Global Precious MMI: Gold price hits three-month high as dollar weakens

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Precious Metals

The Global Precious Monthly Metals Index (MMI) jumped by 7.1% for this month’s index reading, as the gold price gained while the US dollar retraced.

May 2021 Global Precious MMI chart

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Gold price up to three-month high

After stumbling to around $1,735 per ounce in late February, the gold price has gradually picked up steam.

The gold price closed April around $1,790 per ounce. However, gold really picked up last week, closing Friday at around $1,831 per ounce.

The price marked its highest since February.

Instructive for commodities in general, the US dollar has lost strength in recent weeks. In general, the US dollar and gold trade inversely.

The US dollar index closed March at 93.30 before steadily declining in April down to 90.60. Despite a slight recovery in early May, the dollar has continued to slide. The dollar index closed Friday at 90.23.

Meanwhile, in other economic indicators, the 30-year Treasury yield fell to 2.28% last week. Generally, the gold price correlates inversely with bond yields.

The 30-year yield reached a 2021 high of 2.45% in March.

The 10-year yield closed last week at 1.60% after hitting a 2021 high of 1.74% in March.

Furthermore, the US added 266,000 jobs in April, well below expectations. The underwhelming jobs report follows the addition of 916,000 jobs in March. Unemployment ticked up slightly to 6.1% from 6.0% in March.

Fed Gov. Bowman: optimistic about pace of economic recovery

Michelle Bowman, member of the Federal Reserve Board of Governors, last week indicated she is optimistic about the pace of the US economic recovery.

“One reason for my optimism is that businesses have been effective in responding to the challenges posed by the pandemic and by economic restrictions implemented in efforts to contain it,” Bowman said. “We really can’t know how the pandemic will proceed and how that will affect the U.S. economy, but I think we are currently on a good path, and our policy is in a good place.”

Bowman said she expects headline inflation measures to rise above the Fed’s long-run 2% target rate in the coming months. She said the dropping off of low readings from the 12-month calculations contribute to that expectation. In addition, she said the rapid economic rebound has contributed to a number of supply chain bottlenecks. In turn, much to the chagrin of consumers, prices have gone up.

“One prominent example is with semiconductor producers and their need to dramatically alter the mix of production to meet demands of the high-tech and automotive industries,” she continued. “Although I expect these upward price pressures to ease after the temporary supply bottlenecks are resolved, the exact timing of that dynamic is uncertain.”

Precious metals fundamentals remain positive, Sibanye-Stillwater says

Major platinum and palladium producer Sibanye-Stillwater released operating results for the quarter ending March 31, 2021.

The South African firm said precious metals fundamentals are positive and prices are well supported.

The firm reported adjusted EBITDA of $1.3 billion, up from $724 million in the quarter ending March 31, 2020.

“Precious metals prices remained strong during Q1 2021, with palladium and rhodium prices again reaching record levels, supported by ongoing supply disruptions and strong physical demand,” the firm said.

Sibanye-Stillwater’s 2E PGM production (i.e., platinum and palladium) totaled 4,801 kilograms, down from 4,899 kilograms the previous quarter. However, the output total jumped from 4,404 kilograms in the first quarter of 2020.

Silver perspectives

We noted earlier that the gold price has posted gains, coinciding with a slide in the US dollar.

Yesterday, MetalMiner’s Stuart Burns delved into factors impacting the silver price.

“After hitting a low of $24/oz back in early April, the silver price has seen a steady appreciation to just under $27.50/oz today,” he explained.

“However, it has still not hit the artificial eight-year high seen in January, when it reached nearly $30/oz on the back of frenzied retail investors’ demand.”

As Burns noted, investors flocked to silver-backed ETFs in January, prompting the iShare Silver Trust to increase its shares in issue by 6.1%.

Physical demand for silver is also gaining, as the precious metal is used in electronics and photovoltaic cells.

Nonetheless, Burns noted banks have differing views on the metal’s price future.

“According to the Financial Times, Standard Chartered predicts the silver price will test January’s high again this year before easing next year,” he wrote.

“But not everyone agrees.

“HSBC is taking a more cautious line. It suggests the current price is likely to be the upper limit and is expecting prices to ease sooner, down to sub-$25 by year’s end.”

Actual metals prices and trends

The US gold price rose by 3.7% month over month to $1,772 per ounce as of May 1. Meanwhile, the US silver price gained by 6.9% to $26.10 per ounce.

US platinum bars rose 1.2% to $1,194 per ounce. Meanwhile, US palladium bars jumped by 12.7% to $2,862 per ounce.

Chinese gold bullion rose by 2.9% to $56.99 per gram.

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