Gold ETF demand sees 300% annual Increase in first quarter

Gold-backed exchange-traded products were the prevailing asset to own, driving global demand for the yellow metal in the first quarter, as the world economy was crushed by the COVID-19 health crisis, according to the latest research from the World Gold Council (WGC).

Thursday, in its first-quarter Global Demand Trends report, the WGC said that total gold demand increased to 1,083.8 tons between January and March, up 1% compared to gold demand in the first quarter of 2019.

The dominant theme in the gold market remains unprecedented investor demand for the yellow metal, through exchange-traded funds (ETFs). The report said that gold-backed ETFs saw inflows of more than 298 tons in the first three months of the year, which pushed global holdings in these products to a record high of 3,185 tons. The WGC said that ETF inflows in the first quarter were up more than 300% compared to inflows last year.

“The coronavirus outbreak, which swept the globe during the first quarter, was the single biggest factor influencing gold demand. As the scale of the pandemic – and its potential economic impact – started to emerge, investors sought safe-haven assets,” the analysts said in the report.

ETF demand, which hit its highest level in four years, helped to drive prices to a nearly 8-year high, the WGC said.

“Consequently, global gold demand in value terms reached US$55bn – the highest since Q2 2013,” the analysts said.

A rush into ETFs is pretty much the one factor that drove gold demand as key sectors saw significant declines.

The WGC said that bullion investment in coins and bars in the first quarter fell to 241.6 tons, down 6% from the first quarter of 2019. However, it was a tale of two markets as Western demand for bullion coins hit a three-year high of 76.9 tons, an increase of 36% from last year.

However, demand for gold bars dropped by 19% to 150.4 tons.

“Demand for small bars is far more prevalent in East Asian markets, which were among the earliest to be hit by the coronavirus and lockdown measures. Local record high gold prices in these markets also encouraged profit-taking at points during the quarter,” the analysts said.

Jewelry demand fell off a cliff in the first quarter

While investment demand was strong in the first quarter, the same could not be said for the jewelry market, the most significant segment of demand for physical gold.

“Almost without exception, jewelry markets across the globe recorded y-o-y losses as the impact of the coronavirus compounded the effect of high, and steeply rising, gold prices,” the analysts said. “Jewelry consumption plunged in Q1 as local gold prices in various countries rocketed and markets were shuttered in efforts to contain the coronavirus pandemic.

In total, global jewelry demand dropped to 325.8 tons, down 39% compared to the first quarter of 2019. Jewelry demand fell to its lowest level on record, the WGC said.

The report noted that China was the hardest hit, with jewelry demand falling 65% in the first quarter.

Looking at Indian jewelry demand, another essential gold market, the WGC said that demand fell 41% in the first quarter. They added that jewelry demand could get a lot worse.

“While Q1 demand was hard hit, we expect the impact of COVID-19 to be more severe in the second quarter, as the lockdown extends into May. This will impact gold demand during the key buying festival of Akshaya Tritiya, as well as wedding-related purchases,” the analysts said.

The WGC said that U.S. jewelry demand saw its first quarterly decline since the fourth quarter of 2016.

“The healthy growth in U.S. jewelry consumption over the last three years abruptly reversed in Q1. Demand slipped 3.7% y-o-y to 23.1t, the decline being almost purely COVID-related,” the analysts said.

Central bank demand totaled 145 tonnes in the first quarter, an 8% decline compared to last year. The WGC noted that only six central banks purchased more than 10 tons of gold between January and March.

“While central bankers around the globe were focused on the measures needed to contain the economic impact of COVID-19, the need for robust, liquid and diversified international reserves was apparent. And positive net purchases of gold confirm that it remains an important component of those reserves,” the analysts said.

Gold supply drops in Q1

While the gold market continued to see demand growth, the market also saw a decline in supply. The WGC said that total gold supply in the first quarter was 1,066.2 tons, down 4% compared to the first quarter of 2019.

The WGC noted that mine supply dropped 3% as miners had to shut down production last month as governments tried to slow the spread of the coronavirus, closing all non-essential businesses.

“The y-o-y decline in mine production in Q1 is somewhat unsurprising given the scale of disruption caused by the global coronavirus pandemic. Most industries have been affected by the spread of the virus, and mining is no exception,” the analysts said.

By Neils Christensen

For Kitco News

David

Trump victory in November is no longer base-case scenario, here’s why

The pandemic has made it more difficult for current President Donald Trump to be re-elected in November, this according to Matt Gertken, vice president of geopolitical strategy at BCA Research.

