Gold hit a 9-year high and silver rose 18percent weekly. Why is the precious metal market crazy?

 Gold hit a 9-year high and silver rose 18percent weekly. Why is the precious metal market crazy?

Silver, on the other hand, rose even more. Silver prices (London Silver) hit a peak of $23.251/oz, the highest since September 2013. As of Fridays closing, silver prices were at $22.76/oz, up 17.78% in the week.

So far this year, gold prices have risen by 25.27%, while silver prices have risen by 27.71%. The gold market is a freight train out of control, and now is not the time to stand in front of this train, given the impending historic high, sighed one investor Some analysts believe that the gold price may continue to move towards the high point of US $2000 / oz, but we should also pay attention to the high altitude is too cold.


For the reasons for the recent rise in gold and silver prices, Huang Yan, a precious metal analyst at founders medium term, told the economic observer that the market liquidity was sufficient and provided a catalyst for the rise of precious metals. In March June, he explained, the Feds balance sheet expanded by 80% year-on-year, and base money supply increased by 25% year-on-year. If the currency multiplier can return to the position at the beginning of the year, this means that all assets denominated in US dollars have depreciated by 25% and therefore need to be replenished. In the previous year, gold barely won and silver lost, which is unreasonable. In the recent week, the Federal Reserve and the European Central Bank have a tendency to further release liquidity to promote the economy, which has a positive effect on the prices of both

According to the data, as gold and silver prices continue to rise, SPDR gold trust, the worlds largest gold ETF, kept increasing this Friday. On July 24, the position of iShares silver trust, the worlds largest silver ETF, increased by 298.39 tons compared with the previous day, and the current position was 17379.98 tons.

Xue Na told reporters that the silver market has more individual investors, smaller market capacity, lower price, and easier to form greater volatility, so the short-term increase is greater under the stimulation of emotions.

According to Huang Yan, silver is highly speculative. Its function is actually for industrial use and decoration, industrial use accounted for 50%, silver jewelry investment accounted for 50%, industrial properties and precious metal properties fluctuated repeatedly. Moreover, the value of silver unit is relatively low, and its hedging effect is like a castle in the air. A million dollars of gold may be only 23 kilograms, but a million dollars of silver may weigh 1.5 tons. Huangyan further said that silver is mainly the by-product of lead-zinc copper mine, and the global lead-zinc copper mine is in the expansion cycle on the whole, so the output of silver is also in a state of continuous increase, with a huge apparent inventory. As a result, the long short game of silver is very fierce, and once there is a large influx of capital, it often fluctuates rapidly and violently.

Huang Yan said that the reasons for silvers supplementary rise are as follows: the first is the gold silver ratio, which leads to the influx of funds due to the over inflation of gold; the second is that the expectation and heat of market economic recovery are very high, and at the same time, the risk aversion sentiment may also boost the periodic rise of silver price; the third is that there is a tendency of breakthrough in technology, the heat of funds is high, and the increase of futures market positions is obvious.

It is worth noting that the current silver market also appeared in the late February of this year, but in February and March, silver showed a sharp correction, with a cumulative decline of more than 20% in the two months.

As lead, zinc and silver are associated minerals, the price of lead and zinc fell sharply at that time, and the cost broke. In order to protect the main products with large losses, enterprises sold silver in the futures market to maintain value, resulting in the decline of silver price.

Huang Yan believes that at the beginning of July, the continuous rise of gold also brought attention to silver in terms of precious metals, as well as the expectation of market economic recovery and high capital heat, as well as technical breakthroughs. But he believes that the biggest difference between July and February was that lead and zinc prices rose rapidly due to Australian ore shipments, eliminating potential negative factors.

Even if many people in the market are bullish, they are in a wait-and-see state because they are scared by the price of February to March. In this case, silver in the first ten days and the middle of July, in the overall heat of the market is very good, but the trend is extremely stable, narrow range volatility When the money really came in, the money made the market extremely crowded, and the price of silver soared by more than 20% in a few days. In fact, the turnover rate didnt really open until the silver price was above $22 / oz, due to the excessive speed of the increase. Therefore, silver is not rising too fast, but rising too slowly, turning the slow bull structure into a mad cow structure. Even so, because the turnover rate has just opened, there is still room above.

Upper space

At present, international gold is around 1900 US dollars / ounce, and silver price is also fluctuating between 22-23 US dollars / ounce. Analysts believe that from the perspective of the aftermarket, precious metal prices still have room to rise, but uncertainty and volatility risks are increasing.

Xue Na believes that in the future, the inflation expectations that may stimulate the rise, the demand for safe haven due to the economic slowdown caused by the spread of the epidemic situation and the instability of the international environment will still lead to strong demand for safe haven. It is estimated that gold may fluctuate around 1900 in the short term, and there is still a strong upward momentum in the future. Gold is likely to break through the previous high of $1921 in the second half of the year. There is a lot of space above, and it may exceed $2000 / oz in the year.

However, silver has been rising too fast and rising too much recently, and there may be a risk of correction in the short term. Xue Na suggests, investor view

Watch and wait for the silver callback to form a certain form, and then enter the market to do more when breaking through. There is still a large space above silver, which may rise to $30 / oz within the year.

Huang Yan also said that the historical peak of gold was 1921 US dollars / oz. judging from the current capital heat and sentiment in the market, the possibility of a high level before reaching the peak is very high. However, if we consider the gold copper ratio, gold oil ratio, gold silver ratio, gold platinum ratio and other relative prices, the current price of gold is undoubtedly overvalued, but the heat of funds shows that the bull vigor is relatively sufficient, so it is likely that there will be a wide earthquake market in the future, with great fluctuation.

He further said that after the spread of international relations to other sectors, the markets risk preference decreased significantly, and capital sensitive varieties such as stocks and nonferrous metals experienced a deep decline. In extreme cases, there was the risk of a resonant correction of all assets in March.

For many uncertain factors faced by the precious metal market, Xue Na reminded: investors should focus on the progress of the U.S. epidemic, especially the change of mortality rate. If the market is worried about the rising risk aversion mood of the US economy, it will generally benefit gold, but it will have a certain negative effect on silver. In addition, the progress of international relations also needs to be focused on. If the risk aversion sentiment is warming, it will generally benefit gold and silver. In addition, if the Federal Reserves monetary policy is looser than expected, it will benefit gold and silver.

Source of this article: Yang Qian, editor in charge of the Economic Observer_ NF4425