Metals Weekly Round-Up: Gold Readies as Economies Stall

Following five days of volatility, gold was in the green on Friday (June 19) morning, on track to end the session 1.7 percent higher.

With the yellow metal edging above US$1,730 per ounce, analysts are forecasting a steady upward trend as concerns about stimulus and a weak US dollar drive investors to the sector.

A Goldman Sachs (NYSE:GS) report released this week projects that the currency metal will hit US$2,000 in the next 12 months as economies struggle with staggered reopenings and disrupted GDPs.

The firm expects an inflationary reaction to the COVID-19 response from central banks — but just how much is uncertain.

“For gold prices to go materially above US$2,000, we believe inflation will need to move above the Federal Reserve’s 2 percent target and this move to be met with a muted policy response,” it states.

For David Smith, the economic recovery will be more complex, a topic he touched on during his presentation at the digital MoneyShow last week.

The senior analyst at the Morgan Report warned of a period of stagflation similar to the one experienced in the mid-1970s.

“You have inflation and deflation going at the same time, but the underlying trait of inflation. Eventually, if the Fed keeps printing the amount of money that they are doing, we could have a massive inflationary move,” he said to listeners.

In this environment, gold is favored to perform positively, according to Smith.

“But in any of those circumstances gold will continue to do well because it’s a storehouse of value — it’s real money and it’s an opportunity to preserve your wealth as insurance first, profit second.”

Gold was trading for US$1,737.58 at 10:27 a.m. EDT on Friday.

Silver continued to trend higher, poised to make its fifth week of gains, despite headwinds mid-session.

The white metal has climbed 2.7 percent since late April and is benefiting from safe haven investor attention and growth in industrial demand.

Moving towards US$18 an ounce, silver’s steady ascent is right on trend, explained Sprott’s (TSX:SII,OTC Pink:SPOXF) Rick Rule during a MoneyShow webinar late last week.

“Remember again too that silver follows gold. It is the gold stocks and the gold itself that move first, but historically silver and then the silver stocks have moved the furthest — and I suspect that that will be the case now,” Rule told listeners.

At 10:40 a.m. EDT on Friday, silver was valued at US$17.75.

Platinum displayed strength on Monday (June 15), climbing to US$821 per ounce, its highest price since late May, before falling to US$793. Currently platinum is moving for US$808.50.

As the other precious metals pushed to end the period in the green, palladium was dragged lower.

The automotive metal has faced dwindling demand from manufactures. While some of this was offset by a COVID-19-induced production decline, stockpiled material will drag on its value now that projects are ramping up output. At 11:02 a.m. EDT on Friday, palladium was priced at US$1,826 per ounce.

Also on track for a week of positive growth was the base metals sector, which saw gains across most of the assets. Copper added 2.7 percent to its value this week, propelled by reinvigorated industrial demand, mostly in China.

In an interview with the Investing News Network, Byron King, who writes Whiskey & Gunpowder at Agora Financial, highlighted the potential of the red metal.

Watch the full interview with King above.

“There’s going to be a lot more copper in cars, there’s going to be a lot more copper in — just in other electrical things as the world builds out. Whether it’s renewable energy, all those sorts of things. And it’s not just a US/Canada thing, it’s a global thing,” he said.

Copper was trading at US$5,799 per tonne on Friday.

Zinc made modest gains over the week. Impacted by some of the same production setbacks that have plagued copper since the pandemic was announced, zinc may benefit from a reduction in supply.

That’s because prior to the COVID-19 containment measures, the metal had been on its way to a significant surplus at the pre-closure production levels.

With prices 17 percent lower than the same period last year, the output reduction may motivate the metal later on.

“We are now looking at a 2.6 percent mine decline year-on-year,” said Bruce Alway, director of metal research at Refinitiv.

“We are relatively cautious on the outlook for zinc mine supply in the light of earlier cutback announcements due to price weakness, and now with COVID-19 we basically double the year-on-year expected losses.”

Zinc was priced at US$2,037 per tonne at 11:22 a.m. EDT on Friday.

Nickel was also on its way higher, advanced by positive tailwinds.

The momentum has earned the attention of the London Metal Exchange, which changed its speculative position on the metal to bullish on June 12.

After shooting from US$12,503 per tonne to US$12,903 early in the period, the metal slid back to US$12,760, where it sat on Friday.

Four solid days of gains drove lead from US$1,718 per tonne on Monday to just shy of US$1,800 by week’s end. The base metal is now back in pre-COVID-19 lockdown price territory, but still well off its one year high of US$2,265.

Lead ended the week at US$1,796.50.

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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.