A Trump victory is no longer the base-case scenario, Gertken said, owing to the fact that a recession has traditionally made it difficult for an incumbent to be re-elected.

“President Trump was lined up to win the election,” Gertken told Kitco News. “We’ve got good data on [the elections], going back over a hundred years of very regular data. It shows that elections that are held during recessions are usually very negative for the incumbent. Trump will be trying to win and do something that has not been done since 1904, which is despite a recession, win re-election.”

As unemployment rises, he said, voter turnout will also rise proportionally.

However, voters will also take into consideration that the pandemic was not initially Trump’s fault.

“It’ll be important to see if his approval ratings continue to remain pretty firm in the wake of the crisis, but generally speaking you would expect that if unemployment goes up, the president’s approval goes down and he’s much less likely to win re-election,” he said.

Favor has now shifted in favor of the Democrats, Gertken said.

“I’d say the base case is that Biden wins simply because people look around in October…and they don’t have a job,” he said.

North Korea remains a major risk to global stability, Gertken noted. If North Korean leader Kim Jong-Un were to pass away, tensions on the Korean Peninsula could escalate.

“If he dies, if he is incapacitated, that is a threat to global stability, so that will inject a risk premium into assets in the region,” he said.

Importantly, China may step in to fill the void of North Korea should the need arise.

“Today, we’re in an environment in which the United States and China do not have stable relations. In that context, if you then lose the North Korean leader, you’d have a power vacuum,” he said.

By Kitco News

David

Headline financings crowd terrible money picture for juniors

Michael McCrae Monday April 27, 2020 23:31

Kitco News

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Despite some eye-catching financings in the last month, the juniors have been unable to raise money, said Kai Hoffmann, CEO of Oreninc, in a conversation with Kitco today.

Oreninc tracks junior financings on the Toronto Stock Exchange. Despite markets being roiled by COVID-19, late-stage companies are still managing to raise money, juniors not so much.

"The juniors are having a really hard time financing right now," said Hoffmannm, noting that financings below the $10 million mark have "…just completely disappeared in March and April."

Hoffmann said there have been some significant raises in the space, SilverCrest Metals with over C$101 million and Bluestone Resources with C$80 million, but these are advanced-stage mining and development companies.

Any junior financing is going to have to wait, and with COVID-19 restrictions still in place and lack of funds, juniors may be unable to generate any news.

"There's typically a trickle-down effect, and one thing we'll have to see: because of this COVID-19 a lot of companies might not be able to explore this season," said Hoffmann. "And nobody wants to invest in a company that can do anything for 12 months. That'd be lost money. I'd rather go the development route where companies are about to go into production."

Listen to our conversation with Kai Hoffmann.

By Michael McCrae

David

One in six Americans chooses gold as ‘best’ long-term investment â Gallup

“Americans have become less likely to view stocks or mutual funds as the best long-term investment after U.S. markets dropped by more than a third as the economic implications of the coronavirus outbreak set in last month,” Gallup survey said.

Despite the drop, stocks or mutual funds remain the second best long-term investment choice.

Gold and savings accounts saw a rise in this year’s survey. Gold was chosen by 16% of Americans and savings accounts by 17%. “Roughly one in six Americans view savings accounts or CDs (17%) and gold (16%) as the best long-term investment,” they survey said.

For gold, this is a 2% rise since last year’s survey, which potentially points to a shift in Americans perspectives.

Increased interest in gold is also visible through its price gains over the past year. Spot gold is up nearly 35% since April 2019. At the time of writing, spot gold was trading at $1,725.60, down 0.23% on the day.

“It's possible that the economic fallout from COVID-19 could scramble Americans' preferences, with the stock market in peril and the real estate market's future unclear. In 2011, in the aftermath of the global financial crisis that caused both stock and housing values to plummet, gold was perceived as the supreme investment,” the survey said.

Back in 2011 and 2012 surveys, gold held the number one position as the best long-term investment. At the time, 34% of Americans said gold was the best long-term investment.

Gallup’s 2020 annual Economy and Finance survey was conducted between April 1 and April 14, polling 1,017 U.S. adults.

By Anna Golubova

For Kitco News

David

Gold breaks below $1700 trading to a low of $1667 before recovering

April 2020 has been a month that the majority of gold traders and investors will remember for some time to come. It is truly been a roller coaster ride, where gold traded to a low of $1575 on the first of the month, and within two weeks, on April 14 hit this year’s high at $1788 per ounce. After all that gold prices began to correct and within a week traded to the 61.8% Fibonacci retracement of this rally, this was today’s low of $1667.

