The precious and base metals sectors continue to face headwinds as the economic impact of COVID-19 on Q1 begins to be quantified.
The economic instability resulting from COVID-19-related country lockdowns, project closures and supply chain disruptions continues to infuse volatility into the equity markets.
Gold slipped to US$1,576 per ounce early in the week but is on track to end the period above US$1,600 as a strong US dollar is challenged by job losses and economic recession.
According to data released today, the US economy shed 701,000 jobs in March, the largest one month decline since March 2009.
“It’s still a tug-of-war situation for gold between the virus and the equity markets; when equity markets further sell off, there is request for margin calls again,” Xiao Fu, an analyst at Bank of China International, told Reuters.
“So, it’s very unclear if there will be an upward trend, and gold is expected to be range-bound in the near-term.”
As Q1 data begins to come out, concern that massive stimulus and emergency bail outs won’t be enough to support the economy could add to gold’s safe haven status.
“I think as we come out of this liquidity phase into the insolvency phase, as people recognize the scale of increases in the balance sheet and the money supply that have to be made to come out of the other end of this — I’m expecting much larger gold prices to be the ultimate effect of this deleveraging,” said Eric Coffin, editor of Hard Rock Analyst during a webinar.
An ounce of gold was trading for US$1,619.19 as of 12:04 p.m. EDT.
Silver has shown moderate strength this week after spending the month of March steadily falling. As of April 1, the white metal was trading above US$14 an ounce.
Before the bell this morning, silver hit its highest price for the week US$14.55, however the metal is still trading significantly lower than its quarterly high, US$18.60 on February 21.
“We expect prices to recover from current lows, driven by bargain hunting, before moving higher later in the year once the market hysteria calms down and safe haven demand kicks in, taking the silver price to an annual average of US$15.75/oz this year, down by 3 percent year-on-year,” Cameron Alexander of Refinitiv said in a research note.
As of 12:05 p.m. EDT, silver was selling for US$14.23.
Similar to the silver story, platinum spent March in a downward slide, slipping from US$903 per ounce at the beginning of the month to US$710 at the end of the 30-day period.
The price began to exhibit strength following the implementation of a three-week country-wide lockdown in South Africa.
The African nation closed its borders, as well as all non-essential services and ordered residents to stay home as of midnight April 26 until April 16, to slow the spread of the coronavirus.
As a leader in both platinum and palladium output, a 21-day production halt could impact supply and demand trends adding strain to an already fractured supply chain.
Platinum remained range bound on Friday, trading for US$717.25 at 12.06 p.m. EDT.
Palladium had a volatile week, starting the session at US$2,145 per ounce, surging to US$2,348 on March 31. The automotive catalyst metal then fell to US$2,033 a day later its lowest point since early January.
The 21-day South African lockdown could benefit the price into April, however, headwinds in terms of supply constraints and a drop in global output from the auto manufacturing sector will likely keep the metal from surpassing its February 27 all-time high of US$2,754.
At 12:07 p.m. EDT palladium was trading for US$2,119.
Base metals continued to be impacted by mine closures and weaker demand outlooks also resulting from the economic uncertainty of COVID-19.
Copper managed to pull out a small gain climbing from US$4,763 a tonne on Monday (March 30), to US$4821.50 by Friday.
“Copper has taken a lot of bad news on the chin without seeing renewed weakness, so I have the feeling that, unless we see significant renewed stock market falls, copper is on track to challenge the psychological US$5,000 level,” said Ole Hansen, head of commodity strategy at Saxo Bank.
In an interview with the Investing News Network, Stefan Ioannou of Cormark Securities, challenged this view, noting that demand was eroding before the pandemic.
Saying: “In terms of copper, the demand isn’t there.”
He did go on to point out, that the medium to long term fundamentals could be positive.
“Eventually, when we get through COVID-19 and demand starts to increase, there’s a potential where the supply catch-up would lag. We could see, over the next year or two, an actual supply deficit emerge.”
Last week, IMF Managing Director Kristalina Georgieva noted its clear the global economy has entered recession, and this week US Federal Reserve head Jerome Powell also confirmed America has entered recession territory.
The contracting global economy will test supply and demand fundamentals for the base metal space as industrial use falls.
After a brief rebound last week, nickel slid back this session. Hitting US$11,280 per tonne to end the month, the metal fell below US$11,200 to US$11,185.
Lead also faced headwinds from weak industrial demand and lost its modest gains made at the beginning of the week.
On Monday, lead was trading for US$1,694 per tonne, by Friday (April 3) US$10 had been shed and the metal was selling for US$1,684.
Like copper, zinc was able to pull out a slight gain for the five-day period. The metal made a sharp climb from US$1,837 per tonne Monday to US$1,867 on March 31.
Subsequently, zinc pulled back and ended the week at US$1,845.
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.