During the initial phase of the coronavirus crisis, gold (GLD  ) was one of the best-performing assets. After the bottom in March, gold rallied from $1,450 to $1,750. Then from mid-April to the third week of June, it was range-bound between $1,700 and $1,750.

In recent weeks, it's been breaking out of this range. The major catalyst has been the resurgence of coronavirus case counts which means that the economy's recovery is going to be slower and later than expected which increases the odds of more fiscal and monetary stimulus. It also puts downward pressure on interest rates which is another positive for precious metals.

What would be bearish for gold prices would be the economy returning to normal quicker than expected which would mean less stimulus and a rebound in interest rates. For a brief moment this seemed possible given improvements in economic data and falling case counts, however, it's now clear that was a simple intermission of phase 1 of the virus which was due to the complete lockdown of the country.

Increasing Risk Appetites

Another interesting development is that the initial rally for gold saw more speculative assets as silver and miners underperform. This is an indication that although the metal was rallying, risk appetites remained depressed.

However this time, the rally is coming with expanding risk appetites which increases the odds of a multiyear bull market rather than a bounce or a move within a trading range. Many gold miners managed to breakout higher from the trading range before gold.

Additionally, silver has been a major laggard of gold for the past couple of years. For example, while gold is less than 10% off its all-time highs, silver is 62% off its peak. One interpretation is that silver's lack of participation is foreshadowing weak demand, while bulls would argue that it simply shows that there's more upside. One reason that silver has been weak is simply due to supply. Most Silver is a byproduct of gold and copper mining, so that means that production continues regardless of the market price.

During gold's sideways trading phase from mid-April to late-June, silver (SLV  ) is up 20%. This is a constructive development for it, and the precious metals complex. Silver miners like Endeavour Silver (EXK  ) and Fortuna Silver Miners (FSM  ) are leading the sector higher and have already broken out to new highs.

These little changes in character are subtle but noteworthy. Outperformance by silver and miners is a characteristic that makes the current market more consistent with the previous, major bull market advance in precious metals. Another way to see this is through the ratio of the junior gold miners index (GDXJ  ) vs the gold miners index (GDX  ). The junior miners are breaking out, while the gold miners are still in their range.