Metal producers are reducing gold production due to government restrictions in response to covid-19 concerns. Coronavirus also caused all European precious metal refineries to shut down and disrupted transportation. 1/3 of NYSE listed gold mines have withdrawn 2020 production guidance. The South African government imposed a 3-week shutdown of the country, which means temporary mine closures.
Metal Mines Shutdown
In particular, South African prime minister Cyril Ramaphosa has imposed a 21-day lock down in all mining activities, after a surge in coronavirus cases. South Africa is a leading producer of metals and minerals such as, silver, platinum palladium, coal, gold and iron core. To be precise, 70% of global platinum comes from South Africa along with 40% of palladium.
Gold mining a labor intensive mining industry, is a potential hotbed of infection among the thousands of miners, who often work in confined spaces, with some living nearby in cramped accommodation. Meanwhile, furnaces and underground mines will undergo a maintenance program, to make sure mines will be in a condition to reopen in the future.
In addition, many more mines around the world paused production. For instance, the Mponeng mine in Argentina, the Cero Corona mine in Peru, the Salares Norte in Chile and many more others. Furthermore, global mining giants Anglo-American and Rio Tinto have reported production slowdowns, all due to coronavirus related restrictions.
More Supply Concerns
The miners lock down isn’t the only reason for precious metals supply shortage. Coronavirus, has caused all European gold refineries to shut down due to government orders. With online shops out of stock and many of the passenger planes that move bullion grounded, physical gold is becoming harder to track down.
Right now, anyone looking to buy physical gold has an issue. The supply problem due to transport and processing capacity has been worsened by a surge in demand, as investors seek the safe heaven asset amid the global oncoming economic crisis.
Fewer people are selling gold back to dealers despite the excellent gold prices. Those who want to sell are finding difficult because of restrictions on travel and stocks.
Print More Money
The response by politicians and central banks to print huge amounts of currency, (money) in order to keep their economies out of trouble, will cause the intrinsic value of money to fall. That means consumer purchasing potential will be reduced. In other words, you will be buying less with your dollar, euro, pound etc.
The shortage in gold supply trigerred by miner’s shutdown, the European refineries closures, transportation problems and the never ending appetite for gold, will result in a price surge. All other precious metals, silver, platinum and palladium will follow too. In addition, the out of control money printing policy adopted by central banks ensures the precious metal price boost, is here to stay. If you are thinking of buying physical gold, now is the time, as there are reports of shortages in some coins, Krugerrands from South Africa and Maple leafs from Canada.