Gold and silver continue to gain value as pandemic lingers

Even with the intermittent drawdowns that both gold and silver pricing have experienced over the last few months, overall gains in both metals have been impressive and significant. Obviously higher pricing in both precious metals is the direct result of global central banks accommodative monetary policy, and in the United States the massive buildup of their internal balance sheet to implement quantitative easing. It is also obvious that these actions are the direct result of the pandemic which has dramatically affected economies worldwide.

Although we first learned about this new virus after a cluster of severe pneumonia cases were reported on New Year’s Eve 2019 in the city of Wuhan China, it was not until February 2020 that the first case of Covid 19 was detected in the United States. According to the CDC by mid-March, “all 50 states, the District of Columbia, New York City, and for territories at reported cases of Covid 19.” This novel coronavirus is a variation of an existing virus, however this variation had never been seen in humans.

Although this contagion was identified in the beginning of 2020 it was not until March 11 that the World Health Organization declared the outbreak a pandemic. By March 23 New York City had confirmed a total of 21,000 cases. Making the largest most densely populated city in the U.S. the epicenter of the outbreak in the United States. By the first week of April global infections had reached over 1 million individuals.

According to John Hopkins as of July 17, 2020, the total number of confirmed cases is almost 14 million with 13,926,747 cases reported. Among these infected individuals almost 600,000(593,209) people lost their lives. This pandemic has now plagued countries worldwide since the first part of this year, still new cases continue to emerge in various hotspots in the United States such as Texas, Arizona and Florida. Worldwide hotspots can be found mainly in the following countries; Brazil, Mexico, India, Columbia, Iran, Peru, Russia, South Africa and Iraq. As of July 17, the two largest hotspots were in the United States and Brazil. Concurrently many countries worldwide are working to “flatten the curve” reducing the number of new cases from one day to the next.

More importantly even when the pandemic has run its course and subsides, global economies will have to begin to figure out how to effectively deal with the enormous expenditures that were necessary to restart their economies, as well as the massive amount of capital expended through central banks and their highly accommodative monetary policies

It is for that reason that we have seen such dramatic gains in both gold and silver. Since the first week of June when gold traded to a low of $1671 to current pricing of $1812.10 today, an ounce of gold has risen roughly $125, which is a net gain of 6.9% in approximately 1 ½ months. Silver also gained dramatic ground as it traded from the approximate lows of $17.55 during the first week of June, and is currently fixed at $19.745 as of today’s close. Silver his gained $2.20 in the last seven weeks and gained 11.1% in value over this extremely short period of time, half that of golds rise.. The underlying fundamentals which have moved both gold and silver dramatically higher, have already created the necessary environment for both precious metals to continue to move higher and possibly trade above the record high of gold at $1920, and silver at the dollars per ounce.

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What is certain is that the global pandemic will most likely take a longer time to run its course unless a vaccine is created. It is also certain that once the pandemic has subsided the economic fallout which is a direct result of the massive expenditures by countries worldwide used to provide aid for its citizens, and economic stimulus to reignite their contracting economies will have percussions and ripple effects for years to come.

While we all wish for the best, we must prepare for the worst. It is for that reason that market participants and investors have turned to the safe haven assets of gold and silver as a viable means to address the economic fallout which is inevitable.

Wishing you as always, good trading,

 

 

By Gary Wagner
Contributing to kitco.com

David