After reaching another ATH, both in USD and PLN, gold first went through a correction, only to rise again shortly after. Silver also finally took off, reaching the highest levels in 12 years.
The past week has seen another record price for gold, both in terms of the dollar and the złoty. In American currency, the price approached 2760 USD/oz, while in Poland it reached a level of 11,100 PLN for an ounce of the precious metal. The new week started with gold above 2730 dollars and over 11,000 złotych per ounce.
Record, Correction, and Up Again
Shortly after gold reached a new all-time high, we observed a massive sell-off, not only in the gold market but also in the stock market. This is quite natural for gold, whenever it touches the highest level, a correction begins as some investors decide to take profits.
Why did this also happen on the American stock exchange? Bond yields in the United States began to rise, and capital moved to the dollar, which gained in value. The stock market then began to lose, as financial resources began to move towards the currency.
This is the result of the fact that economic data from the USA does not show a clear direction in which the Fed will go. Indeed, everyone is saying that further interest rate cuts in the United States should occur this year, but financial data from the economy is bringing some uncertainty. This translates into uncertainty in the markets.
After the massive sell-off, the situation began to return to normal, both on the stock exchange and in the gold market, and by the end of the week, the metal again gained, exceeding the price of 2740 USD/oz on last Friday. The strong rise of the dollar in recent weeks, in turn, affected the price of gold in złoty, as it is a combination of the gold price and the value of the dollar.
How Can BRICS Countries Impact Gold?
BRICS countries met last week in Russian Kazan, and their representatives discussed, among other things, building an alternative to American currency. They believe that the dollar, used as a weapon in international relations, is a threat to many countries. But why does this matter in terms of the gold price?
Countries in the BRICS, but not only these, have been conducting a gold purchase policy for their currency reserves in recent years. China, which currently has a break, has been buying the precious metal for the last 18 months. Turkey and other countries in this group have also been buying. Even Poland, which is not a member of the BRICS and is not planning to go there, has been buying.
The central banks’ policy of buying precious metals will continue. This is what everyone is saying. And we all know that this actor, being central banks worldwide, has long had a strong influence on the gold price. This will not change in the coming months and years.
In addition, there is the situation related to the aforementioned construction of an alternative to the dollar and the still strong international tensions. And that’s why gold is becoming the only safe haven for many investors – including Bank of America – to which they are fleeing. This causes the price of precious metals to rise in the near future.
Crazy Silver Rally
However, not only gold has been hitting records in recent weeks, as the price of silver has also surged dramatically. Whenever gold rises, silver soon joins this race regarding the dynamics of growth. This has happened in recent weeks, with the metal’s price up 38% this year, compared to gold’s “mere” 30%.
It’s worth remembering that silver is a metal more consumed in industry than gold. All new technologies, like photovoltaics or electric cars, use it and they generate a large part of the demand. But so far, one industry, consuming massive amounts of silver, has not been mentioned.
Journalists from The Jerusalem Post draw attention to the hidden part of the demand from the military industry, which may significantly exceed industrial demand. This is because the whole world, facing numerous threats and various geopolitical tensions, has started investing massively in armament.
Armaments also use new technologies and require silver. Everything is subject to military secrecy, so it is not easy to determine what part of the world’s silver production goes towards military needs, but it is considerable for sure. This causes the price of this metal to rise in the near future.
Currently, silver is at high levels, although it is still quite far from record values that were reached quite a few years ago. But if gold continues to rise, so will the silver price, so it’s a good alternative for anyone considering diversifying their portfolio.
Michał Tekliński, a gold market expert at Goldsaver.pl, Goldenmark Group.
Source: https://managerplus.pl/nowe-rekordy-zlota-i-srebra-po-korekcie-ceny-znow-ida-w-gore-srebro-na-najwyzszych-poziomach-od-12-lat-97492
