Silver Outperforming Gold as Industrial Consumption Set to Drive Demand
The coronavirus pandemic has caused many investors to flock to safe-haven assets such as gold, as economic uncertainty plagues financial markets around the world. However, silver prices have also been rallying recently. In fact, silver has amassed returns of approximately 60% so far in 2020, while gold has only delivered returns of 15% in the same time period.
On Monday, silver prices reached above $27 per ounce, meanwhile gold prices have been reaching to just above $1991 per ounce. Although silver prices have performed relatively well during a time when many seek safe assets in times of increased money supply, the commodity still has a ways to go before it will reach its record-breaking price point of $49.24 in 2011.
Some analysts however, predict that as economies around the world begin to recover from the coronavirus-induced recession, industrial consumption will also be on the rise. As a result, the demand for silver will increase, given that the metal has a wide variety of uses in the industrial setting. According to Prithvi Finmart Director and Head of Commodity and Currency Research Manoj Jain, silver is likely to continue on its outperformance path. Given that the value of the dollar has been declining in wake of significantly slowed economic growth in the US, the discovery of a COVID-19 vaccine will drive up global industrial activity, thus pushing silver prices even higher.
Gold is also expected to perform well in such a scenario, since it acts as a wedge in times of high inflation. Banks have been stockpiling their reserves in order to diminish their dependence on the US dollar; however, in the event that investors gain an appreciation for riskier assets, gold prices may be hindered in their advance. Jain is projecting that silver will reach $49 over the next two to three years, while gold is expected to rise to approximately $2,000 in the same time period.
Information for this briefing was found via NDTV and RT News. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
