Gold Prices Plunge To Rs. 50,500/10gm; Silver Tumbles To Rs. 62400/Kg

Marco Green
August 13, 2020

"We can expect yields to rise further on expectations of a United States aid package, which may pressure prices for the short term", Tapan Patel, a senior analyst at HDFC Securities Ltd., told Bloomberg.

Previously the highest the ratio has ever been was 132 to 1 in 1933 when the United States government invoked Executive Order 6102 and forced U.S. citizens to sell all but a small portion of their gold and silver holdings to the Federal Reserve.

Dollar weakness boosted the metal's relative value on Thursday, as did a continued standstill in economic stimulus talks. In the worldwide market gold also corrected 9.32% from a life-time high of $2075 to $1872 levels.

Gold jumped on Thursday, heading for its second daily gain after falling the most in seven years on Tuesday. Spot gold shed 2.1% to $1,872.61 per ounce while USA futures traded below $1900 as the U.S. dollar hold on to gains, prompting investors to evaluate their holdings. On Tuesday, the precious metal slumped almost 6%, the biggest one-day loss since 2013.

Gold gained moderately through the morning before launching higher at around 1:30 p.m. ET.

Historical precedent appears to suggests so, only once in history was silver more undervalued compared to gold than it was in April 2020 and that was in 1933, when the US Government forced its citizens to sell their precious metal holdings.

Senate Majority Leader Mitch McConnell announced Thursday afternoon the Senate will recess for the rest of the month, hinting at little chance for a spending deal.

"Higher US health care costs and the expansion of balance sheets will continue to support gold prices over the longer term", he said. "Development of the vaccine of COVID-19, hawkish data from the United States economy and recovery in dollar put pressure on gold".

Gold prices went on a rollercoaster ride on Wednesday, sinking below the $1,900/oz mark earlier in the session before overturning those losses later.

A spike in the gold-silver ratio in December 2008 to 79.3:1, associated with another global recession, was a leading indicator of a 315% increase in the silver price from US$10.29/ounce in December 2008 to US$42.7 in April 2011 (Figure 1).

Other reports by Click Lancashire

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