30.
Meanwhile gold jumped to $1,865 per ounce – close to 2011’s record $1,921 high – before also falling back somewhat as the dollar rose.
Gold tends to benefit from stimulus measures. Investors view it as a hedge against inflation and currency debasement as central banks create money. And dire growth forecasts and ultra low bond yields have made traders look for higher returns.
Investors expect US lawmakers to agree on some kind of new stimulus package in the coming weeks. The European Union signed off on a huge €750bn (£680bn) coronavirus recovery fund this week.
Rebound hopes boost silver price
“The monetisation of deficits, debasement of fiat currency, low rates and yield curve control speculation [are] propelling the market higher,” said Eleanor Creagh, Australian market strategist at Saxo Bank.
“As well, virus uncertainties compounding macro-economic unknowns and geopolitical risks continue to provide additional momentum for gold demand,” she said.
And Creagh added that “fresh all-time highs” are “on the cards, likely by year-end”.
However, expectations of an economic rebound as countries reopen from coronavirus lockdowns have in particular boosted the silver price. Its use in the technology sector has been a key factor.
Carlo Alberto De Casa, chief analyst at Activtrades, said: “Silver seems to be the main winner.”
“We are in a state of euphoria for this precious metal,” Alberto De Casa said. “Its price is up 90 per cent from the bottom reached just four months ago.”
Gold and silver prices pare gains
However, prices fell back slightly after the US dollar rose. That was after China said the US had instructed it to close its Houston consulate. Geopolitical tensions tend to send investors towards the safe-haven dollar.
Fawad Razaqzada, market analyst at Think Markets, said: “Gold and silver were hit by profit-taking as Europe opened for trading.”
“The US dollar rebounded off the lows amid mild risk-off tone.”
Nonetheless, analysts broadly said they expected the rally to continue. Creagh said of the gold price: “A run at $2,000, an important psychological level, should be the next hurdle.”