Precious metals are traditionally sought-after assets in times of heightened economic and political uncertainty. This year, the coronavirus pandemic and its dire economic consequences are forcing players to think about alternatives to investing in stocks. The Fed and other central banks are pursuing ultra-soft monetary policies, with the US government debt at an all-time high of over $ 26 trillion. During the years of Obama's presidency, the country's debt almost doubled, but under Trump, the US government's debt continued to grow, and given the need for large-scale stimulus measures due to the coronavirus epidemic, the situation with the national debt will only worsen in the foreseeable future. In light of this investment in precious metals is more interesting than ever.
Gold (XAU / USD)
The stock market rally from its March lows has become one of the most powerful in history, but in fact the shares are trading at about the level of the beginning of the year. At the same time, gold rose by as much as 30%, and is not going to stop there. The yellow metal usually strengthens amid low interest rates, exacerbating inflationary risks. Gold is also the oldest known defense against heightened uncertainty, which explains the demand for it in the midst of the worst pandemic ever faced. On August 7, gold set a new absolute record of all times and peoples, significantly exceeding the 2011 highs: 2072 US dollars per troy ounce against 1920. After that, a downward correction began naturally, caused by profit taking on previously opened long positions (longs). The trigger that launched the correction was the data on the US labor market published that day, which turned out to be better than the consensus forecast. Under the influence of the news background, the DXY dollar index corrected up from the local lows at 92.479 to about 93.700. But by now, the recovery in the US dollar appears to be fizzling out. Consequently, with a high probability, in the near future we will see the end of the downward correction for gold and a set of new positions to buy it. A new attempt by the precious metal to renew the tops is almost inevitable: the old fundamental factors that previously caused the rise in gold prices have not gone away. Moreover, new ones were added to them.
Technical picture Gold, W1:
Silver (XAG / USD)
Should institutional investors begin to abandon Gold in search of alternative opportunities that can provide a higher return on investment, the ratio of silver to gold prices will continue to shift in favor of the "white" metal. In addition to fundamental factors, the growth of industrial demand for this metal used in the automotive industry will play in favor of the rise in silver prices in the long term - electric and hybrid engines are produced using silver, and silver is an integral element in solar energy - it is used in photovoltaic cells ... We have every reason to maintain our “Buy” recommendation for Silver, and set the target level to be revised upward.
Technical picture Silver, W1: