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30% Physical Gold Demand Slump; All-Time Price High Reached

“In 20Q3, physical gold demand remained under pressure with losses across nearly all sectors.  Coupling Covid-19’s severe toll on the global economy and a record high gold price, consumption was dragged sharply lower,” comments, Cameron Alexander, Precious Metals Research Manager, Refinitiv.  “However, looking ahead while considering the underlying macroeconomic conditions such as economic headwinds, the […]
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“In 20Q3, physical gold demand remained under pressure with losses across nearly all sectors.  Coupling Covid-19’s severe toll on the global economy and a record high gold price, consumption was dragged sharply lower,” comments, Cameron Alexander, Precious Metals Research Manager, Refinitiv.  “However, looking ahead while considering the underlying macroeconomic conditions such as economic headwinds, the low interest rate environment, ongoing tensions between the United States and China, rising inflationary expectations and the looming second wave of COVID-19, remain highly favourable for gold in the medium-to-long term.”

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Refinitiv Metals Research -  30% Physical Gold Demand Slump; All-Time Price High Reached in August

Highlights

  • Total physical gold demand slumped by 30% in the third quarter, with all the major sectors, apart from official coin fabrication, recording YoY declines.
    • Jewellery fabrication remained the worst impacted sector, dragged lower by the economic impacts of the COVID-19 pandemic and record gold prices.
  • Central banks shifted to net sellers for the first time since Q4 2010.
  • Gold ETPs recorded the third consecutive quarter of inflows, albeit at a slower pace in the third quarter, with YTD inflows far exceeding the record annual gain seen in 2009.
  • Mixed investment activity for the quarter, with demand for gold bars slumping by 20% to the lowest quarterly level since the financial crisis of 2008/09 as Asian investors took profits, while Official coin fabrication surged by 53% as fears around the COVID-19 crisis and the global market turmoil saw resurging interest among the retail investors.

Gold recorded a spectacular performance during the third quarter, soaring to an all-time high of $2,067/oz in early August, driven by escalating fears over the global economic downturn caused by the COVID-19 pandemic and massive stimulus measures introduced by central banks around the globe in an attempt to lessen the impact. Gold averaged $1,909/oz in the third quarter, up by 27% from the previous three months and 30% above the level seen over the same period of last year.

Meanwhile, physical demand recorded another poor performance in the third quarter, tumbling by 30% year-on-year to an estimated at 562 tonnes. Jewellery fabrication remained the worst affected segment, with global offtake contracting by 23% to a total of 314 tonnes. Despite many markets re-emerging from severe lockdown restrictions prevalent for most of Q2, demand remained poor across all the key regions. Countries continued to battle against the COVID-19 pandemic, which took a serious toll on the global economy, unemployment rates, household incomes and consumer demand. Jewellery offtake in the world’s two largest gold consuming markets, China and India, dropped by 7% and 21%, respectively, battered by weak economic conditions, along with a record high gold price. It is worth adding, however, that the rate of decline was less pronounced than the one seen in the previous two quarters as economies started to re-open after the lockdown.

Demand For Gold In Industrial Applications Dropped 9% YoY

Demand for physical gold in industrial applications recorded a 9% year-on-year drop in the three months to September, with double-digit percentage declines in dental and other industrial & decorative offtake. That said, demand from the electronics industry seems to have rebounded from the previous quarter, particularly from the automobile industry as manufacturing resumed, although remained some 9% down year-on-year.

Turning to retail investment, which is the sum of physical bars and all coins, demand was marginally up year-on-year, as a strong rebound in official coin fabrication was largely offset by poor physical bar investment. Official coin fabrication surged by 53% to nearly 72 tonnes as fears around the COVID-19 crisis and the global market turmoil, along with the improved gold outlook saw resurging interest among the retail investors, driving premiums to unprecedented levels. Meanwhile, demand for gold bars slumped by 20% to just under 97 tonnes, the lowest quarterly level since the financial crisis of 2008/09. The regional analysis, however, reveals some interesting and contrasting findings between the East and the West. The 20% drop was largely attributed to a poor performance in Asia, where investment demand plunged by 59% over the three-month period.

Central banks shifted to net sellers for the first time in nearly a decade, with net sales estimated at just under thirteen tonnes for the third quarter. The shift was driven by an absence of purchases from Russia and China, as well as a significant rise in gross sales as countries continued the battle against COVID-19, which has taken a severe toll on the global economy, with perhaps some also taking advantage of the gold’s astonishing price performance in recent months.  Gold ETPs witnessed another quarter of strong demand, estimated at over 280 tonnes, with total inflows over the nine-month period estimated at over 1,000 tonnes, up by 60% from the record annual gain seen in 2009.