The 61.8% Fibonacci retracement occurs at $1657, and last night’s trading activity took June futures pricing just $11 above of that price point. Although gold pricing recovered through the latter part of the trading session in New York, it still closed down by $13.70, and is fixed at $1697.50.

Yesterday we spoke about a two-day pattern called a piercing line. Although this Japanese candlestick pattern is a bullish reversal it requires a confirming candle. As we spoke about in our opening letter yesterday, “There is one other critical parameter that you would want to see in the upcoming days, the most important of which is a confirming candle. This means that tomorrow’s trading range will contain a higher high, a higher low than the previous day. Also, it must result as a green candle with the closing price well above the opening price. The bigger the confirming candles body sizes the more it confirms the piercing line pattern.”

Last night for a brief instance the market did in fact go into positive territory with gains on the day, but that was short-lived at best. Although it appeared as though we would see a confirming candle unfold, that was not to be the case.

Analysts are all over the board when it comes to their assessment of gold pricing in the future. They vary from Bank of America’s call for “$3000 gold in the next 18 months”, and TD securities forecasting that gold will “rise to $1900 per ounce in the next three months”. Two independent analysts at capital economics predicting that gold will hit $1600 partially due to deflationary pressures.

It is absolutely clear that there is not a unified or clear consensus as to where gold pricing will go in the future.

The truth of the matter is that we are in uncharted territory, and facing a crisis that the world was unprepared for. The COVID-19 virus has devastated global economies for the last month as it has put most countries citizens into isolation. This of course has caused the economy to dramatically contract, as evident in crude oil prices collapsing, with crude oil futures turning negative for the first time in history yesterday.

However, one thing is clear, and that is the unprecedented and immense stimulus which is been allocated by central banks globally. All things being equal the monetary policies of central banks around the world will devalue currencies, and as such be supportive of gold prices at some point.

David

Gold needn’t get any better to make investors a lot of money right now: Keech

Gold needn't get any better to make investors a lot of money right now: Keec

The Resource Insider co-founder talked to Kitco today. "It is one of those rare times when investing in a junior company in some ways carries a lot less risk than a mining company or even a later stage development company," said Keech. Keech notes that there are high costs to keeping a mine on care and maintenance. "There's millions or hundreds of millions of dollars of equipment that needs to be cared for and maintained. "There's cyanide moving and percolating through heap leach pads. There are a huge costs associated with making sure that even if a mine is not running, that it is safe and well cared for," said Keech. Regarding Keech's investment strategy, he said there has been a big change, and he is looking at later stage companies, such as producing mining companies and royalty businesses. "This is very different than our typical strategy, which involves primarily investing through private placements in junior stage companies or in new companies–companies that are still private, which are typically about 12 months from going and going public. "So we're actually buying things on the market right now, and the main reason is that you're able to get cash-flow in companies that are long-term established businesses that we know are going to be able to survive a shutdown or be able to survive the pandemic. And hopefully be able to see a massive rebound." Keech is delighted with precious metal prices. "Gold does not need to get any better for people to be making a lot of money right now. Mining companies are a lot more valuable than they were even a year ago, and there's going to be a lot of projects that were sub-economic that are going to be able to print money at these valuations. Additionally, companies are starting to wake up and realize that their supply is constrained, especially in gold." Listen to our conversation with Jamie Keech.

David

Asia shares off to cautious start, gold recoils

Reuters

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS eased 0.2% in slow early trade, with a pause needed after five straight weeks of gains. Japan's Nikkei .N225 fell 1.3% and South Korea .KS11 0.1%.

E-Mini futures for the S&P 500 ESc1 slipped 0.7%, having jumped last week on hopes some U.S. states would soon start to re-open their economies.

U.S. President Donald Trump said Sunday that Republicans were “close” to getting a deal with Democrats on a support package for small business.

But the U.S. Centers for Disease Control and Prevention reported ï»¿an increase of 29,916 in new infections and said the number of deaths had risen by 1,759 to 37,202.

The S&P 500 .SPX has still rallied 30% from its March low, thanks in part to the extreme easing steps taken by the Federal Reserve. The Fed has bought nearly $1.3 trillion of Treasuries alone, and many billions of non-sovereign debt it would historically have never gone near.

