Gold and Silver Supply and Demand in 2021

gold and silbver supply and demand in 2021
gold bars

The supply and demand basics for precious metal markets got tossed into disarray this year, resulting in heightened volatility– initially on the drawback, then on the upside. Will the gold and silver supply and demand in 2021 will be such that will drive the prices of the two assets higher?

The Gold and Silver Supply and Demand in 2021

Although gold and silver will complete 2020 listed below their highs for the year, the gold price will end up with a yearly return of nearly 25%; and silver around 45%.

Can Precious Metal Investors Expect More Price Appreciation in 2021?

Yes, however,  there are some near-term threats to the favorable long-lasting supply/demand outlook.

Assuming financial conditions begin stabilizing next year, we would anticipate demand– specifically from commercial users– to increase. Mine production is expected to rebound also.

The mining market, like numerous others, faced extraordinary operational challenges in 2020 due to covid19 interruptions. Many mines around the world were required to scale back or suspend production in the first half of the year.

By the third quarter, mining output among significant producers started to ramp back up. In general, however, the top 20 gold miners will end up in 2021 with an approximate 5% drop in output.

The mining industry is issuing positive assistance for 2021. Whether it fully recuperates to pre-covid19 numbers remains to be seen.

While mine supply is likely to increase versus 2020, so is consumer demand for refined precious metals items such as fashion jewelry. The financial investment need for bullion will, as usual, be a wild card that could move the marketplace at the margins.

A related wild card is a covid19 virus. Epidemiologists hope something near herd resistance can be reached through mass vaccinations. However, the virus stays unforeseeable and might mutate into numerous new strains.

Virus dangers, political dangers, and inflation risks originating from the Federal Reserve‘s unrestrained printing of money and the European Central Bank’s money flooding are all potential drivers for safe-haven investment purchasing of precious metals.

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Silver’s 2020 Historic Low Could Turn to a Historic High in 2021

A massive rise of investment demand hit the bullion market this spring as panic gripped Wall Street and bargain hunters came out in numbers.

What occurred was a once-in-a-generation event. Some markets reached unprecedented extremes that defied centuries of recorded history.

For instance, crude oil futures traded deeply into the unfavorable area for many months. And silver got historically oversold versus gold, as the gold-silver ratio surged to as high as ever prior to seen 130:1.

Near the outright bottom of the market on March 17th, we wrote, “Never has silver been as low-cost to acquire in genuine terms as it is today. Never has the silver market traded so extremely detached from its fundamentals.”

That post recommended we had actually hit “peak fear”– out of which “a new uptrend in silver, and a corresponding constricting of the gold/silver ratio, can be expected to extend for many years.”

The very next day, March 18th, silver struck its outright low point for the year at $11.75/ per troy ounce. It went on to surge as much as nearly $30/per troy ounce in August.

A less remarkable 2021 may be the case. However, an international economic recovery and return to some form of normalcy would assist stimulate demand for commercial metals along with silver, platinum, and palladium.

A major trend set to accelerate in the months ahead is the move away from nonrenewable fuel sources and toward electrification.

Solar energy and battery technologies are experiencing explosive growth, and with that development comes a need for lots more copper, nickel, silver, and strategic metals. In fact, photovoltaic panels are among the fastest-growing sources of silver demand.

The “green” programs of the incoming Biden administration, paired with ongoing fiscal and monetary stimulus being into the economy, could have the unexpected repercussion of stimulating metals markets.

Demand can grow a lot more quickly than supply. Some analysts expect to see broadening supply deficits for silver and platinum in 2021.

According to Bloomberg Intelligence commodity strategist Mike McGlone, silver will head towards a new record high on improving principles and collecting technical strength.

Silver investors must anticipate some volatility and maybe some surprises on the way to an eventual brand-new high in dollar terms above $50 per troy ounce. It might take place next year. It might take a bit longer.

Having a long-lasting horizon is important to be able to participate in the full magnitude of a precious metals bull market.

A brand-new nominal high in silver will just be the very first major turning point in a booming market that might increase several times from here prior to being overvalued in genuine terms.

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Investing in Gold and Coins

investing in gold and coins
Gold Bar

Investing in gold and coins could be a headache for the new investor. There are many ways to invest in gold but not all of them are recommended. In this article, I will present to you all ways of gold investing and I will explain why investing in physical gold is the best way to invest in gold and coins.

