Metals Weekly Round-Up: Gold Passes US$1,750, Then Falls Lower

The gold price faced numerous challenges this session, leaving the yellow metal on track for its first week of losses since early April.

Positive economic data and industrial activity from countries emerging from COVID-19 shutdowns weighed on gold’s movement late in the period.

The currency metal reached its highest point since October 2012 on Monday (May 18), then was locked just below US$1,750 per ounce until Thursday (May 21), when it fell to its session low at US$1,719.30.

The other precious metals faced similar challenges, except for palladium which marked its first week of gains since the end of March.

Countering the risk appetite country restarts had raised was mounting trade tensions between the US and China benefiting gold as investors sought safety.

Currently sitting in the US$1,730 range, Ian Ball of Abitibi Royalties (TSXV:RZZ) told the Investing News Network (INN) he expects to the gold price to continue climbing.

“When I look at the factors right now, I would think that a fair price of gold is probably somewhere on the low side of US$1,750 an ounce and closer to US$2,450 on the high side,” he said.

The CEO and president of the Abitibi Royalties admittedly noted that there is still a lot of uncertainty in how markets will recover from the coronavirus disruptions, but regardless it was positive for gold in the long term.

“Is it going to come out with a V-shape, a U-shape — or they’re saying an L-shape? I don’t think anybody really knows, and on the back of that, how much more government stimulus is going to be needed to push the recovery? I think that’s what’s going to be the driver for gold further out in 2020,” said Ball.

At 9:49 a.m. EDT an ounce of gold was trading for US$1,735.25.

Volatility also impacted the silver price this week pushing the white metal below US$16.80 per ounce before a rebound brought it back above US$17.

Despite much of the attention focusing on its yellow sister metal, silver is expected to outperform gold in the long term, according to Brien Lundin editor of Gold Newsletter.

“The real characteristic about silver is that it moves later than gold, typically, but it moves further than gold percentage-wise, and for the same reasons as gold,” said Lundin during a video interview with INN. “It’s kind of an easy, unexpiring option on the gold price — it offers you leverage to gold without a lot of the risk.”

An ounce of silver was selling for US$17.27 at 10:09 a.m. EDT.

Platinum prices also fluctuated greatly this session, starting the week at US$813 per ounce, climbing as high as US$866 and then falling off to US$809.

A Metals Focus platinum group metals (PGMs) report released on Wednesday (May 19), noted that platinum’s performance in 2020 will be positively correlated to gold.

“We are cautiously optimistic about the price outlook due to the boost from gold later in the year; Metals Focus is bullish on gold, which we expect will benefit from ongoing uncertainty and loose monetary and fiscal policies,” it reads.

At 10:18 a.m. EDT, an ounce platinum was trading hands for US$830.

Palladium surged 5 percent this week moving as high as US$2,069 per ounce for the first time since April 7. The gains were short-lived when the autocatalyst metal subsequently slid as low as US$1,817 a 12 percent decrease.

The metal was also a topic during the Metals Focus PGMs webinar which followed the outlook release.

The metals consultancy firm sees the metal recovering during the second half of 2020, driven by tight supply and renewed demand.

“The annual average palladium price is forecast to rise 48 percent as the bullish impact of tight aboveground stocks gradually overcomes the drag of COVID disruptions towards the end of the year,” explained Wilma Swarts, analyst at Metals Focus.

Palladium was priced at US$1,826 as of 10:25 a.m. EDT.

A re-emergence from COVID-19 lockdowns may have dragged on the precious metals this week, however it bolstered the base metals sector with the majority of the sector — except zinc — ending the week in the green.

The copper price ticked 2 percent higher this week despite reports that LME stocks of the red metal in Rotterdam are swelling.

According to data from Fastmarkets, stores of copper now total 84,925 tonnes, with 73,700 tonnes now on-warrant. That figure is almost 10 tonnes higher than the beginning of the month, indicating European consumption is still down.

Copper was valued at US$5,387 a tonne as of 10:36 a.m. EDT.

After starting the year above US$2,000 per tonne, zinc has faced increasing pressure from weak demand due to the COVID-19 pandemic.

While the metal briefly moved as high as US$2,021 this week its ascent was upended late in the period when it fell back below US$2,000.

Things may get worse as seasonal demand in China — which is propping up prices currently— is anticipated to drop in June and July.

“We are noticing quite a dichotomy between sentiment in China and outside of China,” said Oliver Nugent, commodities strategist at Citi. “Investors outside China are cautious, there’s still lots of concerns about what is the new normal we are getting into and what risks are surrounding the market.”

Zinc was selling for US$1996.50 at 10:47 a.m. EDT.

Nickel performed well during the second last week of May, edging higher after starting the session at US$11,950 per tonne. By week’s end the metal had grew by 6.7 percent.

Primary nickel consumption is comprised of the stainless steel sector, however growing demand from the electric vehicle sector could be a problem for producers down the road, as outlined by Fastmarkets during a webinar covered by INN.

At 10:55 a.m. EDT nickel was valued at US$12,762.

Lead ended the week 4.8 percent higher from its Monday (May 18) value of US$1,578.50 per tonne.

Current demand for lead has been another casualty of supply chain interruptions and country lockdowns, but the metal is expected to perform better in the medium term according to Nugent.

“Demand is very weak, but lead will probably trade with the complex and that medium-term story,” he said during a webinar. “We see it getting to US$1,800 sometime next year.”

Lead was trading for US$1,654.50 at 10:59 a.m. EDT.

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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.