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Precious Metals Experienced Excellent Price Performance during Last Month

By
Alexei Afanasiev
-
45
18010

Amid global economic turmoil, gold had its best monthly climb in July 2020. A similar price performance had not been seen since 2012. While the US dollar declined, the gold value grew 11% during July. Spot gold was trading at $1,974.40 per ounce on Friday. Earlier on the week (Monday), a historical record of $1,945.10 per ounce was reached. The previous all-time high price was seen in September 2011; it now has been displaced to the second place.

At some point on Friday, the gold price passed the $2,000 per ounce barrier. Some analysts expect even a higher climb during 2020. Gold’s good performance and the decline of the US dollar make the American currency’s status as the most-used reserve asset unclear. The dollar is close to reaching its largest monthly fall in a decade. Investors holding other currencies found the dollar-priced gold easier to acquire.

In the long term, investors may readjust their portfolios to include more gold investments. This may be already happening. Gold futures for December delivery grew 1.1% (equivalent to $19.10) to $1,989.30 per ounce in New York and became the most traded contract. Bullion, for its part, grew 4.7% in the same week. In the shorter term, August gold grew 1% (equivalent to $19.10) and settled at $1,942.30 per ounce last Thursday.

The “Poor Man’s Gold” Experienced Historical Growth Too

Silver, nicknamed the “poor man’s gold,” experienced astonishing performance last month too. This metal closed July with a climb of 30%, the biggest monthly gain in price observed in 40 years. This growth is linked to the appreciation of gold. However, it is also the result of higher demand by the industry. Silver has a variety of applications in power generation, mining, metal refining, and other industrial processes.

However, before this all-time high, silver fell to $11.645 per ounce in March this year. But as the gold price started to climb, so did the silver’s value. This was in great part thanks to the Federal Reserve, which together with other central banks released an economic stimulus. The silver’s gain last month hadn’t been seen since September 1980. This turned this precious metal into the best performing commodity of July 2020.

Silver is regarded as a haven more than ever, and some analysts expect it to reach $30 per ounce this year after climbing to a maximum value of $26.28 per ounce last week. It would not be surprising if it reached $40 or even $50, according to Philip Streible, a senior market strategist. As seen, “poor” is not exactly the word to describe the performance of this metal.

For his part, Christoper Lewis, and independent metal analyst, supports the idea of keeping one’s silver investment for the long term. Even if the Federal stimulus ended, Lewis affirms that silver is a commodity that we should never consider selling.

The drop of almost 4% seen last Thursday caused some concern, but the metal quickly rebounded. The next day, Friday, silver was back on track. Gold experienced historical growth on Friday too, but it was not comparable to silver’s performance.

Lewis is optimistic about the future of this precious metal and predicts even higher value climbs for the long-term future. However, he also foresees a hard fall at one point in the future. But he thinks such a dip must be viewed as an opportunity to buy. Special attention should be given to the $22 per ounce level, in his opinion.

However, conditions to buy are still favorable. The gold/silver ratio is still below 85.30, its average value for the last 10 years. This ratio was 1:81 on Friday, which means you needed 81 ounces of silver to purchase 1 ounce of gold. In mid-March this year, the ratio was 1:127, when silver had a price of $11.65, hitting an 11-year low. However, over several decades, the average ratio has been 1:56. According to Streible, silver will continue outperforming gold to settle in a ratio of around 1:60.

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