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.
The green agenda has lifted prices across the metals sector.
To what extent it has driven physical demand rather than sentiment-driven investor activity — in the form of exchange-traded fund (ETF) buying, stockpiling or exchange position building — is debatable. It’s more of the latter than the former, we would suggest, as the main physical driver for metals remains electrification in transport. As a percentage of the whole, that remains relatively small.
But one important metal in the sector that has yet to see the same support this year is silver.
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.
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.
Late last year, MetalMiner’s Stuart Burns touched on the gold price’s prospects in 2021.
Gold surged above $2,030 per ounce last August amid ongoing economic uncertainty and well before the rollout of COVID-19 vaccines.
Since then, however, the gold price has cooled significantly. From the aforementioned peak, gold has dipped approximately 15%.
The gold price trended sideways throughout March, settling in around $1,730 per ounce. Despite a dip in treasury yields — which gold typically moves inversely to — the price largely held in place, as the US dollar strengthened.
The US dollar index rose to 93.30 in late March before retreating in the first week of April (coinciding with a modest bounceback for gold and silver).
So far this month, however, gold has shown some upward momentum. The gold price picked up Thursday, approaching the $1,760 per ounce mark.
Like gold price, silver price bounces back in April
Meanwhile, the silver price narrative followed a similar theme to that of the gold price.
After reaching $28.10 per ounce in February, the silver spot price fell to just below $25.00 per ounce to start April. Over the last week, silver has clawed back some gains, reaching around $25.50 per ounce Thursday.
While silver is often most thought of for its use in jewelry and kitchen utensils, the precious metal does have high-tech industrial applications.
As MetalMiner’s Stuart Burns noted earlier this week, nations around the world will need to secure their supply chains for the next industrial revolution, whether it’s the broader push toward renewable energy or the automotive sector’s transition toward electrification.
Among other uses, silver is used in semiconductors. As we’ve discussed at great length in recent months, the semiconductor shortage continues to weigh on automotive manufacturers.
30-year treasury yield declines
Meanwhile, the 30-year treasury yield has slipped over the last few weeks. Generally, higher yields serve as an indicator of economic confidence (as opposed to the gold price).
The 30-year yield reached a high of 2.45% on March 19.
This week, the yield fell to 2.32% on Thursday, down from 2.35% the previous day.
The 10-year yield fell to 2.22% on Thursday, down from a March peak of 2.36%.
“In the United States, the trend toward higher longer-term yields observed in recent months accelerated over the intermeeting period, and far-forward real rates based on Treasury Inflation-Protected Securities (TIPS) rose considerably,” the minutes indicated. “Market participants highlighted an improving economic outlook, bolstered by passage of the American Rescue Plan (ARP) and progress on vaccinations, as underlying the increase in yields.”
Sibanye-Stillwater announces strategic partnership with Johnson Matthey
Through the partnership, the South African mining giant said it aims to “develop solutions to drive decarbonization.”
Furthermore, the parties will explore more efficient use of PGMs and other metals in battery technology.
“Johnson Matthey and Sibanye-Stillwater will collaborate on the sourcing and application of PGMs and metals used in battery technology to enable the development and commercialisation of low carbon technologies, with a focus on circularity and sustainability,” Sibanye-Stillwater said in its release. “In addition, the companies will examine potential opportunities to apply their collective experience to support the development of more sustainable supply chains for battery materials.”
Actual metals prices and trends
The US silver price dipped by 8.6% month over month to $24.41 per ounce as of April 1.
The US platinum bars price held flat, closing the month at $1,180 per ounce. Meanwhile, US palladium bars rose by 14.0% to $2,540 per ounce.
The Chinese gold price fell by 1.8% to $55.41 per gram. The US gold price fell by 1.6% to $1,709 per ounce.
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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.
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.”
Silver’s rise has been meteoric since its low in mid-March.
The precious metal’s surge has been particularly notable over the last month.
Both gold and silver have benefited from cheap money, a weak dollar and stronger oil prices. The yield on the benchmark 10-year U.S. Treasury note is presently around 0.57%, while the oil price is holding around $42 per barrel.
Driving all commodities higher, the U.S. dollar index has slipped nearly 7% in the last three-month period. Measured against six major currencies, the dollar is down nearly 9% from its March highs and is on track for its worst month since 2011, according to a Yahoo Finance report.
Other investment products, like Bitcoin, are also up sharply.
