Metals surge as gold tests new highs!

In this week's market update:

• Precious metal prices surged this week, with gold testing new all-time highs above USD $2,450 per troy ounce (oz) at one stage.

• Silver also rallied, with the precious metal climbing to USD $28.50oz, with the gold to silver ratio (GSR) rising to 86.

• Australian dollar investors saw similar moves in precious metals, owing to a stable AUDUSD foreign exchange rate, with the Australian dollar still buying just over USD $0.65.

• Equity markets were also bid up, with the S&P 500 +1%, while the ASX has climbed above 8,000 points, with a +3% move in the past five trading days.

• Commodity prices continued to ease, with oil -2%, while Bitcoin also pulled back, last trading just below USD $65,000 per coin.

• Bond markets soared, with 20-year Treasuries rallying by 3% for the week, with US 10-year bond yields falling back below 4% amidst market conviction that a rate cutting cycle in the United States will commence by September at the latest.

Mark your calendars

Precious metal prices rallied strongly this week, with gold pushing back toward all-time highs, as tensions in the Middle East and market expectations around the commencement of an interest rate cutting cycle by the US Federal Reserve (the Fed) combined to push the yellow metal higher.

Silver was also bid up, though could not match the move in gold, with a +2% rally in USD terms seeing it climb back toward USD $28.50oz, with the gold to silver ratio rising to 86 in the process.

While the Fed did not come through with a rate cut in their just completed policy meeting, a move lower in September seems all but assured. Indeed markets are now pricing in multiple rate cuts between now and the end of 2025, with comments from Fed chair Jerome Powell doing nothing to dissuade market participants from their belief that easier policy is just a few weeks away.

If history is any guide, that is likely to be very supportive of higher precious metal prices, with investment into both gold and silver also likely to benefit given rate easing cycles often see major drawdowns in risk assets.

In other precious metal related news this week we have seen:

• The World Gold Council release their highly anticipated Gold Demand Trends report for Q2 2024. The report found that gold demand rose 4% on a year-on-year basis to over 1,250 tonnes, the highest Q2 figure ever recorded in a data series that goes back to the year 2000.

• The rise in gold demand was driven by OTC demand, and central banks, who had a 6% year on year increase in demand to just over 180 tonnes.

• Retail bar and coin demand was 5% lower at just 261 tonnes, with weaker demand in Western markets a major contributor to this.

The report also noted that:

• The LBMA (PM) gold price averaged a record US$2,338/oz in Q2 – 18% higher y/y and 13% higher q/q. Gold reached a new record of US$2,427/oz in May.

• OTC investment of 329t was a significant component of Q2 total gold demand. Together with continued central bank buying, it helped drive the price to a series of record highs during the quarter.

• Total gold supply grew by 4% y/y to 1,258t. Mine production of 929t was a record for a second quarter. Recycling supply was the highest for a second quarter since 2012, responding to the rising gold price.

• Regional investment trends continued to diverge. Demand for bars, coins, and ETFs, was robust in the East, compared with a marked decline in the West. Western ETF investment flows have, however, started to return so far in Q3.

The investment flows noted by the World Gold Council were also addressed in a recent article in Yahoo finance, which noted that family offices in Asia were a major contributor to strong OTC demand for physical bars and coins, with gold long seen and favoured as a trusted store of wealth in the region.

Chart of the Week

The Gold Demand Trends report contains a treasure trove of charts and data to highlight recent trends in the gold market. The report has a special chart section available for download, with this quarter highlighting:

• Record gold prices in many parts of the world.

• Record central bank gold demand for H1.

• A slump in jewellery demand, which is being seen across gold markets globally.

• Record high mine output in H1 2024 and a surge in recycled gold volumes.

• The divergence in investment demand between Eastern and Western markets.

That final point is illustrated in the chart below, which shows that retail investment into physical bars and coins in China hit its highest level in over a decade and ran at almost double the ten-year average.

While most commentators in western markets continue to look at the US Dollar, bond yields, inflation rates and the relative strength of the US equity market, it is clear that Eastern markets are exerting ever more influence over the gold price.

That bodes well for future price growth.

Inside the Office

Market volumes at ABC Bullion were incredibly healthy across July, with investors busily positioning their portfolios for the new financial year. This continued through to the final week of the month, with ABC Bullion seeing solid trade across online, phone and in-store channels.

On the investment side, the ABC Bullion gold cast bar range continues to lead the way, with more and more investors showing a preference for the smaller products, led by our signature 1oz ABC Bullion gold cast bar. We are also seeing great interest in the ABC Bullion minted tablet range, with investors that have a more modest budget particularly keen on these products.

On the silver front, we continue to see meaningful investments into our 5kg ABC Bullion silver cast bar, with larger investors often gravitating toward these products, while pool allocated silver remains a popular choice.

We’ve also been delighted to see huge interest in our just launched Untamed Landscape silver coins, a limited mintage series that features a range of animals to celebrate the fauna and natural landscape of the Oceania region.

Jordan Eliseo
General Manager
ABC Bullion Australia

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