Articles in Category: Precious Metals

January 2021 MMI trends chartBefore we head into the weekend, let’s take a quick look back at the week that was and the metals storylines here on MetalMiner, including the release of the January 2021 MMI, a look at what might happen to the iron ore price and much more.

Inauguration Day draws near for President-elect Joe Biden, leaving metals industry groups to wonder what happens next for President Donald Trump’s signature metals policy: Section 232 tariffs on steel and aluminum imports. Whether Biden ultimately chooses to maintain those measures or do away with them remains to be seen, but metals watchers will be eyeing those developments closely.

As for metals prices, some price gains slowed down amid the festive season, but some have resumed their upward ascent in early 2021. Copper, for example, crossed the $8,100 per metric ton threshold earlier this month.

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gold price

Olivier Le Moal/Adobe Stock

The Global Precious Monthly Metals Index (MMI) gained 5.3% for this month’s index value, as the gold price surged to start the year but couldn’t hold onto those gains.

January 2021 Global Precious MMI

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Gold price ups and downs

Amid ongoing economic uncertainty, a falling dollar and the coronavirus pandemic, many market watchers are keenly interested in the fortunes of gold.

While numerous analysts predicted gold could reach $2,500 per ounce last year, that didn’t happen.

The gold price did reach as high as $2,034 per ounce in early August, inspiring speculation with respect to how much further the price had to run.

Gold cooled off in the ensuing weeks before heating up again throughout December and early January. The gold price reached $1,957 per ounce during the first week of January before retracing, dropping to $1,828 per ounce as of Jan. 10.

Meanwhile, the U.S. dollar — which generally correlates inversely with the gold price — hit a two-year low back in August (when gold reached its 2020 peak). From the beginning of November to early January, the dollar lost approximately 5% of its value.

However, the dollar has staged a small rally over the last week. The U.S. dollar index fell to 89.44 as of Jan. 5 before bouncing back to 90.47 on Jan. 11.

So what could drive the price this year?

“Physical demand could pick up in 2021,” MetalMiner’s Stuart Burns wrote last month. “China is forecast for potentially double-digit growth in 2021 with a strong tailwind from this year’s stimulus measures and a robust recovery in consumption.

“India, the other major physical gold market, does not look as positive. The country will likely have a slow vaccine rollout and is facing severe banking risks. That could hamper the Indian economy’s recovery in 2021. In turn, a slower recovery could impact consumer appetite for spending, with unemployment up and some sectors still struggling.”

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metalworking

nordroden/Adobe Stock

Before we head into the penultimate weekend of 2020, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner, including: research findings related to organic molecules’ impact on machinability; gold prices; and the arrival of an allocation market for steel-buying organizations, as explained by MetalMiner CEO Lisa Reisman:

Week of Dec. 14-18 (machinability, gold prices and steel allocation market)

Cut-to-length adders. Width and gauge adders. Coatings. Feel confident in knowing what you should be paying for metal with MetalMiner should-cost models.

The Global Precious Monthly Metals Index (MMI) gained 1.5% for this month’s index value, as the gold price has lost some of its gains from the summer.

December 2020 Global Precious MMI chart

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Gold price gains

MetalMiner’s Stuart Burns recently checked in on the gold price and where it might be expected to go in 2021.

As precious metals watchers know, the gold price has enjoyed a sharp rise this year amid the global pandemic.

“The bulls are predicting a resurgence in the price to U.S. $2,300 per troy ounce in 2021,” Burns wrote.

“Goldman Sachs stated last month they had a target of $2,300, as recovery from the coronavirus-related recession fuels higher inflation next year. Goldman’s economics team sees inflation rising to 3% next year before weakening through year-end. Further fuel could be added from a recovery in demand from India and China.”

However, in the short term, the gold price has retraced since its August peak.

“Investors rotated out of safe havens into riskier assets on hopes of a vaccine-induced economic boom next year,” Burns explained.

“The story here is more conflicting. Yes, vaccines appear to be coming faster than London buses in rush hour.

“However, so are infection rates and hospitalizations.”

So, as with most commodities and commercial sectors, much of what happens next depends on the the world’s ability to get the pandemic under control and begin to return to pre-pandemic routines of life.

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The gold price has been on the rise during the pandemic this year. As infections rise, vaccines loom on the horizon and economies gradually recover, what do we expect from the gold price in 2021?

Gold price bulls

The bulls are predicting a resurgence in the price to U.S. $2,300 per troy ounce in 2021.

Goldman Sachs stated last month they had a target of $2,300, as recovery from the the coronavirus-related recession fuels higher inflation next year. Goldman’s economics team sees inflation rising to 3% next year before weakening through year-end. Further fuel could be added from a recovery in demand from India and China.

Punchy, you may think.

