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(USAGOLD – 3/12/2020) –
Silver has had a rough go of it thus far this year when compared to gold. It is down almost 6% on the year while the yellow metal has gained over 8.5%. Most of that has to do with gold being boosted by its safe-haven allure and silver being buffeted by disinflationary/deflationary concerns. Gold Predict’s A.G. Thorson believes all of that is about to change and uses another virus shock – the 2003 SARS epidemic – as a measuring stick to divine silver’s future. “Now, the good news,” he writes at FX Empire. “I think the 2003 SARS outbreak could shed some light on what to expect next. The SARS outbreak of 2003 peaked with the flu and began to decline with warmer weather. It’s too soon to know, but I expect the same fate for the coronavirus. The news tends to overplay the real threat level. As China goes back to work, the pent-up demand will slingshot an immediate need for materials and commodities leading to a second-half reflation.” Under this scenario, Thorson sees silver “by this time next year testing $26.00 – $28.”
Chart of the Day
Chart note: Gold and the U.S. dollar have a long history of being inversely correlated. From May 2019 until early February, however, the two rose in tandem to the surprise of analysts as investors globally viewed both as safe haven hedges in the face of geopolitical eruptions and recession worries. Beginning in about mid-February, as the coronavirus’ full impact began to be felt, the two resumed their old ways with gold heading north while the dollar went south. Thus far in 2020, as shown in the chart, gold is up over 7% even with its recent weakness taken into account and the dollar is roughly level. Gold still enjoys the benefit of safe-haven capital flows. The dollar weakened against other major currencies as the Fed moved aggressively to counter the debilitating economic effects of COVID-19, while other major central banks – most notably the European Central Bank and Bank of Japan – have yet to follow suit.