Run for the precious items: The depot shines! The prospects for gold, silver, platinum and Co. | message
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by Emmeran Eder, Euro am Sonntag
Since gold is quoted in dollars, it becomes cheaper for buyers from other currency areas to buy the yellow metal, which increases demand. The reasons why the greenback recently gave way also contribute to the run on gold. The USA cannot get the corona virus under control. This leads to economic upheaval and high unemployment. There are also violent clashes on the streets because of racism.
A wave of bankruptcies is expected in the USA and Europe by the end of the year. As the pandemic is rampant around the world, many investors fear a global economic crisis like the one in the 1930s. To avoid this, the central banks are printing a lot of money and launching huge economic stimulus programs. “Many investors fear that the enormous flood of money could sooner or later lead to rising prices. That is why they are investing in gold, which is traditionally used as protection against inflation,” says Hans-Gnter Ritter, chief trader at the precious metal trading company Heraeus, explaining the rising prices.
Analyst Hannes Huster from the information service “Der Goldreport” sees inflation coming from another side. The dependence of the supply chains on China should be reduced after the experience of the Corona crisis, which will lead to the establishment of our own production in Europe and the USA. “That drives up prices,” says Huster.
Then there are the negative real interest rates in Europe and the USA. In the United States, these have fallen to minus 0.9 percent, the lowest level since 2012. The disadvantage of gold, that it pays no interest, no longer plays a role.
Investors are fleeing into ETFs
This mixture of different factors makes investors flee into gold ETFs. In the first half of 2020, the inflows into the products reached a record level of almost 40 billion dollars worldwide. They are primarily responsible for the rising gold price. Because the number of speculators on the futures markets who are betting on further rising prices is still a long way from the annual high in February. This suggests that the market is not yet overheated. Gold should hit the $ 2,000 mark soon. Then there could be a breather. In the medium term, however, prices of well over $ 2,000 should be possible, as nothing will change in the price-driving factors for the time being.
Its little brother, silver, recently climbed considerably more than gold. At a peak of $ 26 per troy ounce, the highest price level since 2013 was briefly reached. Silver was priced at $ 24.20 mid-week. When it comes to the hybrid of industrial and precious metal, the precious metal side clearly prevails. “The bull market is purely investor-driven,” says Huster.
The reasons are for the most part the same as for gold: the global economic crisis, an impending wave of bankruptcies, the flood of money caused by the central banks, fears of inflation and a loss of confidence in the dollar. There were also production bottlenecks in the main producing countries Peru and Mexico, in which Covid-19 was particularly severe. In Mexico, however, the production problems have now been resolved.
In terms of the amount stored in silver ETFs, a historic high of 1.42 billion ounces was reached. Previously, the maximum was 900 million ounces from 2012. Last week alone, 44.25 million ounces were added, the highest weekly number in the past 20 years.
Demand from industry, on the other hand, has fallen due to the recession, and there is no pressure on prices. There is oversupply of silver globally.
The number of speculators who bet on higher prices with futures contracts is still well below the high for the year from February. In terms of the chart, there is a strong resistance at $ 26 from 2011 and 2012, which was tested several times at the time. There, at the latest, the bull market should stall and there should be a correction in the $ 20 area.
In the medium term, however, the chances for white metal are as good as for gold, so that much higher levels should be reached. The reasons that drive prices remain intact, and a recovery in industry could increase demand, which would also have the effect of increasing prices. An increase to $ 30 is possible. Because of the high volatility, however, investing in silver is more sporty for investors than investing in lesser gold.
Platinum fluctuates far more than the yellow metal. For a long time the price lagged the other metals. The reason was that it is primarily used in catalytic converters for diesel engines and in jewelry. Demand is slacking in both areas. Since the price difference to gold is now historically high in view of the new all-time high for gold, investors hope that jewelry buyers will increasingly turn to platinum jewelry.
Hydrogen creates the imagination
Above all, the promotion of hydrogen as a new future technology in vehicles or steel production by many governments and the EU is now bringing imagination to the platinum price. “Platinum is indispensable for the electrolysis process and thus the production of hydrogen”, Heraeus writes in a hydrogen study. The trading house expects higher demand for platinum, which should boost the price.
Palladium has also picked up in recent weeks, but less than the other precious metals. The main reason for this was that more cars were being bought again in China. 85 percent of the white metal is used in catalytic converters in gasoline cars. However, demand is weak in Europe and the USA. Since the demand for palladium should therefore fall far more than supply in 2020, the market is in equilibrium after being in deficit for eight years. “So there is little room for price increases,” says Ritter.
Gold is likely to continue to rise with fluctuations. In addition to the existing uncertainty, the trade war between the United States and China has recently intensified over Hong Kong. The US elections are also likely to cause nervousness. If you simply want to invest in gold, you can do so with an ETC from the British supplier of commodity products WisdomTree, which is based on the gold price. There is no currency hedge against the dollar’s weakness.
The sharp rise in silver could be followed by a brief correction. In the medium term, however, white metal has good prospects, as it often marches in lockstep with gold. In addition, the gold-silver ratio of 80 is still above the historical average. It shows how many troy ounces of silver are needed to buy one troy ounce of gold. With the physically secured ETC from db ETC, investors rely on the precious metal.
After platinum lagged behind the other precious metals in price increases for a long time, it caught up sharply in July. In terms of charts, the way to $ 1,000 per troy ounce is now free. A revival in the sharp collapse in demand for cars in Europe would also support platinum. Investors can participate with a physically secured ETC from WisdomTree. The metal is very volatile and therefore only suitable for investors who are willing to take risks.
More news on the gold price
Image sources: Degussa Goldhandel GmbH, Nomad_Soul / Shutterstock.com