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Gold & silver prices exploding higher, setting new highs

Commentaries & Views

GOLD

Last week was exciting and highly profitable for gold and silver owners. The price of gold increased $90 for the week, closing at $1,897.30 per ounce. Gold hit a high of $1,904 last Friday, a nine-year high, before seeing some light weekend profit taking. Last week’s trading volume was the highest I’ve seen in months, as old and new buyers increased their holdings of gold. Gold investors spent $3.8 billion in precious metal funds last week, the second largest weekly amount ever, according to data analyzed by Bank of America.

What is driving this increase?

  1. The U.S. Federal Reserve and central banks around the globe pumping Trillions of Dollars, Euros, Yen and Yuan into their financial markets.
  2. The U.S. Congress and governments around the world passing Covid-19 stimulus aid programs and legislation to provide trillions to victims of economic problems.
  3. Geopolitical tensions are increasing, not only between the U.S. and China, but in Asia and the Middle East.
  4. The U.S. Dollar has been dropping, down 5% since the start of July. That has a direct bullish effect on the price we pay for gold/silver.
  5. Yields on U.S. Treasuries from 2 year to 10 year have been dropping, another positive for the gold and silver price

In the United States, the Congress (House of Representatives and the Senate) debated new Covid-19 stimulus legislation last week. I believe we will see the results of this debate passed into law this week. From what I’m hearing from multiple sources, it could be another $2 Trillion Dollars in aid distributed to unemployed workers, businesses, states, cities, hospitals, schools, and fire/police departments.

As the worth of currencies continues to be devalued around the world, the price of gold can only go one direction, HIGHER. As many of you know, I have been predicting gold will reach $2,000 per ounce by year-end since early this year. When I made that prediction, I could not have imagined the extra trillions of dollars/euro/yen/yuan that would be printed, just in the first half of 2020.

What do I see next for Gold?
Because of the current momentum, I believe gold’s all-time high of $1,923.20 (Sept 6th, 2011) will be passed on Monday. Then, I’m hoping for price consolidation, as it’s badly needed and should happen during August, between $1,800 and $1,950. That consolidation would be great for gold to build a firm base for the next move above $2,000 per ounce.

After looking at what is currently happening by governments and central banks around the world, I have revised my year-end gold prediction. Let’s recap 2020, gold was $1,519 per ounce at the start and reached a low of $1,450 in March. Since March, gold has been in a bullish trend, moving higher with an occasional correction. Once the gold price passes $1,923.20 per ounce, its all-time high, it’s in uncharted territory. With media coverage on the all-time high for gold, it could briefly cause a spike in demand and price. That happened in 1979 and again in 2011, which caused another 5-8% increase in price. Based on these factors and many others, I believe we will see gold reach $2,200 per ounce before the end of 2020.   

7/27/20 9am PT update for Gold:  A combination of a weaker U.S. Dollar and lower yields on U.S. Treasuries fueled the raise for gold to an all-time high. Gold broke above the past all-time high of $1,923 and kept on gold, reaching a high of $1,946 per ounce.

SILVER

Not only was last week extraordinary for silver investors, it’s been an extraordinary year. At the beginning of this year, the silver price was $17.83 per ounce. By March as the pandemic started affecting the economy, the price of silver dropped to a low of $11.60 per ounce (with the silver/gold ratio reaching 120-to-1).  From March to July, the price of silver moved from $11.60 to $18 at an excellent pace with the silver/gold ratio dropping. Last week, after exploding through the $20 resistance level, silver kept on going reaching a high of $23.60 on record-setting high volume. Silver closed the week at $22.80 per ounce, the highest price since August of 2013, up an amazing $3.00. To stay healthy, silver needs time to build a base above $20 and consolidate recent gains. However, with its current high volatility, it may reach $25 before seeing a major correction. The silver-to-gold ratio has dropped to 83-to-1.

7/27/20 9am PT update for Silver:  Following the today’s raise in gold prices, silver went into orbit, flying through $24 per ounce, reaching a high of $24.50. Late last week, a good number of professional traders shorted silver around $23 and this morning they ran to cover those shorts, taking the price above $24.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.