Turning to supply, mine production slipped by 2% to an estimated 862 tonnes. While the rate of decline is a lot less pronounced than in the previous quarter, many mines continued to operate at restricted capacity in order to maintain COVID-19 safety restrictions. Global scrap supply rebounded by 29%, with scrap flows rising in all the key regions, as many businesses returned to normal operating capacities, with supply further helped by record high gold prices. With total supply rising by 10%, while demand remaining subdued, the gold market registered an even bigger physical surplus in the third quarter.

Looking Ahead

The underlying macroeconomic conditions such as economic headwinds, the low interest rate environment, ongoing tensions between the United States and China, rising inflationary expectations and the looming second wave of COVID-19, remain highly favourable for gold in the medium-to-long term. It is in the near term that we are likely to see increased volatility, choppy trading and fluctuations in the stock markets and the gold price, particularly in the run up to U.S. presidential elections. That said, while we may see gold consolidating or being caught up in a broader sell-off in the short term, gold should be the one to benefit from growing risks revolving around the second COVID-19 outbreak and the global economic turmoil and we may well see the yellow metal hit a fresh record before the year-end. The gold price is forecast to average $1,784/oz in 2020.

Quarterly World Physical Gold Supply and Demand (tonnes)

Demand physical gold

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Precious Metals

O2Gold Shares Rise 7.14% After Reporting Intersects 20.11 g/t Gold Over 0.7 Metres At Aurora

O2Gold (TSXV: OTGO) last night reported on its first drill results from its Aurora Property in Colombia…

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O2Gold Shares Rise 7.14% After Reporting Intersects 20.11 g/t Gold Over 0.7 Metres At Aurora

O2Gold (TSXV: OTGO) last night reported on its first drill results from its Aurora Property in Colombia. The firm had previously halted trading in its equity due to the assay results received.

The first drill hole reported by the company comes from the Aurora Tunnel within the Main Aurora Vein, where O2Gold encounter 20.11 g/t gold and 3.30 g/t silver over 0.7 metres, within a larger interval of 9.19 g/t gold and 1.89 g/t silver over 1.6 metres. Mineralization was encountered at just 97.4 metres of depth.

The hole, referred to as AUR-21-001, also encountered 12.30 g/t silver over 3 metres, at a depth of just 8.70 metres within fragmented quartz veins. The hole was drilled to a total depth of 220 metres.

The hole marks the first within an ongoing 8,000 metre drill campaign, which currently has two drills turning on the firms property. Four holes have been completed to date, with assays pending on three holes presently.

O2Gold last traded at $0.21 on the TSX Venture.


Information for this briefing was found via Sedar and O2Gold Inc. The author is currently long the equity. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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Top Silver Stocks To Watch This Week

Will These Silver Stocks Go Up? The market for silver stocks has…
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Will These Silver Stocks Go Up?

The market for silver stocks has been quite an interesting one to watch in the market in recent times. The pandemic caused silver assets to skyrocket in price throughout the last year and a half. The percentage gains for many silver assets were higher than gold stocks. This brought a lot of new investors to the metal that may have overlooked it before. One other recent event also brought a lot of new people to silver investing. You have certainly heard of the GameStop situation where Reddit traders boosted the price of the stock.

Well in early February the same thing happened to silver prices as a result of retail traders according to the mainstream media. But Reddit traders quickly stated that it was not their doing. This caused the price of the metal to pull back. What this did do, was attract a lot of new eyes and investors to silver related assets. The price of silver has been able to remain relatively stable at the moment.

So what else is affecting silver prices? Jobless reports often affect the price of silver and gold. It will be interesting to see the effect that unemployment and the economy has on the metal in the future. There are many great silver stocks to watch at the moment despite the volatility in the market. Let’s take a look at four silver stocks that show market potential right now.

Top Silver Stocks To Watch

  1. First Majestic Silver Corp. (NYSE: AG)
  2. Fortuna Silver Mines Inc. (NYSE: FSM)
  3. Endeavour Silver Corp. (NYSE: EXK)

First Majestic Silver Corp. (NYSE: AG)

First Majestic Silver Corp. is a mining company that primarily focuses on acquisition of land, exploration, development, and production of mineral assets. The company’s biggest projects include silver production in Mexico. Currently, First Majestic has 100% interest in the San Simas mine, Santa Elena mine, and holds interest a variety of other land too.

