Silver’s Biggest Weekly Gain In 40 Years

Strengths

• The best performing precious metal for the week was silver, up 17.79 percent. Silver had its biggest weekly gain in nearly 40 years and could keep soaring. The metal hit its highest level since 2013. Mike McGlone, commodity strategist at Bloomberg Intelligence says the white metal could eventually climb to $30 an ounce amid a broad-based bull market for precious metals. McGlone predicts the metal will stay between $20 and $25 for an extended period before moving higher. The Global X Silver Miners ETF had a ninth straight day of inflows and the iShares Silver Trust saw five consecutive days of money flows.

• Gold has rallied an amazing 24 percent so far this year and rose above $1,900 an ounce for the first time since 2011. Investments in U.S.-listed commodity ETFs rose last week for the fifth straight week of inflows, according to Bloomberg data. Precious metals funds saw investment inflows of $3.8 billion in the week ending July 22, which is the second largest weekly inflows ever, according to Bank of American strategists citing EPFR Global data.

• Veteran investor Mark Mobius says that investors should buy gold now and keep buying it as political tensions and worries over global growth fuel the bullion rally. Mobius said in a Bloomberg TV interview this week that “I would be buying now and continue to buy. When interest rates are zero or near zero, then gold is an attractive medium to have because you don’t have to worry about not getting interest on your gold.”

Weaknesses

• The worst performing precious metal for the week was gold, still up an incredible 5.06 percent. With gold positive 24 percent for the year, investors are broadening their exposure across the precious metals space with palladium and platinum both with nearly double digit gains this week too.

• Teck Resources Ltd reported an 82 percent drop in second quarter adjusted profit as the Covid-19 pandemic hurt demand for its products and squeezed prices, reports Kitco News. Miners globally have been faced with challenges in the commodities market, forced mine closures and production cuts. Teck largely produces copper and zinc and suspended its 2020 outlook in April.

• Pan American Silver announced this week that it is moving two of its operations in Peru into care and maintenance after several works at the mines recently tested positive for Covid-19.

Opportunities

• Platinum could rise higher along with gold, according to UBS Group AG. “Our near-term bullish view on gold implies higher platinum prices this year,” said analyst Giovanni Staunovo in a note this week. The bank raised its platinum forecast to $975 an ounce at the end up September, up from $850 an ounce. U.S. imports of platinum from Switzerland more than tripled in June from a month earlier to 3.4 tons – the highest level since October 2006.

• According to Deutsche Bank AG, the close correlation between gold and the Japanese yen has broken down in the new macro environment. A risk-averse environment that leads to easy monetary policy, which in turn triggers a rebound in risky assets, is among the most constructive for a long-gold and short-yen position, writes strategist Alan Ruskin. “Gold then remains the easier long” versus the dollar or yen.

• Gold miners have room to catch up with spot gold. The performance of gold miners relative to the MSCI World Index has widened a gap with spot prices in recent years, signaling plenty of catch-up potential. According to Societe Generale strategist Sophie Huynh, “both fundamentals and positioning look aligned for gold miners to shoot higher.”

Threats

• Gold’s meteoric rise is flashing a warning signal that faith in central banks has disappeared. Bloomberg’s Eddie van der Walt comments: The risk is that top central bankers’ “clay feet are exposed by asset price bubbles and the fear of stagflation. In particular, I’m starting to hear the question: ‘If these people really knew what they’re doing, why is gold going gangbusters?’ The assumption being that there should be no reason to own the metal if growth is steady and inflation is benign.”

• U.S. and China tensions rose dramatically this week. The U.S. ordered China to close its consulate in Houston after accusing it and other Chinese diplomatic missions of economic espionage and visa fraud, reports Wall Street Journal. Beijing then ordered the closure of the American consulate in Chengdu in retaliation on Friday.

• Many see a bubble brewing. According to a Bank of America survey, a majority of fund managers believe tech stocks to be the “most crowded trade” in history. The combined market cap of Apple, Amazon, Microsoft, Google and Facebook now represents close to a quarter of the total S&P 1500 market cap. tech stocks, as measured by the NASDAQ 100, are now more overvalued relative to the S&P 500 than they were during the dotcom bubble, after which the market tumbled nearly 50 percent.

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