Gold

gold price

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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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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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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.

U.S. and Canada

ehrlif/Adobe Stock

This past week’s metals news covered everything from silver price movements to the copper price rise’s slowdown to the reimposition of tariffs on some Canadian aluminum.

We also broke down President Donald Trump’s recent proclamation with respect to reimposing the Section 232 tariff on some Canadian aluminum. MetalMiner’s Stuart Burns delved into the concern expressed by Ontario Premier Doug Ford: could Trump target Canadian steel next?

As our readers know well by now, Trump imposed Section 232 tariffs on imported steel and aluminum of 25% and 10%, respectively, in 2018. During the course of negotiations with Canada and Mexico over the United States-Mexico-Canada Agreement (USMCA) — the successor to NAFTA — the U.S. rescinded the tariffs in May 2019.

Now, at least for unalloyed aluminum from Canada, the tariff is back.

The Aluminum Association called the tariffs the “wrong approach.”

Furthermore, the tariff comes in a time when beverage makers are struggling with an aluminum can shortage.

For the buyers out there, if you are under pressure to generate cost savings in aluminum, steel or anything else, make sure you are following these five best practices.

But the tariff storyline is but one thread in the world of metals.

Before we head into the weekend, let’s take a look back at the week that was:

MetalMiner Week in Review, Aug. 10-14

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The Global Precious Monthly Metals Index (MMI) surged 9% for this month’s MMI value.

August 2020 Global Precious MMI chart

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Surging gold price

The gold price recently soared to an all-time high.

The gold price is inversely correlated with the U.S. dollar. As such, it is worth noting the U.S. dollar recently fell to a two-year low.

The U.S. dollar fell to 93.23 as of Thursday afternoon.

Silver rises but could be headed for short-term weakness

Meanwhile, the silver price has also been on the rise longer term.

MetalMiner’s Stuart Burns has kept a close eye on the resurgent silver market in recent months.

“Early this year, the silver market was going through a tough time,” Burns wrote last month.

“Its reaction to the growing pandemic was in stark contrast to that of gold. The disconnect between the two metals rose to historic proportions, as gold rose on the back of deeply negative real interest rates and expectations, justified or otherwise, of rising inflation as a result of massive fiscal stimulus.”

Burns added the silver price could still have a ways to go.

“Silver’s case, apart from it underperforming its historic average, is the potential for it to be boosted by: the growing Chinese recovery driving demand for industrial consumption (particularly electronics and plating), its attractions as a safe-haven investment and supply constraints due to COVID-19 mining-related disruptions in Central and South America,” he added.

“One arbitrage doing the rounds these last few months was to sell gold and buy silver, largely on the historic disconnect between the two prices as gold soared and silver collapsed. But with economic activity improving and supply-side concerns not going away, silver’s continued rise has better prospects, regardless of the trajectory for gold or the fact the historic connection between the two has partially recovered.”

Silver slowdown?

However, the silver price could take a bit of a breather from its upward ascent.

In a followup post Wednesday, Burns explained why silver’s rise has slowed.

“Silver’s rise has been so dramatic over the last 30 days; a pullback is to be expected,” he wrote.

“In fact, silver bulls are said to be looking for short corrections to create more value to add to positions.

“Both gold and silver retrenched yesterday. 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.”

Palladium, platinum make gains

Gold and silver have made significant gains since the start of the pandemic: what about the rest of the precious metals complex?

Powered in part by recovering automotive sales, both platinum and palladium showed some life.

Palladium, for example, trended largely sideways from March through June. However, over July, the palladium bar price jumped over 5%.

It remains to be seen if the automotive market will continue in its recovery. As noted in the Automotive MMI report earlier this month, July automotive sales in the U.S. saw the recovery take a bit of a pause.

Automotive sales in China, meanwhile, have proved more consistently resilient.

According to China Association of Automobile Manufacturers (CAAM) data released July 13, June sales rose 11.6% year over year. The July sales figure marked the third consecutive month of year-over-year sales gains in China.

The three-month positive streak followed a March year-over-year decline of 43.3%.

Actual metals prices and trends

The U.S. silver price gained 34.5% month over month to $24.47/oz as of Aug. 1.

The U.S. platinum bar price gained 9.9% to $900/oz. Meanwhile, the palladium bar price jumped 5.3% to $1,973/oz.

The U.S. gold bullion price gained 11.0% to $1,976.10/oz. The Chinese gold bullion price jumped 8.5% to $61.39/gram.

See why technical analysis is a superior forecasting methodology over fundamental analysis and why it matters for your metals buy.

gold price rising

Are gold prices really going to keep rising? Source: Adobe Stock/Nikonomad.

This morning in metals news: the gold price has surged to an all-time high; China is eyeing changes to its steep capacity swap rules; and Northern Dynasty Minerals has received an environmental impact study for its Pebble copper-gold-molybdenum project in Alaska.

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USMCA

ronniechua/Adobe Stock

This morning in metals news: the United States International Trade Commission asked for an additional $2.75 million in its budget to help it toward implementation of the United States-Mexico-Canada Agreement (USMCA); the World Gold Council released its H1 2020 report; and U.S. beverage makers are grappling with an aluminum can shortage.

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