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Gold, silver prices spike as investors seek safe havens

Mohit Oberoi
Author: Mohit Oberoi

Last Updated: July 22, 2020

Gold prices moved above $1,850 per ounce, just short of its all-time highs while silver jumped more than 7% to the highest level since 2013, as investors flocked to safe-haven assets amid the pandemic.

Gold touched an intraday high of $1,865 per ounce in early trading on Wednesday, not far from its all-time high of $1,921 per ounce that it hit in 2011. Silver prices in spot markets rose 7.2% to $22.84 an ounce, the highest level since 2013.

Gold in some local currencies has hit all-time highs amid a stronger US dollar. In India, the world’s second-largest gold buyer, prices in local currency moved above INR 50,000 for the first time on Wednesday.

Negative real interest rates, rising fiscal deficits, and a slowing global growth due to the pandemic are key reasons why investors have flocked to gold this year.

Inflows into gold ETFs in the first half of 2020 totalled $39.5bn, beating the previous record of $23bn in the full year 2016. The SPDR Gold Trust ETF, which invests in physical gold, is up 21.0% so far in 2020 while iShares Silver Trust ETF, which invests in silver has gained almost 18% over the period.

US-China tensions are among the other reasons weighing on bullion prices. On Tuesday, the US accused some Chinese nationals of hacking labs developing coronavirus vaccines.

The US has also directed China to close its embassy in Houston by Friday. The US State Department said that it took the measure “to protect American intellectual property and Americans’ private information.”

“It’s a typical low liquidity summer market where prices tend to be easier to push, especially when momentum has been established as per the trifecta of support,” Ole Hansen, head of commodity strategy at Saxo Bank told Bloomberg. He added: “The closer gold gets to its record high the stronger the magnetic field will become and that could see it challenge that level before long.”

“Gold has already set fresh all-time highs in every other currency this year, but this swing toward 2011’s record highs in dollar terms is of course attracting all the headlines,” said Adrian Ash, director of research at BullionVault. He added, Fear of missing out “is driving a flood of speculative money into gold, piling on top of January-June’s heavy physical demand.”

However, from a technical trading perspective, both gold and silver appear overbought with a relative strength index above 70.

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Mohit Oberoi

Mohit Oberoi is a freelance finance writer based in India. he has completed his MBA with finance as majors and also holds a CFA charter. He has over 13 years of experience in financial markets. He has been writing extensively on global markets for the last six years and has written over 6,500 articles. He mainly covers metals, electric vehicles, asset managers, and other macroeconomic news. He also loves writing on personal finance and topics related to valuation.