Focus : Drivers Of Gold Performance
Golds behaviour can be explained by four broad sets of drivers:
- Economic expansion: periods of growth are very supportive of jewellery, technology and long-term savings
- Risk and uncertainty: market downturns often boost investment demand for gold as a safe haven
- Opportunity cost: interest rates and relative currency strength influence investor attitudes towards gold
- Momentum: capital flows, positioning and price trends can ignite or dampen gold’s performance
At the same time, we anticipate that the economic recovery in some emerging markets, such as China and India, may limit some of the headwinds the gold market experienced in 2020 caused by extremely weak gold consumption.
Using Qaurum, our gold valuation tool , we analysed the performance of gold as implied by five different hypothetical macroeconomic scenarios provided by Oxford Economics. These are: 4
The results of the analysis suggest that, in general, gold may see a positive, though more subdued, performance in 2021.5 This may be driven primarily by a recovery of consumer demand relative to 2020 as economic conditions improve. In addition, golds performance may be boosted further by the prolonged low interest rate environment which would all but remove the opportunity cost of investing in gold.
Size Of The Silver Market
How big is the silver market? It should be easy to answer this question, right? After all, the silver market is a market for silver. According to the U.S. Geological Survey, 1,740,000 metric tons of silver has been discovered to date, which translates into about 56 billion ounces of silver ever mined.
However, most of the physical silver mined over time has been lost due to industrial use. And we are interested in silver as part of the financial market, i.e., private investment and perhaps official reserves. Hence, although jewelry also serves as a store of wealth in many cultures, we subtract it from our calculations. Neither do we include silver for technological applications. Therefore, after all these corrections, we estimate the market for investable silver at 4 billion ounces. So, at todays dollar price , the silver market capitalization would be about $108 billion.
We can also interpret and measure the size of the silver market in terms of its liquidity. According to the London Bullion Market Association , 218 million ounces of silver worth $3.1 billion were cleared in the London market in September 2018. If we add futures and silver ETFs, the trading volume was even be higher. Hence, silver is heavily traded, although less intensively than gold.
What Are Precious Metals Futures Contracts
A precious metals futures contract is a legally binding agreement for delivery of gold or silver at an agreed-upon price in the future. A futures exchange standardizes the contracts as to the quantity, quality, time, and place of delivery. Only the price is variable.
Hedgers use these contracts as a way to manage price risk on an expected purchase or sale of the physical metal. Futures also provide speculators with an opportunity to participate in the markets without any physical backing.
Two different positions can be taken: a long position is an obligation to accept delivery of the physical metal, while a short position is the obligation to make delivery. The great majority of futures contracts are offset before the delivery date. For example, this occurs when an investor with a long position initiates a short position in the same contract, effectively eliminating the original long position.
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International Major Gold Market
The gold market is a place where is focus on trading gold, and exists in around the gold exchange. Gold Exchanges are generally in various international financial centers, as an important part of the international financial markets. Currently, there are more than 40 gold markets around the world, and is forming the global market frameworkThe international gold market is as the core, and the local gold market is as the auxiliary.
The four major important international gold exchange markets are: London Gold Market, America Gold Market, Zurich Gold Market and Hong Kong Gold Market. However, London gold market prices have a greater influence on the world gold market price.
London Gold Market
London gold market or London bullion market is the largest world gold market with a long history. In 1804, London replaced Amsterdam as the center of world gold trading. In 1919, the London gold market was officially established, twice fixing gold price in a business day. The London fixing price affects trading in New York and Hong Kong. In 1982, the London gold market specializes in spot trading in April 1982 futures market opened.
American Gold Market
The New York Mercantile Exchange is a commodity futures exchange. In 1975, the New York Commodity Exchange was starting forward trading of gold, and became the center of the forward trading of gold in the world. In August 2008, it was owned and operated by CME Group of Chicago.
Zurich Gold Market
Hong Kong Gold Market
What Are The Most Popular Gold Coins
Every major mint produces their own gold bullion coins and are extremely popular for investors who want to hold physical metal. While only government mints can produce gold coins with a monetary face value however, the face value is well below a coins intrinsic value. Along with government mints there are a variety of private mints that produce similar products referred to as gold rounds.
Of all government mints only the South Africans Krugerrand gold coin does not have a face value and its value is completely based on the global gold price.
Here are the top five gold coins currently available.
