Macroeconomic Backdrop Favors Higher Gold and Silver Prices

Up about 8% for gold and roughly 2% for silver within the past month, both precious metals could continue to experience an uptrend in prices, especially given the current macroeconomic backdrop.

A confluence of economic factors is making for this ideal climate for precious metals. The biggest one is a dollar that’s been losing its steam as the capital markets have expected to see the U.S. Federal Reserve slow down the pace of its rate hikes.

“The primary driving force behind gains in the precious metals market are a devaluing US dollar, inflation, and other federal government monetary policies,” said Jonathan Rose, CEO of Genesis Gold Group.

“This environment creates a strong case for allocating funds to physical precious metals,” he added.

In order to get convenient as well as efficient gold exposure, investors can turn to the Sprott Physical Gold Trust (PHYS) — PHYS provides an enhanced physical bullion structure, offering the ease of purchase and sale that comes with being traded on an exchange. PHYS exclusively invests in London Good Delivery (LGD) physical gold bullion, held in custody by the Royal Canadian Mint, with no levered financial institution getting between unit holders and the trust itself.

As opposed to paying full price for gold bars, PHYS gives investors easy diversification by purchasing shares of PHYS on a regulated exchange — the New York Stock Exchange and the Toronto Stock Exchange. This also gives PHYS a liquidity advantage over physical gold bullion bars, allowing for the easy sale and/or purchase of gold assets.

9-Year Highs for Silver in Sight

Not to be outshined by its more expensive peer, silver is also seeing upside. A CNBC article noted that silver could outpace gold, reaching a nine-year high.

Silver typically performs well in a high-inflation environment, and in addition to its precious metal status, silver also has utility in a variety of industrial uses. Furthermore, silver is experiencing a shortage, as the CNBC article noted, giving it an extra catalyst for price increases.

“Silver has historically delivered gains of close to 20% per annum in years inflation is high. Given that track record, and how cheap silver remains relative to gold, it wouldn’t surprise to see silver head towards $30 per ounce this year, though that will likely offer significant resistance,” said Janie Simpson, CEO at ABC Bullion.

Investors looking to build off this demand for silver can consider the Sprott Physical Silver Trust (PSLV). PSLV is a closed-end trust that invests in unencumbered and fully allocated LGD silver bars, providing a secure, convenient, and exchange traded investment alternative for investors who want to hold physical silver easily and efficiently.

For more news, information, and analysis, visit the Gold & Silver Investing Channel.