The gold price rose strongly in the first half of 2020, in large part due to the fall in both nominal and real yields. An increase in safe-haven investment demand in the wake of the virus-induced economic slump also contributed, Capital Economics wrote recently. The research house explained the the price rise has been strong since the start of 2019, riding an 18-month surge in demand for ETF holdings as a safe-haven investment. That is a process that gathered pace in the face of the pandemic.

Gold price retraces after August peak

However, the gold price has dipped from its August peak. Investors rotated out of safe havens into riskier assets on hopes of a vaccine-induced economic boom next year.

The story here is more conflicting. Yes, vaccines appear to be coming faster than London buses in rush hour.

However, so are infection rates and hospitalizations.

It will be a dark winter, as actual vaccination rates fail to live up to expectations and people continue to die. However, markets generally look forward, not at the present. The expectation remains that, sooner or later, markets will recover as vaccinated immunity spreads through the population.

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The World Platinum Investment Council (WPIC) released a report this month with a bullish view of the platinum market in 2021.

The WPIC is bullish on the basis of stronger investment demand and restricted production in South Africa.

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Platinum in deficit

The WPIC is predicting a record deficit of 1.2 million ounces in 2020. The projected deficit would mark a sharp uptick up from a deficit of 100,000 ounces in 2019.

The report states supply in 2020 fell by 18% due to virus-induced lockdowns. Meanwhile, demand fell only 5% as automakers managed to maintain output, resulting in a deficit of -1,202 Koz.

Next year, the council is expecting demand growth of 2%. That growth, it expects, will come on the back of stronger consumer and industrial demand as consumers return to less cautious ways and increase spending on jewelry and cars.

Automotive will see support not just from increased car sales but also greater per-vehicle PGM use as implementation of new, tighter Euro 6 emission standards in Europe come into effect.

This is expected to result in supply increasing by 17% and demand rising by 2%, resulting in a lower deficit of -224 Koz.

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gold bars

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The Global Precious Monthly Metals Index (MMI) fell 2.2% for this month’s index reading, even as the gold price surged in late October.

November 2020 Global Precious MMI chart

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

Gold price surges before significant drop

After hovering around $2,000 per ounce in August, the gold price took a step back over the ensuing months.

In late October as Election Day approached in the U.S., gold fell to $1,878 per ounce to close the month. The price rose as high as $1,960 per ounce by Nov. 9.

However, the gold price lost a good deal of shine that day, plummeting back down to $1,860 per ton. The single-day decline marked gold’s largest drop in seven years, according to MarketWatch.

News of a potential Pfizer and BioNTech COVID-19 vaccine sent the dollar upward. The dollar index closed last Friday at 92.23 before closing Monday, Nov. 9, at 92.72.

Gold in Scotland?

Late last month, MetalMiner’s Stuart Burns delved into Scotgold’s efforts to develop gold reserves in Scotland’s Trossachs National Park.

“So, it has taken a strong gold price and political blessing for Scotland’s only domestic gold miner, the aptly named Scotgold, to gain permission to develop gold reserves in the Trossachs National Park,” Burns wrote. “The park is in an area of outstanding natural beauty and is home to some of the best-preserved oak woodlands in Scotland.

“Gold mining and Scotland are not activities and locations that one immediately makes an association between. In fact, more Scots rushed to California’s gold rush than ever mined at home.  However, gold prospectors have looked for gold in Scotland’s rivers for centuries.

“The country is in the broad gold belt that stretches from Scandinavia across Greenland to Canada with, in places, similar topography and geology.”

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Scottish Highlands

EyesTravelling/Adobe Stock

People have mined, refined and valued gold since Mesopotamian times, with records of early gold jewelry from 2600 BCE — but what about gold from the Scottish Highlands?

Anyone who has seen images of Egyptian Pharaoh Tutankhamun’s tomb created almost entirely of gold in 1223 BCE can only wonder at the volumes of gold that must have been refined over 3,000 years ago.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

Gold from the Scottish Highlands

Yet, investors today are still fascinated with gold. However, gold’s actual uses are limited (outside of jewelry and high-end electronics).

Unfortunately, as a recent Daily Mail article quotes Scotgold CEO Richard Gray, who said “gold mines are where god put the gold,” not by extension where we would like them.

So, it has taken a strong gold price and political blessing for Scotland’s only domestic gold miner, the aptly named Scotgold, to gain permission to develop gold reserves in the Trossachs National Park. The park is in an area of outstanding natural beauty and is home to some of the best-preserved oak woodlands in Scotland.

Gold mining and Scotland are not activities and locations that one immediately makes an association between. In fact, more Scots rushed to California’s gold rush than ever mined at home.  However, gold prospectors have looked for gold in Scotland’s rivers for centuries.

