Example of the 'BullionVault Weekly Update'

BullionVault Weekly Update

 

Another gold-price record to start Platinum Week...

 

Monday, 15 May 2023

 

In the markets today...

 

For up-to-the-minute live spot gold and silver prices use the BullionVault chart

 

Gold $2000 vs. Platinum Week

from Adrian Ash

Director of Research, BullionVault

 

PLATINUM WEEK kicks off today in London.

 

Or rather, it began last Thursday for that select group of analysts invited to SFA's pre-match events over the weekend...

 

...and who, therefore, sadly couldn't make BullionVault's private friends and family tour of the British Museum's wonderful exhibition Luxury and power: Persia to Greece.

 

(If you're in London this spring, I can't recommend it enough. Nor could most reviews so far. You could even win a pair of tickets here, joining our latest winners Stuart from Clacton, Ian from Cambridge and Anthony from London in seeing this blockbuster show for free.)
 

For this year's Platinum Week, our friends at the World Platinum Investment Council were first out of the traps this morning with their new data and forecasts...

 

...predicting a much deeper deficit of supply versus demand than they had previously advised thanks to rising investment demand and a new record for industrial use.

 
Global platinum market supply/demand balance. Source: WPIC

WPIC will be followed later today by refining and technology specialists Johnson Matthey, plus the launch party for independent analysts Metals Focus' own report this afternoon.

 

You'll find all the top-line news, numbers and predictions crunched and shared on GoldNews later this week, as soon as we can find time to read the deluge of data in between running to the seminars and events which the platinum-group metals enjoy every May in London.

 

Because so many people gather together for Platinum Week, it has been hijacked somewhat by the wider precious-metals industry.

 

And the big question everyone's asking right now...besides how silver can dump $2 in one week when everyone thinks 2023 will see a big deficit of supply vs. demand...is whether gold can hold and push above $2000 at the 4th time of asking.

 
hart of US Dollar gold price, last 5 years. Source: BullionVault

As we note in the latest edition of the London Bullion Market Association's Alchemist magazine, it doesn't always take a crisis to push gold prices higher.

 

But it sure does help.

 

Breaching $2000 per ounce has so far needed a global pandemic, Europe's most awful war since WW2, and a crash in the US banking sector that's already hit more deposits by value than the financial crisis did 15 years ago.

 

Now throw in a global real estate slump, inflation which just won't quit, sabre-rattling over Taiwan, plus Washington's latest debt ceiling stand-off, and could it be fourth time lucky for gold to push and hold above that $2000 mark?


The UK gold price in Pounds per ounce has already risen 5% from its own £1580 triple-top, and May began with new all-time highs in Yuan, Yen, Rupees and most other currencies. Little wonder, therefore, that it's becoming increasingly hard to find any bears.

Outside the bug-o-sphere and the precious metals market, however, gold has risen to these new record levels both quietly and despite the stiffest challenge from rising interest rates since the US Fed under Paul Volcker burst the late 1970s' bubble.

 

Even as US borrowing costs rose by four whole percentage points last year, gold across 2022 set a new annual record, averaging $1800 per ounce. The Powell Fed has kept raising rates in 2023, yet gold this March set a new quarter-end and month-end record at $1979. Gold then set a fresh month-average record in April, topping $2000 for the first time ever across the month’s LBMA benchmark auctions...

 

...and it's now set yet another record to kick off Platinum Week, extending its 7-session run of trading above the $2000 level at both the AM and PM benchmark auction in London, suggesting solid physical-market appetite at that level and higher.

 

So far, so hot, but so what? Gold is failing to make front-page headlines, a stark difference from its financial-crisis peak of summer 2011. Weirder still, it's lacking a mania among the usual suspects too.

 

Yes, speculative betting in Comex gold futures and options has risen...
hart of Managed Money net speculation ($bn) in Comex gold futures and options. Source: BullionVault

...but the net long position among money managers remains 1/3rd below the frenzied levels of late-2019 or the pre-Covid peak of February 2020 by value, even though gold prices are now $350 per ounce higher.

 

Coin and small-bar offtake has also risen from its doldrums of 2019 and 2020, but it's running far below the 2011 peak, never mind the bonanza of the 2013 price crash. And gold-backed ETFs are meantime tiptoeing towards a third year of contraction, shrinking in both 2021 and 2022 and seeing another small outflow in 2023 to date (albeit led by European profit-taking as US funds finally start to expand amid the banking scare and debt-ceiling crisis). 
 

So, with the real, retail and hot money out of the frame...

 

...and with global jewellery demand starting to struggle at prices jumping 25% in six months...

 

...who does that leave as today's unusual suspects?

 

Central banks.

 

Led by the emerging-market gold-buying giants of China and Turkey, many of today's buyers are sovereign states suffering or fearing US-EU sanctions according to analysis in this paper for the IMF by economic historian Barry Eichengreen among others earlier this year. This demand is also showing in the London vault holdings data updated each month by the LBMA and the Bank of England.