In today’s economic environment, it is crucial for the investor to have part of his/her portfolio invested in gold. In these troubled times, there should not be an investment portfolio that does not include gold.

Investing in Gold and Coins

Gold in the Past and Gold Now

In the past, humans used gold as a way to facilitate trade and to accumulate and store wealth. In particular, there was a gold standard policy where early paper currencies were generally backed by gold with every printed bill corresponding to an amount of gold held in a vault. This approach to paper money lasted well into the 20th century.

Nowadays the gold standard policy has been replaced by fiat money therefore, the link between gold and paper money has long been broken. Nonetheless, investors and central banks, still consider the yellow metal a paramount investment tool. For example, central banks still own huge amounts of gold.

Who Buys Gold?

It is not only investors who buy gold. In fact, 50% of gold demand comes from jewelry. People love to wear gold.

Another 40% comes from direct physical investment in gold bullion, gold bars, and coins, including all collectible numismatic gold coins, medals, and so on. Physical gold investors include central banks and individual investors. The Chinese and Russian central banks are some of many central banks who invested in physical gold recently.

Gold is considered to be a safe haven asset. Every time there has been political and economical instability, gold has been called upon to save the day. When a paper currency loses its value and global inflation starts rising, gold offers security and acts as a safe haven for the investor.

Last but not least, industrial demand for gold is on the increase, especially in technology. Computers have gold and so do mobile phones. Gold is also used in electrical appliances, medicine, and so on.

Reasons to invest in gold

  • To protect and preserve wealth from unexpected events.
  • A hedge when the stock market is not expected to do well.
  • Portfolio diversification.
  • The weak dollar
  • Loss of confidence in central banks
  • Geopolitical uncertainty (Middle East, Brexit, ISIS, North Korea, Hong Kong.)
  • The US-China trade war.
  • The covid-19 caused recession
  • Low or negative interest rates
Black Monday1987 Iraq-Kuwait War1990 Dot Com Crash2001 Financial Crisis2008
Stock Market Decline -38.9 -22.5 -27% -34%
Gold Price Results +5% +7.5% +1% +5%
Gold Outperformed Stocks By Ratio 45:1 31:1 29:1 40:1

Investing in Physical Gold

Gold Bullion Bars

Gold bullion bars are a popular way to invest in gold. They are available in various sizes, 12kg, 1kg, 100gr, 50gr, 10gr, 1gr, etc. Gold bullion bars must be certified for weight and purity. A serial number is attached to all certified gold bars for security purposes. Bars’ purity must be 99.5% (24 karats) at least, whereas there is a number of manufacturers producing bars at 99.9% purity. (24 karats too)

Gold bars can be sold easily at any given time. However, it is best to own smaller size bars rather than the 12 kg or 400-ounce bar. Imagine, owning a 400-ounce bar and wanting to sell it. It’s not easy to find an investor willing to fork out $650,000 overnight. If you want to liquidate 10% of it you can’t exactly saw off 10% and sell it. The best option is to own smaller size bullion gold bars, as most gold investors do. They offer much better liquidity.

Gold Bullion Bars Pros

  • Direct exposure
  • Tangible ownership
  • High liquidity (small size bars)

Gold Bullion Bars Cons

  • Markups
  • Storage

Gold Coins

investing in gold and coins

Gold bullion coins is another popular way to invest in gold. Bullion coins are priced according to their fine weight plus a small premium, based on supply and demand, as opposed to numismatic gold coins, which are priced mainly by supply and demand, based on rarity and condition. If you are willing to invest strictly in gold, focus on widely circulated coins and leave the rare coins to collectors.

Bullion coins are mostly minted in smaller than one-ounce sizes, making them a more convenient way to invest in gold compared to larger bars. Reputable dealers can be found almost anywhere, even your local bank might be able to help you.

Gold Bullion Coins Pros

  • Direct exposure
  • Tangible ownership
  • High liquidity

Gold Bullion Coins Cons

  • Markups
  • Storage

Gold ETF’s and Mutual Funds

Gold exchange-traded funds, (ETF’s) is an interesting way to invest directly in gold. Each share of these specialized tools represents a fixed amount of gold, such as one-quarter of an ounce. These funds can be purchased or sold like shares, in any brokerage. This is a simple and cost-effective way to invest in gold, especially for small investors. ETF funds hold gold bullion as their own asset therefore, you will not have to actually store your own bullion.

