The Impact of Covid on Precious Metal Investment

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While the risk of further spikes in Covid-19 case continues to weigh heavily on the world’s economy, there are some assets that continue to experience a significant boom in the marketplace.

Take precious metals, for example, with gold and silver having recently soared to their highest price points since 2011 and 2014 respectively. Incredibly, the rally in silver prices has peaked at around 80% since the explosion of the global pandemic in March, which left much of the world in a state of lockdown and economic activity.

We’ll explore this further in the article below, while asking what the future could have in store for precious metal prices and investors in the months ahead?

Why Have Gold and Silver Soared of Late?

Following their recent price surges, what’s more impressive is that gold and silver have been able to hold onto their significant gains.

To this end, bullion sparked at $1,865 per ounce at the end of last week, experiencing further, incremental gains of just over 1% in the process. This extended the gold rally to its highest level since 2011, when the world was still recovering from the impact of the great recession.

At the same time, analyst Jeffrey Halley from Oanda reported that silver exploded by a whopping 7% on the morning of July 22nd alone, continuing an aggressive rally that has gripped the precious metal market as a whole of late.

The question that remains, of course, is why have precious metals seen such expansive price growth in recent times? On a fundamental level, both gold and silver have benefitted from the tailwinds created by negative yields across the spectrum of the US yield curve, as the global recovery remains mired in uncertainty amid the ongoing Covid-19 crisis.

In the case of silver, this asset has experienced more pronounced gains due to its core industrial and practical applications, which play a pivotal role in multiple industries and have benefited directly from the return of production and economic activity across the globe.

Silver’s price shifts always tend to be more pronounced than gold too, thanks to the asset’s innate liquidity in the marketplace.

What’s Next for Silver and Gold?

In simple terms, economic growth affects the price of silver far more than gold, which is a far more stable asset that’s seen as a secure store of wealth during times of economic austerity.

Much of the demand for silver is based on industrial uses, particularly in popular products such as batteries, brazing alloys, dentistry, medicine and LED chips.

Some of the applications are included as part of high-growth markets, while the cessation of recent lockdown measures provided a huge boost to the global economy and sent the demand for silver soaring in the process.

While this trend is likely to continue for a while before silver corrects its price course, the future of this precious metal is relatively uncertain and incredibly vulnerable to further lockdowns and the impact that this will have on global economic output.

Conversely, the price of gold is likely to remain relatively stable, while continuing to make incremental gains and investors seek out safe-haven assets in a volatile and contracting economy.

Remember, barely 10% of the demand for gold comes from industrial use, so its price will remain largely unaffected by the economic peaks and troughs that follow in the  months ahead.

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