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 COVID-19 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 the COVID-19 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. Silver got historically oversold versus gold, as the gold-silver ratio surged to as high as ever prior to being seen at 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 in stimulating 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 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.

 

 

Palladium Comes Back

palladium comes back

Palladium prices increased on Monday, settling within the $2,200 cost range, as the US dollar continued to drop for the fourth straight day. It looks like palladium comes back.

Palladium Comes Back

Palladium attracted assistance just recently by capitalists’ hopes about encouraging coronavirus injections, which will most certainly stop any more lockdowns and also support the recuperation of economic activity to pre-pandemic levels.

Amidst many countries’ measures to relieve the coronavirus lockdowns, the global supply is decreasing of the metal that is greatly used in the production of cars and truck parts as well as parts that decrease pollutant emissions.

The buck index fell against a basket of money by 0.1% to 92.9 points since 13:23 GMT, after hitting a high of 93.1 and a reduction of 92.8.

Palladium September futures dropped 3.2% to $2,212.9 an ounce as of 13:25 GMT, after hitting a high of $2,233 and a reduction of $2,144.4.

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 which is one of the reasons why gold breaks over the 1600 mark, and people are putting gold and silver into their portfolios.

Why Gold Breaks Over the 1600 Mark

In the meantime, the US dollar is actually strengthening against both the Euro and the Japanese Yen. Investors see the dollar as a safe haven 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 economic 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 on 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.

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.

-Gold And Dollar Prices Fall Simultaneously

-Gold And Dollar Prices Fall Simultaneously

Written by Christopher Aaron

The US dollar continues to show us signs of a significant long-term reversal lower in the making. As first proposed in January 2017, the dollar has now hit our initial lower target of 95.5 on the dollar index:

USD US Dollar Index

This target was derived from a measurement of the amplitude (4) of the false breakout above the 99.5 resistance zone (black lines) subtracted from this same level following the breakdown. It represents a liquidation of long contracts by those who purchased the US dollar on the assumption that Trump’s policies would overshadow any money printing by the Federal Reserve after the election.

We were on alert for the US dollar reversal starting in January 2017, as the currency continued to make lower lows after a major multi-year breakout. This was a warning sign – such immediate weakness should not occur in a strong breakout scenario.

Again, as of this week, the dollar has now hit our first target lower, at 95.5 on the dollar index.

What now?

First, please note that initial targets are just that: the first stopping point based on a technical measurement. We must use other forms of analysis to gauge the probability for subsequent movements.

Prepare For Dollar Bulls To Show Up

Dollar bulls are going to begin buying in the currency markets near 95.5. They are going to try to paint this decline as simply a higher-low in a series of such higher-lows that have formed over the past nine years. They are going to try to buy the dollar up above the recent false breakout at 103.5.

We suspect they will fail, as sellers are clearly present above 99.5 on the index. False breakouts at multi-decade highs tend to represent long-term reversal patterns.

While the price action for the US dollar has been weak over the past 3-4 months, the dollar has begun accelerating in downward momentum over the past week. There is no sign of an imminent bottom on the dollar chart, even though our initial target has been met.

Based on the deterioration in momentum, it is likely that the dollar is headed for its 2.5-year support zone between 92-93 as a next stopping point before any meaningful rally.

Visualizing a further drop into the support zone on the long-term chart:

-Gold And Dollar Prices Fall Simultaneously

Although a significant bounce should be expected to occur as the 92-93 support is reached, even a test of this region is a bearish long-term signal, as it opens the door to a possible massive head and shoulders top on any bounce, illustrated by the green arrows above.

Our best assessment is that the dollar will fail to hold the lower range of the support zone at 92 after a meaningful bounce. At this point, there will be little in the way of support for the dollar aside from the long-term rising trendline (magenta color), which comes in at 88. The target on a failure of support at 92 will become 80.5, equal to the amplitude of the failed advance (11.5) above the support zone, subtracted from the same support zone.

US Dollar/Gold Declining Simultaneously

-Gold And Dollar Prices Fall Simultaneously

Unfortunately for gold, we are living through one of those anomalous time periods in which the US dollar and precious metals are positively correlated – but to the downside.

Throughout history, gold tends to have its strongest moves when the US dollar is losing value, as gold receives bids from those looking to protect their savings against a decline in the world’s reserve currency.

However, as we can see at right, especially since the Federal Reserve meeting in mid-June, both the US dollar and gold have moved in the same direction: lower.

This is largely a market psychology phenomenon. Presently, the Fed has the markets fully convinced that it is engaging in just the right amount of money-printing to keep inflation modest but to keep economic growth strong. As a result, investors are choosing to protect themselves from inflation through the rising stock market, but are seeing little need for “safe- havens”, i.e. gold and the US dollar.

Respecting The Market

This is where our outlook may be different from most analysts in the precious metals community.

We of course know that gold and the US dollar are not both equal as per safe-havens. One is a historic store of wealth that has lasted for over 5,000 years, while the other is a fiat currency which has already lost 97% of its value in the past 100 years.

However – we also respect that market reactions are primarily determined by the psychology of its participants at a given time.

We agree that the market – in viewing both gold and the dollar as safe havens to be sold simultaneously – is acting irrationally.

However, the market can stay irrational longer than many expect.

We have no desire to be right on certain fundamentals, but to get “trampled” by the market moving opposite to us.

To do so would be akin to simply ignoring an irrational mob of people as it approaches. Perhaps the people have no logical reason for their behavior – but if we ignore them as they rush toward us, we will get hurt nonetheless.

Large market players can sell gold simply because they trust that the Fed has everything under control.

Something must change in the market psychology to alter this belief.

Gold Not Acting As Safe-Haven?

-Gold And Dollar Prices Fall Simultaneously

The last two days were especially noticeable in that gold failed to receive a bid, even despite weakness in both the US dollar and the broad stock market. At right we plot gold, the dollar, and the S&P 500 since Thursday:

There is an old investment adage which says: “If a market fails to move higher when it should, it is showing internal weakness.” (The implication is that absolute price weakness should be the next to manifest.)

This is the only way we can interpret the price action for gold recently. It is failing to attract buying on either US dollar weakness or stock market weakness.

If gold cannot move higher when traditionally-inverse markets are showing weakness, then when will it?

This is the question gold investors must ask themselves.

Short-Term vs. Long-Term

We are not bearish over the long-term. Irrational behavior can reverse just as quickly as it began.

But something must change as per market psychology to shake the precious metals out of their malaise. A trigger must present itself. We cannot say what that trigger will be yet – but we will absolutely see it on the charts when it occurs.

For now, subscribers continue to hold puts as protection in case of a more serious decline in the metals during the second half of the year.