Mutual funds hold gold bullion and actually own gold companies. They are part of their own investment portfolios. Investors should be aware, only a few mutual funds focus solely on gold investing. Most of them own a number of other commodities, which have nothing to do with gold.

Gold ETF’s and Mutual Funds Pros

  • Direct exposure
  • Highly liquid
  • A simple way to own gold
  • Low cost
  • Suited for small investors

Gold ETF’s and Mutual Funds Cons

  • Fees
  • No upside beyond gold price changes

Gold Jewelry

investing in gold and coins
Gold Jewelry

If you believe that, because you possess a lot of gold jewelry, you own a small fortune, then you are wrong. In jewel manufacturing the amount of gold is small. The purity of gold is measured in carats. The purest amount of gold you can find is 24 carats. However, in jewelry 14 or 18 carats is common. Keep in mind, that a low amount of gold in jewelry does not mean that it is not good enough, as gold in its purest form (24 carats) could bend or deform quite easily.

From an investor’s point of view, jewelry will not reward you with high profits, as retail markups are up to 400% of gold’s value. However, bargains can be found at auctions or estate sales. This way you avoid the retail markup.

Gold Jewelry Pros

  • Gold jewelry makes you feel good

Gold Jewelry Cons

  • Mediocre gold investment

Investing in Paper Gold

Gold Futures and Options

investing in gold and coins

 

Gold futures are contracts to buy or sell a particular amount of an item (gold) on a given date. Futures are traded in contracts, not shares, and represent a predetermined amount of gold. Some contracts settle in dollars, while other contracts may settle in gold. As a result, the investor has to be very careful. Futures are suited to the experienced investor.

Options are also another way to invest in gold. They give you the option to buy a futures contract, without having to pay the contract outright. Instead, you will have the option to buy the futures contract at a preset time frame and price. An option might reduce losses to the price paid but, a futures contract based on a margin might require more capital than originally invested, in case of losses mount quickly. Options are also suited to the experienced investor.

Gold Futures and Option Pros

  • Highly liquid
  • Small upfront capital investment to control a large quantity of gold
  • Low commissions

Gold Futures and Options

  • Indirect gold exposure
  • Time-limited contracts
  • Need to be a financial expert

Gold Mining Company Stocks

Investing in Gold and Coins
Gold Mine

Another way to own gold indirectly is to invest in gold mining and refining companies. You can do that by purchasing their shares. If gold’s price rises, so will its profits and the value of your shares will follow. Simple as that. However, you have to be thorough and diligent when selecting which gold mining company is worth investing in.

Mines are commercial enterprises, with problems such as flooding, subsidence, structural failure, mismanagement, negative publicity, nationalization, theft, and corruption. Such factors can lower the share value of mining companies.

Gold Mining Stocks Pros

  • Usually, track the gold price
  • You may get dividends

Gold Mining Stocks Cons

  • Indirect gold exposure
  • Mine operating risks
  • Exposure to other commodities

What is the Best Way to Invest in Gold?

As you can see there are many ways to invest in gold. They all have their advantages and disadvantages. If you want to invest small, then gold ETF’s could be best for you. You can also invest in gold coins and keep them safe somewhere at home.

For those who are willing to invest a large amount of money into gold, the best will be to invest in bullion bars and coins. Direct gold ownership is best because it has the ability to track gold’s performance. Most investors feel better when owing a tangible asset stored at an independent private facility.

If you are an aggressive and experienced investor with direct access to the markets, the gold futures and options market could be best for you. Beware though, that the risk is high, and so are the profits and losses.

Mining stocks are also an interesting way to invest in gold. Jewelry though isn’t worth considering at all.

Final words

Investing in gold offers several benefits including portfolio diversification and protection from unexpected events. A prudent investor always includes gold in his portfolio, usually around 10%.

There is no one size fits all investment however, you are now armed with the knowledge of how the industry works, and all you need to do now, is to consider all the available options and make the decision that’s right for you.

During these troubled times, ordinary folks have seen their life savings decimated. It is imperative for an investor to diversify his/her IRA investment in order to protect it. A Self Directed gold IRA investment could safeguard and protect your savings.