However, gold and silver have been stealing the headlines.
Investors are betting on gold going through $2,100/ounce shortly and silver to top $30/ounce.
Silver lining
Unlike gold, though, the fundamentals for silver have some decent legs.
The LME has operated the LMEprecious suite of exchange-traded contracts since 2017. In a recent update note, the LME reported industrial demand for silver last year topped 16,200 tons. Furthermore, demand is forecasted to increase thanks to its role as a component in antennae for the new 5G mobile network infrastructures being rolled out around the world.
Like gold, silver benefits from the jewelry market, which is expected to pick up as economies gradually recover from lockdowns. In addition, silver has a wide range of industrial applications, which are coming back fast — first in Asia, but now in Europe and the U.S.
Looking ahead at the silver price
Two weeks ago, analysts at Goldman Sachs lifted their 12-month forecast for silver to $30 per ounce by year’s end.
However, that prediction became within reach after just a fortnight.
The bank’s prediction was based largely on the back of an expected continuing weakness in the greenback. The analysts argued a further 5% decline is probable before the year’s end. On top of that, no end is in sight for rock-bottom interest rates.
Silver’s rise has been so dramatic over the last 30 days; a pullback is to be expected.
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.
This morning in metals news: U.S. Steel plans to restart another blast furnace at its Gary Works; imports of blooms, billets and slabs from Japan have seen a significant jump this year; and silver prices have surged to a seven-year high.
Early this year, the silver market was going through a tough time.
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.
It is rare that companies with a professional reputation like those of Thomson Reuters and the CME Group compete for the privilege of running such an important price benchmark as the London Silver Fix, a global benchmark that has been in place 117 years and has its origins in the London coffee shops of the 1700s. Even more rare? To announce after three short years they are stepping down from providing that service.
CME Group and Thomson Reuters assumed control of executing the daily Silver Price Fix on Aug. 14, 2014, from the London Silver Market Fixing Company. CME Group has been providing the electronic auction platform on which the price is calculated and Thomson Reuters has been responsible for administration and governance of the LBMA silver price both our own Jeff Yoders and Reuters reported. So why, once a suitable replacement can be found, are the two firms stepping down from their respective roles in running the LBMA Silver Auction?
The simple truth seems to be that they are not making any money out of it. According to MarketWatch, new European legislation set for implementation in January 2018 will regulate the provision of, contribution to and use of a wide set of benchmarks which are highly regulated and deeply scrutinized, the site quotes Ross Norman Chief Executive Officer of Sharps Pixley Ltd. as saying.
“It follows there is much work and cost, but for very modest commercial reward, plus the ever-present danger of legal action or reputational damage — whether guilty or not.” Norman said. ‘Few sensible or sane people would want to create a financial benchmark — and, yet, it is absolutely necessary for the normal functioning of markets.”
You should ask, if that is the case, and Ross Norman probably knows better than anyone, who is going to take it on?
One site valued the total of above-ground silver holdings at approximately 1 billion ounces, putting the physical value at some $17 billion, but Bloomberg assessed the total silver-based financial market at closer to $5 trillion, much of which takes its price cue from the London Fix. It seems inconceivable that one of the major banks, or a number of them in cooperation, that currently contribute to the LBMA silver price will not step in to take over.
If they don’t, the Silver Fix could conceivably migrate to Shanghai in the same way that the center of gravity for gold price-fixing has been gradually migrating east over the last decade.
“In consultation with the LBMA, CME Group and Thomson Reuters have decided to step down from their respective roles in relation to the LBMA Silver Price auction,” the LBMA said in a members update seen by Reuters.
The two will continue to operate and administer the silver auction until a new provider is appointed, the LBMA said. It will launch a new tender to appoint an alternative provider to operate the process “shortly”, it said.
“We would be looking to identify a new provider in the summer, and have the new platform up and running in the autumn,” an LBMA spokesman said.
The two companies launched the LBMA silver price in August 2014 to replace the telephone-based London silver “fix,” which had been in operation for more than a century, with an electronic, auction-based and auditable alternative.
CME Group provides the electronic auction platform for the benchmark, while Thomson Reuters is responsible for administration and governance. The LBMA owns the intellectual property rights.
Philippines Might Consider Indonesia-Style Ore Export Ban
The Philippines may consider banning exports of raw minerals to encourage domestic processing and boost the value of shipments, an environment official said on Friday, as the government looks to extract more from its mining sector after a crackdown.
