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LAWRIE WILLIAMS: Gold retreats – but no change there.

After surging to close to $1,800 an ounce earlier in the week, the gold price was knocked back on both European and North American markets to the $1,770s and 80s again.  However, gold investors should probably be used to such market behaviour.  In the past, whenever gold seemed to approach a key psychological price level, profit takers climbed in – or some would say the market manipulators did so – and the gold price consolidated at a slightly lower level before making another run.  Oftentimes it has to take several runs to break through, but when it does so it tends to slice through the psychological barrier as though it never existed in the first place.

We had predicted that gold would build a base, and consolidate in the $1,770s, so the rapid move up to just short of $1,800 did take us slightly by surprise, but if gold is indeed building a base in the $1,770s, or even perhaps in the $1,780s, before moving on, that should be seen as a positive for the yellow metal.  Data seems to be advancing in gold’s favour with the continuation for now of ultra-low interest rates, despite the threat of rising inflation, together with so far anecdotal evidence of a big pick-up in gold demand in the world’s two largest consuming nations – China and India.  These figures still need to be confirmed when official data is released, though.

The U.S. Fed continues to set the global price pattern and as long as this remains the case we can perhaps ignore the impact for now of some of the other global data.  However,  by almost all accounts, demand for gold and silver at small investor level in North America , and globally, remains elevated with premiums soaring on coins and small bars as a result.  As we have pointed out in previous posts, the exodus of gold from the big gold-based ETFs seems to be faltering too.  In combination, this could overwhelm the Fed’s apparent policy, which seems to be keeping gold’s upwards path well in check.  If this should happen, which does seem to be on the cards, we will see the next price breakout and we’ll be in a whole new ballgame!

Thus we anticipate a breakout above $1,800 for gold perhaps sooner rather than later.  The metal will no doubt encounter other ‘sticking points’ as the price progresses but we now seem like we could be back on track to $2,000 gold again this year should these predictions come about.  There’s plenty of time left for this to happen. 

As to the other precious metals.  Silver, despite its primary usage being industrial, still seems to ride on gold’s coattails.  The Gold:Silver ratio (GSR) has risen a little over the past few weeks but if the metal price follows past patterns it may come back down a small amount indicating additional leverage, but silver bullion price premiums seem to be particularly high at the moment, particularly on silver coins and small bars, which can certainly cancel out any price advantage that may be occurring.  So saying, gold premiums on coins, wafers and small bars are also riding high, although not nearly as high as for silver.

Platinum group metals – pgms – platinum and palladium should, in reality be categorised in a different market sector.  They are both nowadays almost wholly industrial metals primarily dependent, particularly in the case of palladium, on the strength, or otherwise, of the auto sales market.  Both metals appear to be in a supply deficit for the moment which will have a continuing positive effect on their price patterns, but they would also appear to be most dependent on global economic recovery, and the auto manufacturing industry in particular.  Long term, palladium looks to be particularly vulnerable to the inexorable growth in the take up of electric-powered light vehicles but may still have a few years of strong demand ahead.

23 Apr 2021 | Categories: Gold

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