Gold and silver prices continue to break records. What does this mean?
Precious metals are becoming more expensive amid political instability. On October 7, the price of gold in the markets exceeded $4,000 per troy ounce for the first time. Two days later, silver prices broke $51 per ounce, almost reaching the maximum recorded in 1980. What influenced the excitement around precious metals and whether to expect the continuation of this trend is in the Izvestia article.
Reasons for the growth of the silver exchange rate
• The latest jump in silver prices occurred amid a shortage of the metal on the London Stock Exchange. The reason for the shortage was information about the intention of the United States to impose duties on the import of silver. This led to an influx of metal into the country and a reduction in the available silver reserves in the UK. Along with silver, the prices of gold and palladium rose, while platinum, on the contrary, became cheaper.
• Silver gained about 70% in price over the year, outstripping gold, which rose in price by only 30% over the year. The increase in the value of precious metals is explained by the fact that they are traditionally safe haven assets, allowing them to save money during periods of political instability and armed conflict.
• The exchange rate of precious metals depends on the dollar exchange rate, so investors' attention to silver and gold is conditioned by the economic situation in the United States. Concerns about the suspension of government work in the United States, overheating of the American stock market and the possible loss of independence of the Federal Reserve System (FRS), which acts as a regulator, led to a weakening of the US currency and rising prices for precious metals (we wrote about the confrontation between the US administration and the Fed here).
• Interest in silver is initially lower due to its higher volatility compared to the same gold. For a long time it was an undervalued metal, but now its stability in the market is explained by the fact that it is in demand in industry — in the production of electric vehicles, solar panels and broadband wireless 5G data networks. Additionally, the silver exchange rate is boosted by record gold prices, which have been trending for several years, and its high cost may alienate some investors.
What does this mean?
• A year ago, the Central Bank of Russia announced its intention to diversify assets and increase purchases of silver in addition to the metals already acquired — gold, palladium and platinum. Russia is the eighth largest producer of silver in the world, and domestic purchases have stimulated the domestic economy. In addition, as early as 2024, there were forecasts for a possible shortage of silver due to industrial demand for this raw material.
• According to the Silver Institute's forecast, demand for the metal will exceed supply throughout the year. Despite a slight decrease in the precious metals exchange rate after record jumps in October, experts expect that they will not subside in the near future, and the price of gold may overcome the psychological mark of $ 5,000 per troy ounce.
• The revision of the strategy of the world's central banks to insure systemic risks in favor of gold marks a new reality where paper currencies and government bonds are no longer risk-free. Now, preference is given to assets that cannot be blocked or devalued by the regulator's decision. According to Deutsche Bank, interest in precious metals will continue and by 2030 gold and bitcoin will become key reserves of central banks.
When preparing the material, Izvestia took into account the opinions of:
- financial consultant Evgeny Marchenko;
- Evgeny Popov, an analyst at InvestFuture.
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