Gold Regains $1800, Silver $19 on Covid Recovery Spook

Gold Regains $1800, Silver Price Holds $19 as V, U or W-Shaped Covid Recovery Spooks TSLA and ChiNext

Bullion.Directory precious metals analysis 14 July, 2020
By Adrian Ash
Head of Research at Bullion Vault

GOLD and SILVER prices both bounced after an overnight sell-off from multi-year highs against the US Dollar in London trade Tuesday, rallying as commodity prices fell with global stock markets against a backdrop of fading ‘V-shaped’ economic hopes amid the re-imposition of Covid-19 lockdown orders on millions of people worldwide.

Recovering the $1800 and $19 level respectively this morning, gold and silver showed gains of 18.6% and 6.4% in US Dollar terms for 2020 so far.

That compares with a drop of 1/3rd in US crude oil prices, a 6.6% fall for aluminum, and a 4.5% drop for global equities on the MSCI World Index when priced in US Dollars.

Copper in contrast has risen 4.9%, while New York’s tech-heavy Nasdaq 100 share index shows 21.4% gains.

China’s Shanghai & Shenzhen stock market has meantime surged 26.1% in the last 6 weeks alone, with the CSI300 touching its highest level since June 2015 as the Communist Party dictatorship urged its citizens to buy shares.

“Overseas investors sold a record $2.5 billion of China stocks Tuesday,” says Bloomberg, reporting that the tech-stock ChiNext Index “plunged as much as 3.5%…before paring the decline to 1.1% at the close” after rising by 3/5ths so far in 2020.

Some 40,000 customers of US day-trading app Robinhood meantime bought stock in Tesla inside 4 hours last night, the news-wire says separately, seizing on the steepest pullback in TSLA for more than 3 weeks after the electric-vehicle manufacturer gained over 280% from the start of the year.

“The [precious] metals opened this morning to some continued liquidation,” says the Asian trading note from Swiss refiners and finance group MKS Pamp, “[but] volumes have been light and moves have been muted.”

Gold bullion traded in London then edged back above $1800 per Troy ounce, the 9-year high reached last week.

Silver prices meantime rallied back above $19 per ounce – the 4-year high breached Monday – after losing 50 cents from yesterday’s top.

“Investors have embraced gold in 2020 as a key portfolio hedging strategy,” says a new mid-year analysis from the mining industry’s World Gold Council, predicting that “regardless” of the shape of the post-Covid recovery – now “shifting” from V-shaped to U-shaped or perhaps “setbacks from additional waves of infections, W-shaped” – “the pandemic will likely have a lasting effect on asset allocation…[and] reinforce the role of gold as a strategic asset.”

One month after it re-opened, Hong Kong Disneyland today said it’s shutting again after the formerly ‘autonomous’ region of China reported 100 new cases in just 3 days.

Florida’s Disney World remains open, in contrast, despite the US state reporting 37,000 cases over three days.

With the UK’s latest official GDP estimate coming in far weaker than analysts expected, the Government of Boris Johnson today said wearing a face-mask will now be mandatory in England’s shops from a week-Friday – the first of two major policy U-turns on Tuesday morning, with telecoms firms ordered to remove all Huawei technology from their 5G networks by 2027.

“The move will please Washington but upset Beijing,” said BBC News of the move.

Back in precious-metals investment, both the giant GLD gold ETF and its smaller US-listed competitor the IAU expanded yet again on Monday, swelling to fresh 7-year and all-time record sizes respectively.

The giant SLV silver trust in contrast saw net liquidation of 0.3% as the ETF peaked at $18.08 per share, its highest price since October 2016.

With that marginal profit-taking by shareholders, the SLV ended Monday needing 52 fewer tonnes of bullion backing, the heaviest 1-day outflow since 22 May, when silver dipped below its pre-Covid Crash price of $17 per ounce after recovering that level 4 sessions earlier.

That outflow took the SLV’s total bullion backing down through the 16,000-tonne mark breached for the first time ever on Friday.

But it still leaves the SLV silver trust 41.8% larger from New Year’s Eve and equal to very nearly 2/3rds of the global silver mine output projected for this year by analysts Metals Focus in the World Silver Survey 2020 published by the Washington-based Silver Institute.

This article was originally published here

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