Silver outperforms gold – metals continue to rise in dollars

Silver prices outperformed gold by 13.7% in May 2020. This is a bullish signal for investors in precious metals. The white metal’s prices have increased by 14.70% from the beginning of the year. According to The Perth Mint Blog, that strong rebound caused the gold/silver ratio to drop below 100 again.

May 2020 was another positive month for precious metal investors, with gold rising by more than 1% in US dollar terms, to end the month at $1,728 an ounce. Silver had an even better month, growing nearly 15% on its biggest monthly gain in almost four years. The metal ended the month above $17.50 an ounce.

The rise in precious metals came despite the continued increase in the stock markets, with the S&P500 climbing 4.53% last month to close above 3,000 points.

Silver prices have resumed rising from the lows seen in March. The metal prices increased by nearly 50% in the past two months. While gold still lags behind the current calendar year, the performance gap between the two metals has narrowed substantially. The gold/silver ratio reflects it – it has decreased from a high of over 120 of March to 98 in May, marking a drop of almost 20%.

The strong rebound in silver since the end of March is a positive sign for bulls. It suggests that there may be a more significant advantage for both metals in the coming weeks and months.

While most Perth Mint clients prefer to purchase their precious metals in physical form, gold ETFs tend to be highly correlated with gold prices.

A drop of bond yields boosts precious metal prices

Gold ETFs had another strong month of inflows in May. Through these products, more than 100 tonnes of metal had been purchased in the three weeks up to May 22.

Holdings have increased by 602 tonnes so far, making 2020 the second strongest year on record for gold ETF demand. 

Furthermore, precious metal investors should pay attention to another interesting factor. This is the lack of the yields of United States government bonds. Bond yields have barely budged in the past two months, even though the S&P 500 has had one of its most substantial increases recorded in this period. It gained more than 30% and recovered at 3,000 points at the end of last month.

In the first three months of the year, stock prices and bond yields fell. This caused an increase in bond prices. Fears about the spread of COVID-19 spurred investors to dump risky assets in favor of safe havens.

It is interesting to note that bond yields have not increased during the stock market recovery after the end of March. If investors were 100% convinced that there would be a smooth way out of the COVID-19 crisis, bond yields would have risen in the past two months. Many also argue that a capital recovery of this speed and magnitude should have seen gold fall.

However, bond yields have remained mostly flat, while gold prices have risen nearly 20% since the end of March.