 

Or rather, it's showing by its absence.
Chart of London Good Delivery gold holdings. Source: BullionVault

Since Russia began its invasion of Ukraine, central-bank gold holdings worldwide have risen by 580 tonnes on the reported data...

 

...and by twice as much on Metals Focus' estimates for the World Gold Council.

 

But custody holdings at the Bank of England...historically the official sector's global storage and trading hub...have fallen by 520 tonnes, with London's commercial vault holdings also down 191 tonnes in the year-to-March. The city's combined total then rallied by less than 5 tonnes on April's strong month-average price rise of 4.5%.


It's a similar story in New York at the Federal Reserve. Marginally more popular but much less active than London, it reports zero change in custody gold holdings over the 12 months to April...


...still down almost 15% by weight from the levels of 2 decades ago.

 

Today's big bulls, in other words, are buying gold to hoard at home rather than holding it ready for sale or lending in the world's central gold marketplaces...and they have been shunning the USA central bank's warm embrace since the Iraq War.

 

That highlights an ongoing and now fast-growing mistrust between "the West and the rest" in which gold remains politically neutral only in certain circumstances.

 

As for price versus value, topping gold's 2011 or 2020 highs in real US Dollar terms would now need nominal prices north of $2400...and New Year 1980's peak would equate to $3200 against the US Consumer Price Index.

 

Gold still has a long way to go, in short. To get there and to push higher still, it now offers a lot of room yet for the real, retail and hot money to get involved, too.

Adrian Ash

Director of Research, BullionVault

 

 

Key data and market events since our last Update and for the week ahead:
  • New Zealand economic activity shrank again in April (NZ Business PMI), inflation expectations retreating hard to 2.8% per year (RBNZ survey)...
  • Australia drop in retail sales accelerated across Jan-March, consumer inflation expectations now rising to 5.0% per year...
  • Japan overall household spending reversed Feb's rise in March, down 1.9% per year...
  • China exports jumped, imports fell last month, almost doubling the trade surplus from April last year. Cost of living meantime fell from March, annual inflation slowed to just 0.1% as producer prices deflation accelerated to 3.6% per year...
  • India industrial + manufacturing output growth both slowed hard in March, consumer-price inflation slowed almost 1 point in April to 4.7% per year...
  • Eurozone Germany's inflation confirmed at 7.2% in April, slowest in 7 months. Investor sentiment sinking in May (Sentix)...
  • United Kingdom GDP fell 0.3% in March (ONS) despite rally in industrial output, but Q1 still showed 0.2% annual rise as a whole. April then saw 0.1% growth (NIESR)...
  • United States banks tightened lending standards in Q1 (Fed's Loan Officers survey), inflation slowed 0.1 points to 4.9% per year in April, but core (excluding volatile food + fuel) only slowed to 5.5% as federal tax receipts sank from the usual spring bump. New jobless benefit claims rising, consumer confidence falling (Michigan)...
  • Canada number of new building permits issued jumped in March, up 11% from Feb's 5.5% rise...
  • Central-bank watch 4 changes in 9 decisions as UK and North Macedonia, both with official inflation near 13% per year, raised 0.25 to 4.50% and 5.75% respectively but Georgia trimmed half-point to 10.5% (inflation 2.7%) and Moldova slashed 4 whole points to 10.0% (inflation slowing hard to 18.1%)...
  • Central banks ahead 6 decisions, no Western majors. Thurs brings Philippines, Egypt and silver No.1 miner Mexico...
  • So far Monday New Zealand services sector activity fell in April, first drop since Feb 2022; Japan producer price inflation slowed hard last month, machine-tool orders continue to drop vs. last year; Eurozone industrial output sank 4.1% in March from Feb but GDP forecast raised by European Commission to 1.1% in 2023 and then 1.6% for next year (with inflation also revised higher to 5.8% and 2.8%); Germany wholesale prices didn't retreat in April quite as much as analysts forecast...
  • Later today New York manufacturing activity (Empire State index); Canada new housing starts...
  • Tuesday China retail sales, industrial output, fixed-asset investment; Eurozone GDP in Q1, plus jobs data; Italy inflation, Germany economic sentiment (ZEW); UK jobs + wages; US retail sales, industrial output, housing market activity (NAHB); Canada consumer-price inflation...
  • Wednesday Australia wages in Q1; Japan GDP from Q1 and March industrial output; China house prices; Eurozone inflation; US new building permits, housing starts...
  • Thursday New Zealand Government budget plans (already vowing savings but also cyclone-hit recovery funds); Australia jobs + wages data; Japan imports/exports; half of Europe shut for Ascension Day; latest US weekly jobless benefit claims, plus sales of existing homes in April; Canada new house prices plus central bank's financial stability review...
  • Friday New Zealand trade deficit + credit-card spending; Japan consumer-price inflation (core forecast to slow to 3.4%); Germany producer-price inflation (steep plunge to 1.5% expected); Canada retail sales...

 

PLEASE NOTE: This email is published to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events - and must be verified elsewhere - should you choose to act on it.