The country is in the broad gold belt that stretches from Scandinavia across Greenland to Canada with, in places, similar topography and geology.

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The Global Precious Monthly Metals Index (MMI) retraced 2.2% for this month’s index reading, as the gold price and the silver price both lost previous gains.

October 2020 Global Precious MMI chart

 

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

Gold price rally loses steam

Amid global economic uncertainty, precious metals like gold have benefited.

The gold price surged as high as $2,063 per ounce in August. The price proceeded to trade sideways for about a month before dipping from mid-September onward, falling to nearly $1,860 per once in late September.

Prices dipped Tuesday after President Donald Trump tweeted he would end negotiations over another federal stimulus package.

Central bank sellers

Central banks are some of the largest holders of gold reserves.

In that vein, the World Gold Council reported central banks switched from net buyers to net sellers in August.

“Global central banks sold a net 12.3 tonnes (t) during the month, continuing this year’s trend of a slower pace of accumulation compared to recent years,” the World Gold Council reported. “Purchases were concentrated amongst regular buyers: Kyrgyz Republic (5t), India (4t), Turkey (3.9t), UAE (2.4t), Qatar (1.6t), Mongolia (1.3t), and Kazakhstan (1.3t).”

However, the Council noted Uzbekistan reduced its gold reserves by nearly 32 tonnes.

Fed releases September meeting minutes

In other news impacting precious metals, the Federal Reserve on Wednesday released minutes for the Sept. 15-16 meetings.

“While the economic outlook had brightened, market participants continued to see significant risks ahead,” the minutes release reads. “Some noted concerns about elevated asset valuations in certain sectors. Many also cited geopolitical events as heightening uncertainty.”

Furthermore, absent a new stimulus package, the release explained “growth could decelerate at a faster-than-expected pace in the fourth quarter.”

As for currencies, the Fed noted the depreciation of the dollar. Traditionally, the price of gold and the U.S. dollar correlate inversely.

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The Global Precious Monthly Metals Index (MMI) gained 3.0% for this month’s MMI value, as the silver price steadied in the second half of August.

September 2020 Global Precious MMI

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Silver surge

Last month, MetalMiner’s Stuart Burns delved into the rise of the silver price and how much further it could go.

After falling to $12.59 per ounce as of March 20, the silver price surged as high as $29.14 in the first half of August.

But, as Burns noted, the price did retrench thereafter, generally hovering around $27 per ounce.

“Both gold and silver retrenched yesterday,” Burns wrote Aug. 12. “Gold fell below $2,000/ounce, while silver dropped toward $27/ounce.

“But whether that will be enough to dampen spirits for a push higher in coming weeks will depend on the course of the dollar, indications on post-pandemic recovery and further action by the Fed regarding longer for lower interest rates.

“You’d be brave to bet against it.”

Since then, silver has continued to trade sideways, starting this week just under $27 per ounce before ticking up to $27.20 per ounce Wednesday.

As Burns notes, how much silver and fellow precious metal gold can continue to gain depends on the aforementioned factors.

From March 20 until the end of July, the U.S. dollar index declined by nearly 10%. Since then, the dollar has trended mostly sideways.

The index stood at 93.20 Wednesday afternoon. By comparison, the index stood at nearly 103 in late March, when the coronavirus pandemic began to significantly impact U.S. health systems and the economy.

Gold, silver could see further gains

In the same vein, the Bank of Montreal adjusted its long-term forecasts for gold and silver, Kitco News reported.

The bank forecast average gold prices of $1,920 per ounce in the fourth quarter. The new forecast marked a 4% increase from its previous forecast, according to the report.

Furthermore, the bank forecast an average Q4 silver price of $27.50 per ounce. The adjusted forecast for silver marked a 47% increase from the bank’s previous forecast, per the report.

Fed targets long-term inflation rate of 2%

As Burns noted, the Federal Reserve’s monetary policy will also have a hand in the strength of gold and silver prices.

On Wednesday, the Fed released a statement announcing its long-term stance on inflation.

“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run,” the Fed said in a statement. “With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved.”

Furthermore, the Fed opted to maintain the existing federal funds rate of 0-0.25%. The Fed said it will maintain the target range until “labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.”

According to the most recent Consumer Price Index (CPI) reporting from the U.S. Department of Labor, the all items index increased 1.3% over the previous 12-month period.

Actual metals prices and trends

The U.S. silver price gained 15.0% month over month to $28.14 per ounce as of Sept. 1.

The U.S. platinum bar price rose 2.9% to $926 per ounce. Fellow platinum-group metal palladium  gained 8.1% to $2,133 per ounce.

The U.S. gold bullion price fell 0.4% to $1,967.40 per ounce.

The Chinese gold bullion price, meanwhile, rose 0.7% to $61.81 per gram.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021.

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