Metals Weekly Round-Up: Gold Slumps to 6 Month Low

After reaching a 21 day high last week, gold was down this session, falling to a six month low. Holding above US$1,725 per ounce, the discount is expected to entice buyers of the yellow metal.

Rising values for the US dollar and US Treasury yields have added headwinds to gold for most of March, preventing any sustainable gains for the metal. Silver has also pulled back from the pressure, while the rest of the precious metals have been able to register small gains.

Dipping as low as US$1,722 this week, gold’s decline also correlates to a decrease in holdings for exchange-traded funds, which shed 84.7 tonnes in February.

Gold breached the US$2,000 level in August 2020, and this year’s lower gold price is likely to lead to high levels of investment demand in 2021. However, as CPM Group’s Rohit Savant explained during a recent webinar, gold demand will be lower than the amount seen in 2020.

“This year, gold investment demand is expected to be slightly lower than levels observed in 2020,” he said. “Nonetheless, investment demand is expected to be very high by historical standards. We do expect that investors will be large net buyers of gold during 2021.”

Savant went on to note that CPM Group expects investors to be savvy buyers of the yellow metal.

“(Investors) are not expected to chase the price of gold higher as they did last year,” said Savant. “Instead, we think that investors will increase their purchases whenever we see softness in prices.”

Gold was valued at US$1,728.98 as of 10:41 a.m. EST on Friday (March 26).

Silver also faced downward pressure this week, with its price falling to a year-to-date low of US$24.53 per ounce. The Thursday (March 25) dip in value was short-lived, as the metal reached US$25 to end the day.

After the morning bell on Friday, silver slid back to the US$24.90 range. As of 10:45 a.m. EST that day, silver was moving for US$24.93.

Supply issues at Russian company Norilsk Nickel (MCX:GMKN) continue to benefit platinum and palladium prices. Both metals edged higher this week, with platinum adding as much 1.9 percent from its Monday (March 22) value of US$1,158 per ounce.

Palladium made a more modest gain of 0.8 percent, but the metal is now trading in close proximity to its all-time high of US$2,614 per ounce, reached in February 2020.

At 10:51 a.m. EST on Friday, platinum was priced at US$1,167 and palladium was trading for US$2,562.

The base metals sector faced declines across the board this session. Concern around spreading COVID-19 variants and the potential impact they pose on economic recovery contributed to the negativity.

With prices falling, there has been some value buying, which could spur on higher prices, said Metal Bulletin. “Once again weakness in base metals prices has run into dip-buying, suggesting underlying sentiment remains bullish,” reads a Friday note from the outlet.

In terms of year-to-date performance, the sector has registered a positive move, which is promising.

“The underlying themes remain bullish and while prices have already performed surprisingly well over the past 12 months, suggesting a lot of the recovery news may be in the prices, dips are still finding support,” the report continues. “This is a sign of robustness.”

Copper prices shed 3.4 percent by Thursday after starting the five day period at US$9,097 per tonne.

As a Roskill Q1 sector report states, the red metal could experience a price bump in Q2 following mine disruptions in Q1 and an expected uptick in global demand.

Friday morning saw copper selling for US$8,781.

Zinc values also pulled back, with the metal losing just over US$100 from its Monday price of US$2,860 per tonne. The metal ended the week holding at the US$2,759 level.

Nickel marked a monthly high of US$16,526 per tonne on Tuesday (March 23) before a reversal forced it lower. Holding just below US$16,000, nickel could see prices rise due to Norilsk Nickel’s production woes.

A recent announcement from Glencore (LSE:GLEN,OTC Pink:GLCNF) could also motivate prices. The company has temporarily reduced production at its Murrin-Murrin nickel and cobalt plant in Western Australia after it was impacted by the malfunction of acid plant fans; they are now being repaired.

Glencore has not indicated how much production will be reduced as a result of the issue. Nickel was valued at US$15,984 early on Friday.

Lead also ended the five day session lower. Friday saw the metal trading for US$1,907 per tonne.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.