Hossa on precious metals. Will the highs of several years be maintained?

Precious metals futures are growing successively. The price of gold is the highest in almost 9 years, and an ounce of silver broke the level of USD 4 for the first time in 20 years. For four months, the price of white ore went up nearly 77 percent The prices of rare precious metals, such as platinum or rhodium, are also interesting. What does this mean for investors? Will the increases continue?

Precious metals in focus

In 2020, gold and silver benefit from investors' aversion to risk, the mild policy of central banks and the uncertainty about the pace of economic growth in the world. The spot price for gold peaked at $ 1865 per ounce on Wednesday night and thus hit its September 2011 high. The spot price stabilized at around $ 1858. The price increase was definitely helped by the weaker dollar, which approached the 4-month lows. Investors look favorably on gold for fear of inflation that could be caused by the ubiquitous fiscal stimulus. The appetite for the precious metal is being raised by governments and central banks, signaling that the support will be as generous as the economy demands.

An additional factor in the increase in gold prices is invariably the fears of a return to the epidemic. Market concerns were intensified by President Donald Trump, who warned that the epidemic could worsen before the US deal with the pandemic. The American Center for Disease Control also provided little optimistic data, which in its report states that the number of active COVID-19 cases in some states is higher than officially confirmed. The reasons for this are to be errors in testing people with suspected disease and deficiencies in data storage.

All of these factors combine to refresh the US-China conflict that is hitting the markets. The sum of these matters means that the demand for gold and other precious metals is still unsatisfied.

Rising trend

- Investors are looking for a safe haven, and gold has been fulfilling this role perfectly for years. Such an environment gives the price of gold room for further increases and reaching new heights - ocenia Bartosz Sawicki, head of the Analysis Department at TMS Brokers.

Gold prices have been moving in an undeniable uptrend for a long time. The dynamics of the royal metal price increases is the effect of real negative interest rates and the advanced phase of the business cycle, which raised investors' concerns about the coming recession.

- The Fed's loose monetary policy and the fiscal aid of the government are surely behind further increases in the metal. As a result of all this, the US budget deficit this year may be twice as high as during the "subprime" crisis in 2008-2009. Additionally, the weakening dollar causes the appreciation of the metal, which is negatively correlated with it. If there is a cooling down in sentiment on the stock markets and the stock indices correct, gold may still benefit from it - explains Łukasz Zembik, OTC market expert at TMS Brokers.

Silver bull market

Although investors have recently been more fond of gold, which has reached the highest price since 2011, some of them have remembered about silver when the barrier to entry into the gold market was relatively high. The situation on the silver market is equally interesting. The metal price reached its highest level since August 2016 on Tuesday and is rising all the time. From the low in March, the rate increased almost 77 percent.

- It is estimated that in 2020 the supply of this raw material may decrease by approx. 4% and will amount to slightly over 978 million ounces. This is mainly the effect of difficulties in the operation of mines during the COVID-19 pandemic. The global slowdown will certainly affect the strength of demand for this raw material. Demand from the photovoltaic sector is likely to be lower this year, but the long-term popularity of solar panels and electric vehicles using silver should continue to generate demand for the metal - explains Łukasz Zembik, OTC market expert at TMS Brokers.

Silver chart, D1 interval. Source: xNUMX XTB xStation

Rare metals go up

This situation also applies to other rare noble metals such as rhodium and platinum. The upward trend is driven by, among others automotive market needs, as these metals are used, among others for the production of car catalysts. They are required by the tightening of regulations on the emission of environmentally harmful exhaust gases.

- Rod is currently more than 3 times more expensive than gold, and at the end of February this year the market valued an ounce of this metal at over 10 thousand. dollars. March brought a strong correction in the quotations of both rhodium and palladium, which shows how strong the correlation between the valuation of these assets and the condition of the global industry is. Since the March breakdown in quotations, rhodium managed to make up less than 50 percent. Further increases will be strongly dependent on the global demand for cars - internal combustion, hybrids and fully electric - assessed by Łukasz Zembik, an OTC market expert at TMS Brokers.

Platinum has an even wider range of applications thanks to its low sensitivity to the influence of oxygen and water, so it does not rust, which makes it an ideal metal for the production of jewelry. Due to the chemical resistance of platinum and its mechanical properties, it is also used in other sectors, such as electronics, chemicals and investments. For example via CFDs, that is, commodity futures.

After two months of consolidation, the platinum price is rising again. The price of the raw material reached USD 920 per ounce, reaching the highest levels since March this year.

- Demand on the platinum market is supported by the revival in the automotive sector, although investors' optimism is subdued. This means that platinum can overshadow gold and silver in terms of returns - Bartosz Sawicki from TMS Brokers evaluates.

Platinum and rhodium, gold and silver can be purchased in the form of bars or investment coins. You can also invest in them through contracts.

- CFDs on platinum, silver or gold can be reacted to a rise or fall in price by using leverage. This means that you can buy or sell a commodity by playing against the trend or against it and either make a profit or lose. This is the magic of OTC markets that allow you to buy the so-called paper precious metals, no need to safeguard physical assets - explains Łukasz Zembik, OTC market expert at TMS Brokers.