Silver soars, gold nears record high on virus concerns

Silver jumped to the highest in almost seven years yesterday and gold continued its march towards a record on expectations of more stimulus to help the global economy recover from the coronavirus pandemic.

Investors have flocked to the metals on surging demand for havens amid a resurgence in virus cases, slowing growth, a weaker US dollar and negative real interest rates in the United States.

The vast amounts of stimulus from governments and central banks have also aided prices, and after the success of a European rescue package this week, the focus turns to negotiations on legislation to prop up the US economy.

Silver's surge has had an added boost from supply concerns and optimism about a rebound in industrial demand. Holdings in exchange-traded funds (ETFs) backed by the metal are at a record, while gold ETFs rose the most since mid-June on Tuesday and sit at the highest-ever price.

"Like gold, silver has benefited this year from safe haven demand and falling long-term US real yields," Commonwealth Bank of Australia analyst Vivek Dhar said in a note. "A sustained rally in silver can continue, particularly when demand hopes and supply concerns are added to the mix."

Spot silver climbed 7.2 per cent to US$22.8366 an ounce, the highest since 2013, before trading at US$22.5156 at 7.37am in London (2.37pm Singapore time). Futures on the Comex jumped as much as 7.6 per cent.

Gold for immediate delivery rose as much as 1.3 per cent to US$1,865.81 an ounce, the highest since September 2011, and closing in on the all-time high of US$1,921.17 set that year.

A gauge of the greenback is near the lowest since March.

Chinese silver and gold stocks rose, including a more than 30 per cent jump for China Silver Group in Hong Kong.

Silver should continue to gain due to its use in industrial applications such as solar cells, in addition to a raft of factors spurring other precious metals higher, Mr Ed Morse, global head of commodity research at Citigroup, said in a Bloomberg TV interview.

Citi previously noted the metal tends to perform very strongly when desire for wealth protection is high and economic activity is improving.

The Silver Institute earlier this month forecast a 7 per cent decline in mine production this year on disruptions due to Covid-19.

"Silver is surging, and we think it is likely to remain strong," Mr James Steel, chief precious metals analyst at HSBC Securities (USA), said in a note.

BLOOMBERG