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Gold Breaks Over the 1600 Mark

Gold Breaks Over the 1600 Mark

Gold Breaks Over the 1600 Mark
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Over the last few days, we’ve all witnessed gold breaking over the $1600 mark as stocks suffer significant losses. There is a lot of nervousness in the market and people are putting gold and silver into their portfolios.

In the meantime, the US dollar is actually strengthening against both the Euro and the Japanese Yen. Investors see the dollar as a safe heaven trade, as people move into the dollar and into the US equity market. In this market condition, there is a headwind for precious metals especially gold.

The Coronavirus Threatens the Global Economy

Gold Breaks Over the 1600 MarkThe coronavirus has caused an unprecedented economical slowdown with investors rushing into gold to safeguard their investments. The market did not take seriously the effects of the coronavirus early and only recently came to terms with the massive threat it poses to the global economy.

A few days ago the Chinese finally admitted that their GDP is going to get hammered in the first quarter. The market now is taking this seriously. If this continues for very much longer it will have a devastating impact in global growth which will put all the central banks including the FED on full monetary easing policy and that reality is starting potentially to sink in.

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More Reasons for the Gold Rally

In addition, the coronavirus is just the tip of the iceberg. There are many reasons for the price of gold to hit the roof apart from the Wuhan virus.

  1. The overvalued stock market will have to correct itself sooner or later
  2. The upcoming recession that is been held up by the FED
  3. The war on cash with the Europeans continuing their negative interest rates policy
  4. The low bond yields
  5. The global debt bubble
  6. Middle East tensions in Syria escalade 

Conclusion

The metals, gold, and silver, continue to charge higher with parabolic moves and heavy volume. In my opinion, it will be healthy for gold to see a pullback, to allow some profit-taking if this is going to be a bull market. All the signs are there for the rally to continue, we are bullish on gold and silver.

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Gold Gets Over the $1500 Mark

Gold Gets Over the $1500 Mark

Gold Gets Over the $1500 Mark
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Today the yellow metal jumped over the $1500 mark. This is a six-year high, as investors are rushing to buy gold and government bonds, as fears of a global recession due to the trade standoff between United States and China grow more real.

Investors Sell Stocks

To top that, investors sold stocks. The Dow Jones fell by 589 points during the first minutes of today’s trading and stocks continued a weekly slide, triggered by fears of a trade war between the two superpowers.

Central banks around the world are reducing interest rates, in a bid to lessen the pain from tariff battle. The central banks of India, New Zealand and Thailand, all dropped interest rates yesterday.

Economic Trouble

It is obvious, investors and central banks are preparing for economic trouble. My opinion is that the conflict between the US and China, will take a long time to resolve. The longer the trade uncertainty, the greater the risk of something bad happening.

As a result, investors will be running to put their money into gold, which tends to do well during times of uncertainty. This will definitely be a safe heaven bid for gold.

Bond Yields Fall

An unexpected rush of money into bonds is another sign of investor anxiety.

With investors rushing to the bond market, the ten-year treasury yield took a nose dive on Wednesday, dropping below 1,63%. This market phenomenon is also the case in Europe. Germany’s ten-year bond rates have reached a remarkable -0,6%. That means, investors who usually get interest, are instead paying holders of German bonds to park their money.

The rush to buy bonds, has lifted the amount of negative yielding bonds around the world to a record 15 trillion, according to Bloomberg.

Conclusion

Gold has set a new target and that is the $1600 mark per troy ounce. Troubletimes are ahead, the China and the US trade standoff, the nervous investors. Moreover, the central banks are lowering interest rates, and the stock market is overrated in my opinion. However, it is possible for a correction to take place as gold has seen a rapid increase in its value.

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-Now Is A Good Time To Buy Gold

-Now Is A Good Time To Buy Gold

-Now Is A Good Time To Buy Gold

Although gold prices are holding five months highs, many investors are wondering if now is a good time to buy gold. I expect prices to continue to move higher and eventually retest last years highs.

Gold is up 12% since the beginning of the year and my opinion is that prices, still have the room to move higher, as ongoing global uncertainty supports the market.

There is a strong undercurrent of uncertainty. A crisis may dissipate quickly, but the general atmosphere of uncertainty will remain with us for a long time.

In particular, there is growing uncertainty in Turkey with the result of the referendum dividing the country further. At the same time the UK prime minister Ms Theresa May announced elections in a year packed with elections, Germany and France are also having elections and their result could change everything in the EU as euroscepticism is growing.

