The Brexit is not forth good fruit for Europe, but for someone it was a godsend, especially for traders in commodities such as gold and silver. Between the two, however, the metal that is profiting more is silver, whose price is to 3-year highs.
The Brexit is a symptom of the failure of the ECB stimulus plan and the spirit of the bullish price of gold and silver is fueled above all by the negative rates, the volatility on the currency market and the failed policies of central banks around the world.
Both silver and gold are not linked to any central bank, which explains why they can go well in this context of bearish markets. However, many have noticed that the silver rally is really impressive.
Since the day of the referendum the metal has gained nearly 20% and for the first time in two years has broken through the barrier of $ 21 per ounce. Pure gold is back to touch the record from 2014, coming up to 1.357,60 $ / ounce, less than a dollar below the peak after Brexit. It has appreciated only about 8% since the British vote.
Silver also wins on distance, with a 47% gain year to date, which outperforms the + 27% of gold, although both performances are outstanding: we must go back to 1974 to find an equally brilliant first half of the year like this. And the rally could continue.
The cause of such rallies is definitely due to the volatility on stock markets and Forex that prompted traders to invest in safe haven assets. In addition to this, there are other equally valid reasons explaining this phenomenon.
One of the main reasons to explain the large silver movement is also the fact that silver is exchanged with a lower volume than gold, and it is therefore much more volatile and each variation tends to be amplified.
‘Unlike gold, silver is widely used in industry and it can follow both the gold price in the risk scenarios of the markets at this time and the price of copper during times of high demand’. This is what explained the analyst Tyler Richey.
Richey argues, however, that “the quality of silver wins thanks to the links to the industry in the long term and it was the turbulence of Brexit that pushed silver to outperform with gold”.
The same fate has not befallen all commodities. If we think about oil, for example, its performance was not like those precious metals. The price of oil continues to be stuck under a high volatility and in a climate of pessimism. After the last descent caused by post Brexit turmoil, the price of oil continues to be nervous and unpredictable.
Analysts expect that the turmoil due to Brexit will continue and consequently also the silver and gold rally. But expectations for a further rise in the price of silver do not depend only on Brexit. What will happen in other markets, including the stock market and the Forex, it will have a very direct impact on the future of the metal.