On August 16th, First Majestic reported its second quarter financial results for 2021. The company’s revenue achieved a new record, at $154.1 million. Its average realized silver price per ounce increased quarter over quarter as well.

President and CEO Keith Neumeyer said, “As a result of the higher revenues, our quarterly dividend increased by approximately 33% when compared to the prior quarterly payment. The mining units generated $29.4 million in mine operating earnings due to strong production and higher realized metal prices.” With this in mind, is AG stock a contender for your list of silver stocks to watch?

Fortuna Silver Mines Inc. (NYSE: FSM)

Fortuna Silver Mines Inc. is a mining corporation with a focus on exploration, extraction, and processing of precious metals. It actively explores for gold, silver, zinc, and lead. Its main properties include the Caylloma and San Jose mines, as well as the Lindero gold project in Argentina.

On June 28th, Fortuna and Roxgold Inc. announced a business combination. President and CEO of Fortuna Jorge A. Ganoza said, “The successfully completed business combination creates a low-cost intermediate gold and silver producer with four operating mines and a permitted development project. The company will benefit from a robust exploration pipeline and expanded presence in the Americas and West Africa, two of the fastest growing precious metals producing regions in the world.”

On September 20th, the company announced changes in its management team. David Volkert retired as the VP of Exploration in Latin America, which goes into effect on September 30th. Other than this, the company has not released a large amount of recent updates. So now it will be interesting to see where FSM stock goes from here. Will you add FSM to your silver stock watchlist?

Endeavour Silver Corp. (NYSE: EXK)

Endeavour Silver Corp. is a silver stock that just went up in the market. This company acquires land, explores it, and develops it. Endeavour works on the processing, refining, and reclamation at its mineral properties. Most of Endeavour’s primary assets are located in both Mexico and Chile. Endeavour for the most part only searches for silver and gold at its mines.

Back in August, the company announced its second-quarter financial results. The CEO of the company, Dan Dickson said, “From a financial standpoint, our Q2 performance was stronger than the respective period last year, as revenue, cash flow and earnings were all higher. However, our operating costs are clearly not where we want them to be. We are working to optimize our operating cost profile in the second half of 2021.”

Endeavour’s metal production grew 80% during the quarter, and its gold production grew 92%. These numbers were in line with Endeavour’s guidance for the year. Its net revenue in the second quarter was up 136% to $47.7 million. Now the company has completed the acquisition of the Bruner Gold Project in Nye County, Nevada. With this in mind, will you add EXK to your mining stock list?

Silver Stocks To Watch

There are plenty of silver stocks to watch in the market in 2021. Some think that there is not an opportunity to invest in silver stocks at the moment, but there are still many companies with potential in the market.

The post Top Silver Stocks To Watch This Week appeared first on Gold Stocks to Buy, Picks, News and Information | GoldStocks.com.

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Precious Metals

Inca One Gold Posts Record Production Figures For August 2021

Records continue to be beat by Inca One Gold (TSXV: INCA), whom this morning reported its best-ever processing results. The
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Records continue to be beat by Inca One Gold (TSXV: INCA), whom this morning reported its best-ever processing results. The firm managed to post record production for the month of August, with production improving 163% on a year over year basis.

Production in August hit 6,838 tonnes, or 221 tonnes per day, the best ever monthly performance for the company. Production occurred at both of the firms plants, and beat the previous record of 6,581 tonnes.

Gold produced came in at 2,309 ounces, while ore deliveries amounted to 6,982 tonnes – which points to the potential for a very strong September for the company as well. Gold production was up 57% year over year, while deliveries improved 131%.

“It validates our business model and operational aptitude that we were able to so quickly and effectively deploy the working capital received from our second Gold Prepayment Facility received in the first week of August,” commented CEO Ed Kelly. “The Company, now armed with sufficient working capital, its only 10% off its record processing pace set in 2018,” he continued.

The results continue to be driven by the working capital the firm was able to access via a $9.0 million gold pre-payment facility. A similar facility drove record results for the firm in the months of May and July earlier this year, with the working capital expected to continue to provide strong results for the firm on a go-forward basis.

Inca One Gold last traded at $0.34 on the TSX Venture.


FULL DISCLOSURE: Inca One Gold Corp is a client of Canacom Group, the parent company of The Deep Dive. The author has been compensated to cover Inca One Gold Corp on The Deep Dive, with The Deep Dive having full editorial control. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.

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