Silver is traded near $15.50 since the equity market weighs the risks of the second wave COVID-19.
Recently, US President Donald Trump adopted a negative interest rate policy. However, Jerome Powell, Federal Reserve chairman, has openly stated that the Fed did not see negative interest rates as an attractive policy. He mentioned that the economy might face an extended period of weak growth.
Powell’s words were bullish for the US dollar, which is an obstacle to silver’s trend. It makes the metal more expensive for buyers who have other currencies.
Some aspects of investing in silver
Since the beginning of the 21st century, growing silver prices have captured the attention of many investors. This white metal, like other precious metals, is a protection against the devaluation of currencies and volatility in the stock market.
Some believe that the metal will play a key role in trade and commerce in the economic collapse caused by the Coronavirus outbreak.
Silver is available for investment in many different forms, both on paper (certificates, ETFs, etc.), as well as physical one in the form of bullion, or investment coins and collector coins. However, the most crucial exchange when it comes to determining the spot price of the metal is the COMEX.
The Fixing price of silver is set by the London Bullion Market Association, the London precious metals market, which offers a daily rate in dollars, euros and pounds sterling.
The price of the white metal is always changing and never remains stagnant for long. Many different factors can affect fluctuations in silver prices. These factors may include, among others: supply and demand, currency fluctuations, inflation fears, geopolitical risks, asset allocation, collapse in the distribution of the metal, etc.
Why the metal may be breaking out
Another aspect to consider is the ratio of gold, a formula to determine how many ounces of silver are needed to buy one ounce of gold. Just take the price of gold and divide it by the cost of silver, that is the relationship. Investors determine the relative value of precious metals and see if there is a possible buying opportunity. Currently, the gold/silver ratio is very high for gold, approximately 115:1; thus, it takes 115 ounces of silver to acquire one ounce of gold.
The price of an ounce of Gold on May 12 was $ 1,702, and that of an ounce of silver was $ 15.47.
Silver has certainly seen some ups and downs in its price over the years. Since 2011, the white metal prices have been trending downward. However, all analysts agree that at the moment, its price is excessively low for its value. So, analysts believe it can be an exceptional moment for the purchase of the precious metal.
As the crisis proceeds to unfold, gold will typically begin a supported upside price move over many months where silver may move a little to the upside. It generates a considerable peak in the Gold-silver ratio. Then, suddenly the metal begins to rally upward faster than gold and the gold/silver ratio starts to collapse. Analysts believe that the breakout move in silver is happening right now, and it may continue for many months.
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