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Q3 2020 Gold Demand Trends: Here is my takeaway from the latest out of the World Gold Council report:
– Demand overall was the lowest quarterly total since Q3 2009, 19% lower y-o-y, and 10% lower than this time last year.
– High Gold $ has hit jewellery sales down 29%,
– Physical coin/bar is up 49%
– Industrial gold use is weak (down 6%)
– Gold ETF are still growing (but at a slower pace)
– Central Banks are not buying much (if any Gold) and Turkey and Uzbekistan are selling in the Quarter.
– Production also fell 3% due to low mine output (even though recycling is up 6%)
To me there are some risks to think about going forward:
– Central Bank Selling: How many other cash strapped Central Banks are eyeing off the high gold prices thinking of dipping into their Gold Reserves? It could be a lot of gold for the market to absorb if a major holder starts to sell, and sentiment could change. Keep in mind that the last time CB sold was in 2010 and then the purchasing resumed.
– EFT Reversals: ETFs inflows (additional net position) in gold is at a record high. This is worth watching as after the last spike in 2009, there were decreases with the inflows then a big ETF outflow in 2013. This “paper” gold looks to be predominantly a US/EU thing. ETF’s now “control” almost 4,000 tonnes of gold or some US$250 Trillion
Oz Update : Yup, good to a the Month End on the weekend, as as Dave pointed out, it ended mostly sidewise except for the AUD/USD which is down -2% for the month most of which was this week (-1.6%). Silver was up at one point by 5%+ during the month but finished at +2.95% for the month after falling -2.38 for the week. Gold was up 1.6% for the month (0.39% for the week), and the ASX200 peaked up almost 6% at one point during the month but finised pretty flat at 0.38% month thanks to this week when it dropped -3.93%.
The ASX 200 was having a great month till last week where it had a run up to break into a new (recent) high. I’d asked if this was now resistance or support. Looks like I got my answer with the sharp declines, lets see if it now tests (recent) lows, but I suspect it will be down to be how the US Stock Market goes next week….. and we will just follow on.
It is remarkable how stable Gold/AUD has been these last couple of month with the AUD/USD exchange rate moving opposite to the Gold/USD price keeping Gold/AUD in a pretty tight range for us.
Physical Premiums & Availability: Availability is still good with product available in most forms and sizes, though silver is availability is tighter and margins significantly higher than last week. Perth Mint has even put a 250 coin limit of 1oz Kangaroos.
– Silver 1oz Coin: 36.5% Retail / 16.3% Mint
– Silver 1KG Bar: 15.1% Retail / 3.6% Mint
– Gold 1oz Coin: 4.7% Retail / 5.0% Mint
– Gold 1KG Bar: 2.2% Retail / 0.5% Mint
The very high Premium on Retail silver still worries me for “Stackers” at these levels. Aussie Kangaroos going for 36.5% above spot is nuts IMHO (though this margin is lower in bulk).
According to the Gold Council a couple of Central Banks (Turkey and Uzbekistan) started selling their reserves pushing quarterly net gold purchases by central banks Negative for the first time in a decade. Here is the link to their Q3 2020 Gold Demand Trends. There is a bit to digest.
Oz Update: Overall stuff is still moving sidewise looking for a signal to break up or down with the ASX 200 (up 0.04%), AUD/USD (up 0.77%), Silver (up 1.04%) and Gold (down 0.73%) all showing a bit of volatility but it was all pretty unconvincing. Gold made a move up…. then fell back. The ASX 200 tested and broke it’s recent highs but then just bounced around after it’s strong run up in prior weeks. I’m wondering if this level is support or resistance? The only one showing some good recent upward movement is Silver after the plunge in Aug then again in late Sept…. but it still has a long way to go to reach those Highs.
Physical Premiums & Availability: Availability is still good with product available in most forms and sizes. The Premium on Retail silver is still very high but has come down since last week. I do worry that anyone stacking silver misses the fact that with premiums so high it will take a very big move to cover that spread to make a profit.
– Silver 1oz Coin: 30.7% Retail / 15.7% Mint
– Silver 1KG Bar: 11.7% Retail / 3.5% Mint
– Gold 1oz Coin: 4.5% Retail / 5.0% Mint (odd that the Mint is still higher than retail)
– Gold 1KG Bar: 2.5% Retail / 0.5% Mint
Other news: We had a week off from China banning/tariffing anymore of our exports!
I get the feeling everyone is just waiting for the next shoe to drop.