- South African Krugerrand
- British Britannia Coin
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When Is The Gold Price The Strongest
It can be difficult to predict the next major rally in gold as it is strongly driven by sentiment. Gold does well in period of high uncertainty, a shifting inflationary environment and during periods of currency debasement however, historically, there have been high and low seasonal period in the gold market. Historically, September is golds strongest month. Many western jeweler start to build their gold inventories during this time to prepare for the holiday season. The next strongest month is January, which traditionally sees strong buying among Eastern nations ahead of the Lunar New Year. The worst month has historically been March, April and then June.
Gold Outlook Table : The Gold Price Is Near Or Above Record Highs Across Key Currencies
Gold price and annual return in key currencies*
| 6 Aug |
*As of 30 December 2020. Based on the LBMA Gold Price PM in local currencies: US dollar , euro , Japanese yen , pound sterling , Canadian dollar , Swiss franc , Indian rupee , Chinese yuan , Turkish lira , Russian rouble , South African rand , and Australian dollar . All dates correspond to 2020.
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Why Does All This Matter What Can Be Done About It How Might It End
All this matters not only because west Africa is being deprived of a market price for a primary export but also because the rigging of the gold market is the rigging that facilitates the rigging of all markets everywhere. If you rig the currency markets, you rig everything currencies can buy, especially commodities and west Africa produces many commodities in addition to gold.
The rigging of the gold market is part of a much broader scheme by which a secretive and unelected elite in the United States and Western Europe controls the value of all capital, labor, goods, and services in the world and thereby impairs or destroys all markets and democracy itself everywhere, obstructing the progress of mankind.
This scheme enables the West and especially the United States rich countries to live off the labor and resources of the developing world poor countries. This point was made by the Russian central banker I told you about Monday, Oleg Mozhaiskov, in his address to the London Bullion Market Association meeting in Moscow in 2004. If the United States did not issue the world reserve currency, it could not live beyond its means and consume so much more than the fruit of its own labor as it long has been doing. In that case the United States might risk falling to the level of a developing country just like the countries of west Africa.
For these reasons America needs an end to gold price suppression and market rigging as much as the developing world does.
Gold Price Predictions For Next 5 Years
When looking at the potential price of gold over the next five years, there are a lot of factors that could propel it higher. Thats one advantage gold ownership offers: it isnt about one factor or another, its about any factor that increases fear or uncertainty on the part of investors. And there are a lot of risks surrounding us at this point that could cause any type of crisis.
But probably the biggest catalyst right now is monetary dilution. When a currency is debased, it makes real assets like gold more valuable, since they cant be created with a few computer key strokes.
And the U.S. now has both monetary stimulus and fiscal stimulus. Monetary stimulus usually goes first to the banking system and ends up inflating asset prices. But fiscal stimulus are funds injected directly into the economy and immediately spent. Its like me giving you $100 and you deposit it in a savings account vs. spending it that day on groceries.
You probably dont need me to say it, but the U.S. doesnt have trillions of extra cash to spend on fiscal stimulus packages. It already cant balance a budget. Some claim theyll collect on the backend as jobs are created and the economic grows, tax revenue will increase. But the debts and deficits are so high now theyre mathematically unpayable. And history clearly shows they will lead to inflation .
Where will the funds come from for these stimulus programs? They have to be , which will add to the already bloated deficit.
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Digging Into The Largest Holders Of Gold In The World
There are many reasons people buy gold. Some invest in the precious metal to protect against inflation, even though one of the common myths about investing in gold is that it can outpace inflation. Others buy it because of a cultural tradition or because they think gold is a safe investment. Meanwhile, some buy it on the speculation that its price will continue to rise. No matter the reason, the core thought driving this buying is that gold is valuable and will become even more so in the future due to the many factors that influence the price of gold.
We’ll explore the many motivations behind investing in gold by looking at some of the worlds biggest gold investors.
How Is The Live Spot Gold Price Calculated
Every precious metals market has a corresponding benchmark price that is set on a daily basis. These benchmarks are used mostly for commercial contracts and producer agreements. These benchmarks are calculated partly from trading activity in the spot market.
The spot price is determined from trading activity on Over-The-Counter decentralized markets. An OTC is not a formal exchange and prices are negotiated directly between participants with most of the transaction taking place electronically. Although these arent regulated, financial institutions play an important role, acting as market makers, providing a bid and ask price in the spot market.
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Central Banks Set To Remain Active In Gold Market
Meanwhile, central banks are set to add around another seven million ounces in 2021, or similar to the level last year. Central banks tend to be opportunistic and price sensitive when adding precious metals to their reserves.