Although, gold is 12% higher since the beginning of the year, many fund managers, who after years of complacency are now rebuilding strategic allocations in gold to act as insurance policy.

I believe, the rally we have seen so far, is more than just safe heaven buying. It is all part of a much bigger pattern. Gold should reach last year’s high of around $1375, with the possibility of reaching $1400 per troy ounce. Of course, it will take some time to break through the $1300 psychological barrier.

It will take some time to get there, but the longer it takes, the more sustainable the gains will be. I am happy with the progress the precious metal is making and I repeat this is a still a good time to buy gold.

Something else to note, is that gold has not only reached nearly five month highs, gold has also managed to see higher lows during key events: Federal Reserve monetary policy meetings.

Nevertheless, I will not be surprise to see markets sell off a bit, as investors will try to pocket their profits ahead of the June central bank meeting. This is not to worry, as markets expectations are falling ahead of the meeting, pricing is only a 42,3% chance of a rate hike. Last weeks expectations were well over 50%.

Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.

-What Is Gold Investment?

What is gold investment?Of all precious metals, gold has been the most popular as an investment.  Although the gold market is also subject to speculation and volatility as are other markets, investors invest in gold, to diversify and reduce risk, especially through the use of futures, contracts, and derivatives due to the fact that gold has shown to be a hedge against inflation and economic uncertainty.

What is Gold Investment?

Every time there was political and economical instability, gold was called upon to save the day, and it actually did that.  When paper currency losses its value and global inflation starts rising, gold offers security and acts as a safe haven for investors.

Common people invest in gold, investors invest in gold, banks invest in gold, governments invest in gold, and even countries invest in gold.  Recently countries such as Russia and China, are buying large quantities of precious metals.

People invest in gold for their own reasons.  Some do it to preserve their own wealth, there are others who do it to actually increase their wealth and many managed it in the past, with much success.

Political turmoil and geopolitical uncertainty are something the markets hate.  The Trump election victory, the negotiations for Brexit, the upcoming elections in France, and Germany the political turmoil in Turkey, and the instability in northern Africa and the Middle East make gold an attractive investment.

At the same time inflation is starting to rise and gold loves that.  In addition, the dollar is still weak, the stock market is overrated and the US debt crisis is out of control.

Supply may also be an issue because gold is not inexhaustible.  Many mines close, but the new mines that open are always fewer.  On the other hand, industrial demand for gold is on the increase, especially in technology, computers have gold, and so are mobile phones and many electrical appliances.

Due to all reasons analyzed above, gold as an investment is at its best now.  The advantages are too many and are overwhelming.  This, of course, is my personal opinion.

I hope my what is gold investment post has got you covered. If you still have more questions let me know in the comment section.

 

-What Is The Meaning Of The Gold Standard

-What Is The Meaning Of The Gold Standard

-What Is The Meaning Of The Gold Standard

Many economists talk about the gold standard, but very few of us know what is the meaning of the gold standard.  The gold standard is a monetary system where the country’s paper money or currency, is directly linked to gold.  With the gold standard, the country agrees to exchange money into a fixed amount of gold.  That country sets a fixed price for gold, it buys and sells gold at that price.  The value of the currency is used to determine the price of gold.  The amount of gold the country possess must be equal to the amount of currency circulating.

England was the first to adopt the gold standard and that was back in 1717.  The United States followed and by 1880, most countries had adopted the gold standard.  The gold standard continued to be part of the world’s monetary system with a small break between the first world war, the great depression and the second world war.  It took President Nixon in August 1971 to abolish the rule of the gold standard.

The truth of the matter is people never trusted paper money or even coins.  From the ancient times, coins had to be made out of gold, you see gold was the value behind the coin.  The first gold coins go back to Asia Minor 3000 years ago.

Today the world operates on fiat currency which is a currency used because the government says so, or because fiat currency must be accepted as a means of payment.

Over the years there has been many voices calling for governments to go back  to gold standard.  Lately Alan Greenspan the former Federal Reserve Chairman. urges the US government to reform its monetary policy and go back to gold standard.  All I have to say is that I agree with him., as a major financial asset and also by investors in order to preserve their wealth.

Nowadays gold is still used by governments and banks, as a major financial asset. Banks also use it as an insurance for loans made to government.  Investors too use gold, to preserve their wealth.