Oz Update: It is interesting how the outlook is different depending on your perspective (Country). This week was a good week for Gold up 1.07%, the ASX up 0.89%, a push for Silver remaining unchanged but the big move was the AUD got slaughtered down 2.22%. Apart from the strength of the USD, for us the move was from the RBA indicating they may reduce rates in their Nov Meeting. Betting has the rate move to 0.1% closing the gap with many other countries.
On a YTD basis, Gold is still trading in a pretty right range and the ASX continue to test post crash highs and for the last week mostly posted daily gains…lets see if it can hold onto those this week. I got some market updates from ANZ Bank that still sees the AUD in the Mid 70’s by the end of the year, but I’m not so sure. With rates coming down and some turmoil with our largest trading partner it would have to be other currency getting weaker than ours faster! For those that thrive on volatility, then Silver is still your go to (but not for me).
Physical Premiums & Availability: Availability is still good with product available in most forms and sizes. The Premium on Retail silver is still very very high and if anything is increasing. I don’t know how “silver stackers” plan to make any money with such big margins to earn back.
– Silver 1oz Coin: 35.5% Retail / 15.9% Mint
– Silver 1KG Bar: 14.7% Retail / 3.5% Mint
– Gold 1oz Coin: 4.7% Retail / 5.0% Mint
– Gold 1KG Bar: 2.7% Retail / 0.5% Mint
Perth Mint / Westpac Bank / Euro Pacific Bank (Peter Schiff) : This is not a good look and there is plenty of “We have/are breaking all ties with Euro Pacific” statements coming out.
China Trade: Looks like China not only has the formal trade sanctions (Barley, Beef, Wine) but also now informal pressure on their importers to not buy our Coal. Rumour has it the CCP have drawn up a list of items to lean on us for not being nice.
Yup – our big supply to China is Iron Ore (which they will find hard to swap out due to the vol required), then Coal (Coking and Thermal). The rumours have it that CCP have a hit list of items to progressively work through. I agree that supply will just move around for many items, though some items like Wine would suffer as their idea is to just raise the costs and drive down demand.
…and now the CCP is targeting Australian Cotton.
Looks like China is sending Aust more “signals” to be nice….
Interesting it is impacting both thermal and coking coal. I’m surprised at the coking coal part, as they need this for their steel production and local supply is not good quality. At this stage it is just verbal instructions. Lets see if it becomes formal. Only a bit of movement to the downside for the AUD.
Oz Perspective for the Week: Everything is Up! Well not Gold, which is still range bound and ended the week just slightly down (-0.07%). The big winner was the ASX 200 that managed to post 5 consecutive days of gains finishing up 5.83%. The ASX 200 is retesting the highs again (see red line). It will be interesting to see if it breaks out, or bounces back down off these levels as it had been doing since early June. Silver also did well jumping 4.21%, and the AUD/USD also is back into an uptrend gaining 1.3%.
Physical Premiums & Availability: Availability is still good with product available in most forms and sizes. The Premium on Retail silver is still very very high but came down abit (or did not go up as much as Spot did).
– Silver 1oz Coin: 31.3% Retail / 15.1% Mint
– Silver 1KG Bar: 11.0% Retail / 3.0% Mint
– Gold 1oz Coin: 3.7% Retail / 5.1% Mint (odd that the Mint is still higher than retail)
– Gold 1KG Bar: 2.1% Retail / 0.5% Mint
Here is a couple of blogs posts from the Perth Mint that are worth a read:
There is a discussion in the 2nd link that I think Dave will find of interest given he tracks MA’s:
The table makes it clear that on every prior occasion that gold was trading at more than 20% above its 200DMA, the price fell in the following three months, resulting in an average pullback of almost 10%.
Those corrections typically proved to be good times for investors to add to their precious metal holdings…..
From an OZ point of view, last week had plenty of “excitement” we saw a bit of bounce after last weeks declines. Silver recovered 1.78% after last weeks 12% decline, the AUD was also up 1.78% after last weeks 4% decline. At least one group of AUD forcasters are going to look silly come December, some say towards US$0.80, others say under US$0.70. Gold stayed pretty much the same again (up 0.19%). The ASX looked weak and was down 2.79%. We are back to late May highs and to me appear to be grinding down.
Physical Premiums & Availability: Availability is still good with product available in most forms and sizes. The Premium on Retail silver is still very very high.
– Silver 1oz Coin: 33.2% Retail / 16.3% Mint
– Silver 1KG Bar: 13.4% Retail / 3.6% Mint
– Gold 1oz Coin: 4.1% Retail / 5.0% Mint (odd that the Mint is still higher than retail)
– Gold 1KG Bar: 2.0% Retail / 0.5% Mint