Silver and Bronze Following the Gold Rally... 'Vibrancy' Blowing into Raw Materials

Silver Price Rises 74% Over 4 Months

[Asia Economy Reporter Kum Boryeong] Anxiety stemming from the spread of the novel coronavirus infection (COVID-19) is increasing demand for safe-haven asset investments. Amid this, international gold prices continue their upward trend, with metals and minerals such as silver, copper, and zinc following gold's lead.

On the 21st (local time), the international gold price closed at $1,842.40 per troy ounce on the New York Commodity Exchange (COMEX), marking the highest level since September 2011. Considering it was $1,484.00 on March 20, it has risen about 24% in four months. One troy ounce equals 31.1034768 grams, approximately 8.3 don. One reason for the soaring gold price is the U.S. Federal Reserve's (Fed) declaration of zero interest rates. In a low-interest-rate era, there is no safer asset than gold. The Fed has announced it will maintain zero interest rates until 2022. Additionally, abundant liquidity gradually transferring to the real economy and the prospect of reflation are also contributing to the rise in gold prices. Reflation refers to a situation where the economy has escaped deflation but has not yet reached severe inflation.

Silver prices are following gold. On the same day, the international silver price closed at $21.50 per troy ounce. Silver was $12.35 on March 20. Calculations show it has risen about 74% over four months. The fact that silver prices have surpassed $20 per troy ounce is the first time in four years, and further increases are expected.

Seongbong Park, a researcher at Hana Financial Investment, explained, "In the second half of the year, silver prices are expected to record a higher increase than gold, not only due to the same upward factors affecting gold but also because the gold-to-silver price ratio significantly exceeds the 10-year average of 69 times."

Copper and zinc prices are also steadily rising. On the 21st, copper prices on the London Metal Exchange (LME) reached $6,513.00 per ton, the highest in a year. This is a 34% increase from $4,855.00 on March 20. Zinc also rose 17% during the same period, from $1,880.00 to $2,207.50 per ton. In particular, copper's price increase is mainly attributed to supply disruptions caused by China's economic recovery and the spread of COVID-19 in South America. As of last year, China accounted for 53% of global copper demand. South American countries such as Chile and Peru supply 40% of copper ore. Kwangrae Park, a researcher at Shinhan Financial Investment, analyzed, "Based on supply shortages and stable demand flow in China until the end of the year, copper prices are expected to move within the $5,500 to $7,000 per ton band."

The rise in metal prices is expected to benefit domestic metal companies. In the case of Korea Zinc, the strong prices of zinc and precious metals are likely to have a positive impact. Korea Zinc obtains gold, silver, and copper during the lead smelting process and resells them. Researcher Seongbong Park said, "Although silver's contribution to Korea Zinc's gross profit fell to 14.6% last year due to weak silver prices, it exceeded 30% during the major silver price uptrend in 2011, so it is expected to act as a new momentum for stock price increases in the second half."

The rise in copper prices is also expected to contribute to profitability improvements for Poongsan and LS. Poongsan produces copper and alloy products, and if copper prices rise, they are likely to be reflected in product prices, boosting performance. Most LS affiliates use copper as a key raw material, so the rise in copper prices leads to higher product sales prices. Supported by the rising prices of metals and minerals, Korea Zinc's stock price recorded 400,000 won at 10:30 a.m. on the 22nd, up 8.40% (31,000 won) from the previous close. Poongsan and LS also rose 11.50% (2,600 won) and 8.07% (3,300 won) from the previous trading day, reaching 25,200 won and 44,200 won, respectively.

This content was produced with the assistance of AI translation services.