Silver Futures Surge and Gold Nears Record in Flight to Havens
Silver jumped to the highest in almost seven years and gold continued its march toward a record on stimulus expectations.
(Bloomberg) -- Silver futures climbed to the highest in almost seven years and gold continued its march toward a record on expectations there’ll be more stimulus to help the global economy recover from the coronavirus pandemic.
Investors have flocked to the metals on surging demand for havens amid a resurgence in virus cases, slowing growth, negative real interest rates in the U.S., flaring political tensions and a weaker dollar. The vast amounts of stimulus unleashed by governments and central banks have also aided prices and, after the success of a European rescue package this week, the focus turns to negotiations on legislation to prop up the American economy.
Silver jumped more than 8% on Wednesday -- the biggest gain since March -- and has been getting an added boost from supply concerns and optimism about a rebound in industrial demand. Holdings in exchange-traded funds backed by silver are at a record, while gold ETF holdings rose by the most since mid-June on Tuesday and also sit at the highest ever.
“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,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S. “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.”
Silver should also continue its run as long as it has support from higher gold, as well as a weaker dollar and bets for more industrial demand, he said.
Silver for September delivery climbed as much as 8.3% on the Comex to $23.35 an ounce, the highest for a most-active contract since 2013. It settled at $23.144 at 1:26 p.m. in New York. The commodity has gained about 29% this year and is the best performer on the Bloomberg Commodity Index.
Gold futures for August delivery rose 1.1% to $1,865.10 on the Comex, nearing 2011’s record high of $1,923.70. Palladium and platinum advanced on the New York Mercantile Exchange.
Read more: ETFs Increase Gold Holdings for 18th Straight Day, Buy Silver
“In the very short-term term the direction is still upwards,” Carsten Fritsch, a Commerzbank AG analyst, said of gold and silver. “You see that prices continue to march higher. There might be some setbacks, but these are just brief and short-lived and are being used as a buying opportunity.”
Rising Tensions
Investors also weighed mounting China-U.S. tensions, with the Asian nation vowing to retaliate after the U.S. forced the closure of its Houston consulate. The State Department said it took the measure “to protect American intellectual property and Americans’ private information.”
Read More: The Stage Is Now Set for Gold to Test Its Record
The fear of missing out “is driving a flood of speculative money into gold, piling on top of January-June’s heavy physical demand,” said Adrian Ash, director of research at BullionVault.
Still, some analysts said there are signs that the rally could be over-extended. Both metals’ relative-strength indexes are above 70, a level that suggests to technical traders that prices could soon pull back.
“Silver has now reached an extreme value. We do not expect silver prices to continue to rise at the same rate,” said Alexander Zumpfe, a trader at Heraeus Metals Germany GmbH & Co. KG. “However, we also believe that a significant correction in the current environment is unlikely.”
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