“The Fed will be a major buyer of risky assets in the coming months, and has displayed its willingness to backstop virtually any part of the domestic financial system in trouble,” said Oliver Jones, a senior markets economist at Capital Economics.

Yet the particular composition of the S&P 500 was also a major factor, he added, as three sectors relatively resilient to a virus-induced lockdown — IT, communications services and healthcare — make up around 50% of the index.

Indeed, Microsoft, Apple, Amazon, Alphabet and Facebook account for more than a fifth of the index.

“What’s more, the S&P 500 is skewed towards a few ultra-large firms, some of which are also in those sectors. Their sheer size might make them better able to weather a few months of dramatically-low revenues than most.”

The rebound in the S&P 500 therefore likely overstated optimism on the economy, Jones argued, noting European benchmark equities indices and U.S. small cap indices were still in bear market territory.

Bond markets suggested investors expected tough economic times ahead with yields on U.S. 10-year Treasuries US10YT=RR steady at 0.65%, from 1.91% at the start of the year.

That decline has shrunk the U.S. dollar’s yield advantage over its peers and left it rangebound in recent weeks. So far in April, the dollar index =USD has wandered between 98.813 and 100.940 and was last at 99.791.

The dollar was a fraction firmer on the yen on Monday at 107.63 JPY= but again well within recent ranges, while the euro idled at $1.0868 EUR=.

Gold had recoiled to $1,676 per ounce XAU=, having touched a 7-1/2 peak of $1,746.50 last week

Oil prices remained under pressure as the global lockdown saw fuel demand evaporate, leaving so much extra supply countries were finding it hard to find space to store it.

So great was the near-term glut that the May futures contract for U.S. crude was trading down 7% at $16.96 a barrel CLc1, while June was standing at $24.28 CLc2.

Brent crude LCOc1 futures have already rolled over into June and that contract was off 32 cents at $27.75 a barrel.

By Gary Wagner

David

Gold closes below $1700, despite dollar weakness

It may have been gone as soon as it appeared gold above $1700 per ounce was short-lived as market forces and a changing market sentiment took the precious yellow metal $37 lower today, with gold futures currently fixed at $1694.50. The first indication that gold futures might correct occurred on Tuesday, April 14. This was also the same day that gold futures traded to the highest level of 2020, when it traded to an intraday high of $1788.80. The indication which we spoke about on Tuesday, Wednesday as well as Thursday was the development of a three-day candlestick pattern called a “Three River Morning Star”.

On Monday gold futures had closed at $1760 the former highest price this year. This was until Tuesday when pricing opened above the close of Monday’s candle, and closed at approximately the same price point which formed a “Doji” star in the evening position. On Wednesday gold opened below Tuesday’s opening price creating a gap above the star above the highs of Monday and Tuesday.

These three candles collectively completed the pattern. The following day, on Thursday gold pricing resulted in a red candle that contained a lower low, and a lower high than the previous candle (star). Most candlestick technicians believe that on any short-term pattern one should wait for a confirming candle which gives the prior signal much greater weight, Thursday’s candle confirmed the pattern which began on Monday.

In a report from MarketWatch, Lukeman Otunuga, Senior research analyst at FXTM said: “Risk sentiment has been bolstered by U.S. President Donald Trump and reports suggesting a potential coronavirus treatment” from U.S. drug company Gilead Sciences Inc. “Market hopes around plans to ease lockdown measures are set to rise, especially after Trump set guidelines that allow social distancing rules to be lifted as soon as four weeks. While gold may sink lower on the good news, the downside will most likely be limited as disappointing economic data across the world drags investors back to reality.”

Today gold had the largest single day decline this week, which resulted in a lower weekly close. Many analysts including myself believe that this current price weakening will be short-lived at best, so the question becomes at what price point will gold find support.

Based on our technical studies, now that gold has broken below $1708 per ounce which is the 38% Fibonacci retracement, should gold continue to trade under pressure next week the most likely targets are the 50% retracement at $1682.90, with major support at the 61% Fibonacci retracement which occurs at $1657.

Wishing you as always good trading,

By Gary Wagner

David

Gold prices should still hit $2,000 this year, but can silver keep up?

Gold prices were down slightly on Wednesday, but in the medium-term, fundamentals should still push prices towards the $2,000 an ounce level, this according to Bill Baruch, president of Blue Line Futures.

“I think gold will see $2,000 this year, I think once we get above $1,800 it will be a quick move to $1,900,” Baruch told Kitco News.

