Silver and gold continue to surge after Brexit

Safe haven buying in the wake of the UK’s vote to ‘Brexit’ the EU continues to drive precious metals higher. There looks to be plenty of momentum behind silver’s move higher in particular as it continues to outperform gold.

Source: Bloomberg

Silver prices have surged again. At one point it was up 8% - its biggest single day surge since September 2013 – after already gaining more than 11% last week.

Although it has pulled back a bit from its highs there still looks to be a lot of momentum behind its move higher. Silver has rallied 47% so far this year, and it has just broken US$21 for the first time since August 2014.

Net positioning in silver is also incredibly bullish.

Gold prices are also putting in a solid performance after they gained a further 2% after the initial Brexit rally, but silver continues to dramatically outperform gold.

Silver’s outperformance of gold has been evident all year, with silver’s year-to-date return almost double that of gold. This may partly be down to silver’s greater exposure to the industrial sector. In the wake of Brexit, expectations for looser monetary policy globally have driven a lot of flows, but we have also seen a rise in fiscal stimulus expectations as central banks increasingly look tapped out.

This rise in fiscal stimulus expectations in the wake of Brexit seems to have rallied a range of industrial metals, but especially silver. This industrial sector exposure has helped drive the gold-to-silver ratio down to its lowest level since August 2014. And if history is any guide, such moves in the ratio usually continue until the long-term average of the ratio of 60 is hit.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.