Precious metals bull run has miners' mouths watering

Gold and silver producers will benefit from the upward trend in precious metals prices, especially gold if current conditions persist, says a commodities expert.

In Monday trading, gold hit a record of US$2,353.95/oz, according to Bloomberg, well above the previous all-time high of US$2,135.39/oz on December 4. 

Before that, it was during the COVID-19 pandemic when gold experienced another bull run that took it to US$2,075.47/oz on August 7, 2020, due to high risk aversion.

“The thing with commodities is that once they break historic highs, the sky is the limit. Gold momentarily broke US$2,350/oz, and when it breaks a level like this, we could go to US$2,400/oz,” Ana Azuara, commodity market specialist at Grupo Financiero Base, told BNamericas.

Azuara said the main factors driving the prices are expectations that central banks will cut interest rates and, above all, the possibility that the US Fed will begin rate cuts this year, which is seen as highly likely.

“Gold has an inverse correlation with interest rates,” the analyst said.

Azuara also mentioned risk aversion in the markets due to tensions in the Middle East, as well as in Ukraine and Russia, which make gold a safe haven asset.

Added to these factors are the presidential elections in the United States and Donald Trump's possible return to the White House, which may cause greater volatility.

“There’s nothing that’s much safer than gold,” Azuara said.

She added that the rise in silver prices is partly due to the increase in gold.

“For silver we could also foresee that there may be room to continue growing this year…. The minimum will be to reach US$30/oz. And it could reach US$35. It doesn't seem crazy to me for it to reach that level this year," she said.

Silver – of which Mexico and Peru are large producers – touched US$28.05/oz on Monday, although it is still far from the high of US$49.80/oz seen after the financial crisis, according to the specialist.

Also considered an industrial metal, like platinum and palladium, silver has benefited in the last few weeks from improved expectations for China's economy, and after the country’s manufacturing purchasing index (PMI) recently exceeded 50 points, according to Azuara.

“China is the main consumer of industrial metals in the world. And that helps industrial metals a little, which is also the case with copper. That’s why copper has also started to rise significantly for about two weeks,” she said.

“They [precious metals miners] are going to do extremely well due to the fact that prices are rising rapidly, even if they don’t produce more. Only that spread, that increase in price, is obviously going to benefit them,” said Azuara.