It may turn out to be … gold for investors’ pockets, as it is a viable opportunity for “contrarian” investors – The pivotal role of the US presidential election
Silver has been in the shadow of gold for years, as for 300 years its price is lower than that of yellow metal, but it may soon prove to be… gold for investors’ pockets, as it is a significant opportunity for “contrarian” investors, i.e. those seeking undervalued values against the prevailing trend.
Prices of both precious metals are rising amid the stricken global economy and the weakening dollar.
This year, gold prices soared to record levels never seen before by the market since September 2011, as investors turned to safe havens for the uncertainty caused by the pandemic, which is proving unexpectedly resilient.
Overnight, the price of gold broke $ 2,000 / ounce for the first time and traded at $ 2,020.30 per ounce. The geopolitical upheavals probably spurred this rally. The horrific explosion in Beirut, with hundreds of dead and thousands injured, “probably sent the gold above $2,000,” Mizuho Bank said in a statement.
So far, the spot price of gold has risen more than 32% this year and is expected to have its best annual performance since 1979. At the same time, silver prices have followed this rally, having risen more than 30% since the beginning of the year.
According to Michael Hsueh, a strategic commodity and foreign exchange analyst at Deutsche Bank, who spoke to CNBC, silver is expected to outperform gold.
This is because analysts estimate that the global economy is expected to recover and this will increase both industrial consumption and consequently the demand for silver that has many industrial uses.
Citi analysts in a note last month also said that the recovery in industrial activity is boosting silver prices compared to gold.
The US elections in November will also play a role, Citi reports. If Joe Biden wins the presidency and passes his “green” infrastructure plan, the markets will anticipate the increase in demand for silver.
The Biden Plan envisages that trains, buses and passenger cars will run on electricity or clean fuel and clean railway and bus systems will be developed. In addition, the plan includes providing incentives to upgrade homes and commercial buildings to make them more resistant to extreme weather conditions.
Ned Naylor-Leyland, precious metals fund manager at Jupiter Asset Management, in a note last week, pointed to the use of silver in a growing number of medical applications, as well as electronic components for 5G telecommunications networks.
More broadly, however, analysts estimate that both precious metals will continue to rally.