Gold
The Japanese yen, Swiss franc, gold and particularly silver are stronger this morning as risk aversion has returned as seen in lower European equity markets. The dollar has recovered from earlier weakness and the euro has fallen to 1.284 USD and €976/oz. Oil back above $77 a barrel and rising commodity prices is likely also supporting gold and silver.
Gold is currently trading at $1,253.10/oz, €975.55/oz, £812.96/oz.
Inflation pressures in the UK continue as seen in this morning’s UK inflation figures again exceeding the government’s 3 percent limit for a sixth month in August. Higher costs of items from air fares to food stoked price pressures in the economy. This saw sterling fall and gold has risen to £814.20/oz.
The ECB bought some €237 million of European sovereign debt last week and this along with the continuing dependency of some European banks on continued ECB funding clearly shows that the debt crisis is not over yet. Indeed, we could soon see a second more serious phase of the sovereign debt crisis. This should lead to continuing safe haven demand in Germany and other European countries affected by the crisis.
Silver
Silver closed over the important $20/oz level yesterday, up 19 cents to close at $20.11/oz which is its highest close since March 2008. It is trading even more robustly than gold with sell offs increasingly shallow and indeed it has been leading gold in the recent move up. It has even managed to close higher when gold has been lower on certain days which is very unusual and may be an indication that silver’s historical underperformance of gold may be changing leading to silver outperforming gold in the coming months.
Silver is currently trading at $20.25/oz, €15.77/oz and £13.14/oz.
Silver in USD – 5 Year (Daily). Click on image to view full size
Technically silver looks very well and may challenge the 2008 record daily close of $20.81/oz. Above this level silver would be in territory not seen since the late 1970’s and it is possible that silver could rise as high as $25/oz in the coming months. Conversely, a failure to reach new record highs would see a new period of correction and consolidation which could see silver fall back to support at $18/oz.
Silver in USD – 5 Year (Daily). Click on image to view full size
It is worthwhile looking at silver’s quarterly chart which takes out the volatility and speculative froth from the price. It shows that the record quarterly close for silver was on the last day of 1979 (31/12/79) at $32.20/oz. Given the even stronger fundamentals today and the fact that a huge amount of silver has been used in a variety of industrial applications in the last 30 years, many analysts expect silver to replicate gold and reach record highs in the coming years. This is especially the case because while silver was demonetised in the 20th Century and became seen more as an industrial metal, more recently investors and savers are looking to silver as a safe haven asset and a store of value (see http://www.goldcore.com/us/research/silver-set-to-soar-as-it-did-in-the-1970s/). This trend looks set to continue with value buyers switching from gold to "poor man’s gold" which remains cheap on a comparative basis to gold and other asset classes.
Platinum Group Metals
Platinum is trading at $1,565.10/oz, palladium is at $538/oz and rhodium is at $2,050/oz.