Baruch noted that silver’s technical indicators are not pointing to an immediate bull rally.

“When silver is above the 50-day moving average, it really likes to stay above it, and when it’s below it, it really likes to stay below it. Right now, it’s struggling to get above that $16.10, $16.50 [level],” he said. “Right now, silver is really holding back gold, but it’s really the broader risk environment. Today’s a risk-off day. We’re seeing the metals come in with the equities market.”

Gold prices pulled back 0.4% on Wednesday while silver declined by 2%. Stocks also traded lower, with the S&P 500 down 2.2% on the session.

On the equities markets recovering in April, Baruch said that much of the gains has been due to monetary easing from the Federal Reserve.

“Ultimately, don’t make a mistake here, this is fed liquidity stabilizing the market,” he said. “But the reality is about to hit us. We’re starting to see some of the poor data, we’re going into the earnings, and it’s not too much of a surprise to see this exhaustion on this move start to play out today.”

By Kitco News

David

Gold, silver bulls bask amid bullish charts, safe-haven buying

Gold futures prices are trading not far from unchanged on the day Tuesday at midday, after scoring a 7.5-year high early on, at $1,788.80, basis June Comex futures. Silver prices are sharply up and at a four-week high today. Gold bulls are enjoying the strong near-term technical advantage to continue to suggest more upside for the yellow metal in the near term. Safe-haven demand continues to boost gold, and to a lesser degree silver, as the global economy is still on very shaky ground. June gold futures were last up $0.10 an ounce at $1,761.30. May Comex silver prices were last up $0.503 at $16.04 an ounce.

Global stock markets were mostly higher in overnight trading. U.S. stock indexes are solidly higher at midday. More and more it appears North America and Europe have “turned the corner” on the Covid-19 pandemic. New York Governor Cuomo said Monday his state has seen the worst of the pandemic. Other hotspots in the U.S. have also showed signs of simmering down. Leading U.S. health officials are now saying the world’s largest economy can very likely begin to reopen in stages beginning in May.

The present Covid-19 situation appears to be a sweet spot for the precious metals. There is enough confidence in the marketplace for traders to want to trade markets, but the global economies are still in very bad shape and it’s uncertain when they will be fully operational or healed.

Major corporate earnings reports are now starting to be released, which will show the early impact of the Covid-19 pandemic, and be a sobering reminder of the tough economic times at present. JP Morgan’s results today were a testament of a crippled U.S. economy.

In overnight news, China, the world’s second-largest economy, saw its March exports down 6.6%, year-on-year, which was less than expected. Imports were down 0.9% in the period, also way less than expected. China watchers deemed this data as upbeat, showing the Chinese economy is recovering from the pandemic.

The important markets today see Nymex crude oil prices trading solidly lower, around $21.00 a barrel. Oil market bulls are sorely disappointed the weekend OPEC and other major oil producers agreement to restrict oil output did not boost crude oil futures prices. However, there is no consensus on how much oil production will be reduced. Some market watchers think 10 million barrels a day and the more optimistic bulls think 20 million. There is more agreement among analysts that worldwide oil demand has dropped by at least 20 million barrels a day.

Meantime, the U.S. dollar index is lower at midday. The 10-year U.S. Treasury note yield is trading around 0.735% today.

Technically, June gold futures bulls have the strong overall near-term technical advantage. More upside is likely in the near term. Gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,800.00. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at $1,700.00. First resistance is seen at today’s high of $1,788.80 and then at $1,800.00. First support is seen at today’s low of $1,755.30 and then at $1,750.00. Wyckoff's Market Rating: 9.0

May silver futures prices were nearer the session high and hit a four-week high at midday. The silver bulls have the overall near-term technical advantage. Prices are in a four three-week-old uptrend on the daily bar chart. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $17.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $14.50. First resistance is seen at today’s high of $16.30 and then at $16.50. Next support is seen at today’s low of $15.655 and then at this week’s low of $15.385. Wyckoff's Market Rating: 6.5.

May N.Y. copper closed up 285 points at 233.10 cents today. Prices closed near the session high and closed at a four-week high close today. The copper bulls have the slight overall near-term technical advantage. A price uptrend is in place on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 250.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 220.00 cents. First resistance is seen at this week’s high of 235.25 cents and then at 238.00 cents. First support is seen at 230.00 cents and then at this week’s low of 226.35 cents. Wyckoff's Market Rating: 5.5.

By Jim Wyckoff
For Kitco News

David