Precious metals made dynamic gains today as a double whammy hit many short sellers. This knockout is the net result of two main ingredients; extreme weakness of the dollar and aggressive purchases by merchants and market participants. Price movements in both gold and silver brought those precious metals to levels not seen in nine years for gold and six years for silver.
Gold futures made a respectable profit today with August’s most active gold contract earning 1.35%, or $ 24.60, bringing gold to $ 1,842 per ounce. Spot or physical gold is very close to gold futures as it is trading at $ 1841.5, a net gain of $ 23.67 or 1.3%.
Silver continues to have a stellar period of higher prices. Today’s earnings are really the icing on the cake considering that silver was trading at $ 12 an ounce in March and has essentially doubled in price since March 2020. Currently the silver base for the most active contract in September is 7.2%, which is a net profit of $ 1.42, and currently set at $ 21.61.
As silver continues to outperform gold in terms of percentage gains, we have seen a tremendous contraction in the gold-silver ratio. In March 2020, it took approximately 126 ounces of silver to buy 1 ounce of gold. Today it takes about 87 ounces of silver to buy 1 ounce of gold.
Today’s one-two knockout was the direct result of two main factors. First was the sharp drop in the US dollar. The dollar index lost -0.65% today and is currently set at 95.15. The second main factor is that traders and market participants have been actively accumulating and trading both gold and silver.
This recent shopping frenzy comes as merchants react to the news that the European Union has agreed to a $ 2.1 billion budget and a coronavirus relief plan. After a marathon negotiation that lasted three days, the leaders of the European Union agreed on a recovery fund of 1.8 trillion euros.
As reported on MarketWatch, “To cope with the biggest recession in its history, the EU will establish a € 750 billion coronavirus fund, partly based on common loans, to be sent as loans and grants to the worst affected countries. That adds to the seven-year, € 1 trillion EU budget that leaders had been haggling for months even before the pandemic. “
Studies indicate that the price of gold is a surprising distance from a new all-time record when compared to the US dollar. Based on that information on a technical basis, there is very little resistance between the current price and the all-time record.
Today’s strong upward movement in both gold and silver conveys the belief of traders that the current level of global fiscal stimulus and quantitative easing by the central bank coupled with zero to negative interest rates is the right market environment for move both gold and silver to higher ground. We hope this trend continues.
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Wishing you good trade and good health as always,
Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a request to make any exchange in products, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept guilt for loss and / or damage resulting from the use of this publication.
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