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Silver has spiked recently, following Gold’s momentum: Strategist

Gold price hit record highs on Wednesday. George Milling Stanley, State Street Global Advisor Chief Gold Strategist joins Yahoo Finance’s On The Move panel to weigh in on how gold is faring amid the pandemic.

Video Transcript

- Gold is up today almost 2%, trading at roughly $2,060 an ounce. As I intro our next guest, George Milling Stanley from State Street Global Advisors, he's the chief gold strategist, I'm hearing Yukon Cornelius from "Rudolph the Red Nosed Reindeer," singing that song, silver and gold, silver, and gold-- is there any chance that we may have missed the run up and now is the time to be cautious with the gold, George?

GEORGE MILLING STANLEY: I don't think so. We're up about $500 year to date, and that's very, very fast, no question. The last time we went up $500 in a matter of months was 10 years ago back in 2011, and that was very speculative. But the big difference between then and now is that the price was about half where it is today. So gold would have to go up $1,000 if it were to match the speed with which it went up in that speculative bubble back in 2011. We're nowhere near that yet.

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- George, I know you're a gold guy, but I want to ask you about gold relative to silver as well, because silver is obviously at a much lower price point, but it has been having the same kind of trajectory of increase. So how are you thinking about the gold to silver ratio, and whether investors should also be looking to silver?

GEORGE MILLING STANLEY: Well, first, I don't really think that there is a correct gold-silver ratio. The ratio was what it was-- was what it was yesterday, it is what it is today, and tomorrow would be the right ratio, as well. The markets will determine that.

The thing to remember is that there are very, very different products. Silver is consumed primarily in industrial applications. Industrial applications only about 10% of gold consumption in any one year with the vast majority being in jewelry, and of course, right now, in investment, as well. Not a lot of investment in silver, not a lot of silver jewelry, mostly industrial applications. So silver's fortunes tend to have a lot more in common with the base metals-- with copper, lead, and zinc, and so on, rather than with gold.

The other thing is silver has moved recently, and I think it has been entirely based off the momentum that we've seen in gold. But you'll remember-- gold actually took off a year ago. It's 12 months ago, June of last year, gold broke out of the top end of our trading range it had been in for six years. By February of this year, we were already $250 above where gold have been capped for six straight years at $1,600. And here we are, we're now more than $400 above that. So I think it's been the momentum in gold that has attracted interest in silver. But I'm nowhere near as confident about the outlook for silver as I am for gold.

- And then that confidence you have for the outlook for gold, is it being driven primarily by people who might be afraid rushing into say, a gold ETF, or is there a demand for gold, because you have such demand in places like China and India? And with the Chinese economy recovering, is demand for gold up?

GEORGE MILLING STANLEY: Yeah, you know, we've only just seen first half figures, and obviously, they were very much driven by what happened with the COVID-19 crisis. But China, and to a lesser extent, India seem to be having a great deal more success with reopening their economy than we are in this country. I think that any outbreaks of the disease tend to be pretty localized, and therefore, they've been contained quite successfully.

If that happens and we get a really good improvement in the economic circumstances in the emerging world led by China and India, they are the two biggest consumers of jewelry in any normal year. So if we get a rebound in jewelry in that part of the world, that could be very helpful for prices going forward. We've had very, very low jewelry demand in the first half, but if that's reversed in the second half, that could be really good for gold. If that's accompanied by further difficulties in reopening in this country, then we're going to see strong jewelry demand, but continued strong safe haven and strategic asset allocation type buying in this country. That would be a recipe for much higher prices than we've seen already.

- State Street Global Advisor chief gold strategist, George Milling Stanley. Good to see you and thank you.