Precious Metals hit multi-year highs on safety demand and stimulus plans

Commodity Update, Thursday, 23rd of July, 2020

Gold and Silver prices climbed to fresh multi-year highs on Wednesday, gaining support from rising geopolitical tensions, low interest rates, falling US bond yields, and the rapid increase in COVID-19 infection cases all over the world.

Gold hit its highest since September 2011 at $1.875 per ounce, nearing its all-time peak, while Silver broke above $23 per ounce for the first time since 2013. 

Silver gained more than 90% since it bottomed in early March, boosted from safe-haven flows, recovering industrial consumption in China and supply concerns.

The recent escalation in the US-China tension has led investors to seek safety into precious metals. The US government ordered China to close its consulate in Houston until Friday, accusing them of spying, while Beijing was considering shutting the US consulate in Chengdu city in retaliation over Houston. 

The tit-for-tat between the two largest economies of the world is likely to put at risk the Phase 1 trade deal and deteriorate the global economic outlook, fuelling demand for safety.

Furthermore, precious metals got support on the expectations of more fiscal and monetary stimulus from the US, together with the agreement on the massive EU Recovery Fund to support their coronavirus-hit economies. The stimulus measures are a positive catalyst for gold, which is considered a hedge against inflation and currency devaluation.