At least part of the demand from central banks is due to a desire to ditch part of their U.S. dollar holdings.
- many central banks, especially in developing coun- tries continue to want to diversify their assets away from the U.S. dollar and euro and are likely to continue adding to their holdings in the foreseeable future.
Mine Production Likely To Improve
Recovery in mine production is likely this year after the fall seen so far in 2020. Production interruptions peaked during the second quarter of last year and have since waned.
While there is still uncertainty about how 2021 may evolve, it seems very likely that mines will experience fewer stoppages as the world recovers from the pandemic. This would remove a headwind that companies experienced in 2020 but that is not commonly part of production drivers. Even if potential second waves impact producing countries, major companies have introduced protocols and procedures that should reduce the impact of stoppages compared to those seen in the early stages of the pandemic.
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Investor Demand For Bullion Remains Key
Two factors stand out in the research report that support that view.
Still investor demand is likely to remain elevated. CPM estimates that global investment demand totaled 44.5 million ounce in 2020 but the company projects that will fall to 42.8 million this year.
Investment demand is key to elevated and rising prices. Demand for gold jewelry tends to be inversely related to prices. So the likely high level of investment demand should be supportive of prices.
Vaneck Vectors Gold Miners Etf
The VanEck Vectors Gold Miners ETF holds the stocks of large gold mining companies. Its one of the largest gold ETFs, with nearly $16 billion in assets as of mid-2021.
At the time of this writing, the VanEck Vectors Gold Miners ETF owns shares of more than 50 gold mining companies. Its top five holdings by value are:
- Newcrest Mining
These five stocks account for more than 46% of the assets of this gold ETF, with Newmont Goldcorp comprising more than 15%. These gold stocks have ranging from Newmont Goldcorps $56.9 billion to Newcrest Minings $17.7 billion.
With the exception of Wheaton Precious Metals and Franco-Nevada, these top holdings are the world’s largest gold mining companies. Franco-Nevada and Wheaton Precious Metals are the leading gold streaming and royalty companies.
This gold ETF enables investors to easily own a diverse, high-quality group of large-scale gold companies. The ETF also has a reasonable expense ratio of 0.51%, making this investment option a relatively cost-effective way to invest in many gold stocks.
Mining investments can range from precious metals like gold to the lithium and cobalt in our modern technologies.
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Should You Invest In Gold
The is often a deeply personal one. Many do so because of the belief that it will hold its value better than a government-backed currency in the coming years due to inflationary fears or other concerns. Others will invest in gold because they believe that it’s a sign of wealth. Then there are those who want to speculate that the price of the precious metal will move higher due to any number of catalysts.
Because people invest in gold for different reasons, it’s important first to know why you want to buy it. If buying gold will help you sleep more soundly at night or fulfill a deep cultural or personal desire, then, by all means, feel free to buy it. Meanwhile, if you see catalysts on the horizon that should send its price higher, then a gold ETF is worth considering. However, if you’re looking for an investment that will grow your wealth over the long term, gold probably isn’t the best option.
Fastest Growing Gold Stocks
These are the top gold stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and most recent quarterly YOY earnings per share growth. Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.
| Fastest Growing Gold Stocks |
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Source: YCharts
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What Is The Difference Between An Ounce And A Troy Ounce When Looking At A Gold Chart
A troy ounce is used specifically in the weighing and pricing of precious metals and its use dates back to the Roman Empire when currencies were valued in weight. The process was carried over to the British Empire where one pound sterling was worth one troy pound of silver. The U.S. Mint adopted the troy ounce system in 1828.
A troy ounce is about slightly heavier than an imperial ounce by about 10%. An imperial ounce equals 28.35 grams, while a troy ounce is equal to 31.1 grams.
Picking The Best Gold Stocks
The best gold mining companies have low cost structures, manageable debt levels, and limited exposure to risky mining projects. Gold streaming companies generally offer the highest return potential among gold-focused investment options because they are well-positioned to benefit from higher gold prices without assuming the risks associated with mining physical gold.
Investors who dont want to be tasked with identifying the best individual gold mining stocks can instead buy shares in gold exchange-traded funds, which are more convenient and cost-effective options for investing in gold stocks. A gold ETF offers broad exposure to the sector by owning either shares of gold companies or physical gold. Because of the wide availability of gold stocks and ETFs, you don’t have to be a stock-picking guru to participate in the gold industry’s upside.
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