Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Pausing Stocks and Gold Fireworks - 21st Apr 21
Precious Metals and Miners Start of New Longer-Term Bullish Trend - P2 - 21st Apr 21
Looking For A Mortgage Broker? Here Is How To Hire One - 21st Apr 21
Amazon AMZN Stock PRIMEDAY SALE! Trend Analysis - 20th Apr 21
Stock Market Sentiment Speaks: You May Not Believe My 2021 Targets - 20th Apr 21
Stock Market Phase Two Projection - 20th Apr 21
Are Precious Metals & Miners Starting A New Longer-Term Bullish Trend? - 20th Apr 21
Inflation: First the Gain, Then the Pain… - 20th Apr 21
8 Stock Market Indicators in 1: Here's the Message of the Panic/Euphoria Model - 19th Apr 21
Gold - You Can Win a Battle, but Still Lose the War - 19th Apr 21
Will Interest Rates Rally Further Push Gold Price Down? - 19th Apr 21
Gold Fireworks Doubt the Official Inflation Story - 19th Apr 21
YuanPay Team Discuss The Process Of Crypto Diversification - 19th Apr 21
Central Banks May Ramp Up Gold Buying - 18th Apr 21
How to Get Rid of Driveway Weeds With Just WATER! 6 Months later NO Weeds, Ultimate Killer! - 18th Apr 21
State of the European Markets - DAX, FTSE, CAC, AEX, SMI, IBEX 35, S&P/MIB, Euro Stoxx 50, RTS - 18th Apr 21
Einvestment Fund: What You Need To Know About Investments - 18th Apr 21
Google Alphabet (GOOG) AI Deep Mind Stock Trend Analysis - 17th Apr 21
Stocks and Bonds Inflationary Slingshot - 17th Apr 21
Best Smartphone Selfie Stick Tripod Review by ATUMTEK Works with Samsung Galaxy and Iphone - 17th Apr 21
How to Give Budgie's First Bath | Easy Budgie Bathing and Water Training with Lettuce - 17th Apr 21
Record-breaking Decrease in New Passenger Vehicle Sale in Europe - 17th Apr 21
US Stocks Climb A “Wall Of Worry” To New Highs - 16th Apr 21
Gold’s Singular Role - 16th Apr 21
See what Anatomy of a Bursting Market Bubble looks like - 16th Apr 21
Many Stock Market Sectors Are Primed For Another Breakout Rally – Are You? - 16th Apr 21
What Skyrocketing US Home Prices Say About Inflation - 16th Apr 21
Still a Bullish Fever in Stocks? - 16th Apr 21
Trying to Buy Coinbase Stock on IPO Day - Institutional Investors Freeze out Retail Investors - 15th Apr 21
Stocks or Gold – Which Is in the Catbird Seat? - 15th Apr 21
Time For A Stock Market Melt-Up - 15th Apr 21
Stocks Bull Market Progression Now Shows Base Metal Strength - 15th Apr 21
AI Tech Stocks Buy Ratings, Levels and Valuations - 14th Apr 21
Easy 10% to 15% Overclock for 5600x, 5900x, 5950x Using AMD Ryzen Master Precision Boost Overdrive - 14th Apr 21
The Current Cannabis Sector Rally Is Pointing To Another Breakout - 14th Apr 21
U.S. Dollar Junk Bond Market The Easiest Money in History - 14th Apr 21
The SPY Is Nearing Resistance @ $410… What Is Next? - 14th Apr 21
The Curious Stock Market Staircase Rally - 14th Apr 21
Stocks are Heating Up - 14th Apr 21
Two Methods in Calculating For R&D Tax Credits - 14th Apr 21
Stock Market Minor Correction Due - 13th Apr 21
How to Feed Budgies Cucumbers - Best Vegetables Feeding for the First Time, Parakeet Care UK - 13th Apr 21
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21
The History of Bitcoin Hard Forks - 10th Apr 21
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Supply, Demand, and Depreciation: Key Drivers for Copper, Gold and Silver as the Economy Reopens

Commodities / Metals & Mining Apr 20, 2020 - 01:28 PM GMT

By: MoneyMetals

Commodities

The metals markets are being pulled in multiple directions simultaneously like never before. The global virus-triggered economic freeze has caused industrial demand for all commodities to crater.

At the same time, mining output is also crashing as virus fears force many mines around the world to suspend operations.

What is the “right” equilibrium price for copper, silver, gold, and other metals in an environment of such extreme and unstable supply and demand stresses? The verdict of the market changes – often dramatically – day by day.


In March, hard assets tumbled along with stocks as investors priced in increasingly dire scenarios for the economy. A double-digit contraction in U.S. GDP and double-digit spike in unemployment became inevitable after economic lockdowns spread across the country.

Now hopes are growing for the economy being able to start reopening in May and reverse some of the damage done by the draconian policies prescribed Dr. Fauci and adopted by most state governors.

Still unknowable, however, is how quickly the economy will be able to heal itself… and to what extent demand for raw materials will recover toward pre-virus levels.

The biggest wild card in all this may be the effects of unprecedented fiscal and monetary stimulus.

Already the federal budget deficit is set to explode to an all-time record over $3 trillion (likely closer to $4 trillion) and represent a greater share of the U.S. economy than at any time since World War II. Already the Federal Reserve’s balance sheet has ballooned to $6.1 trillion as central bankers furiously try to prop up everything from mortgages to junk bonds.

All this is leading toward a devaluation of the U.S. dollar. That should naturally make sound money – gold and silver – more valuable in dollar terms.

However, as we saw last month, demand destruction amidst a wrecked economy pull down precious metals prices quite suddenly – if only temporarily. Gold has since rebounded strongly to a new 8-year high while silver is regaining its footing from historically depressed levels.

Drilling Down into Supply and Demand Fundamentals

The Silver Institute had forecasted in early February – back when the economic impact of the virus was thought to be minimal outside of China – that global silver demand would rise by 3% in 2020. The Institute projected supply would nearly keep pace with 2% growth (which would be the first annual increase in five years).

Those forecasts now have to be thrown out the window. Both demand and supply are set to plummet in the near term.

On the plus side, investment demand for silver bullion products spiked last month to levels dealers had never seen before, clearing out inventories of most coins, rounds, and bars.

Bullion buying has receded from the frantic pace seen at the peak of the panic but remains strong. Safe-haven buying could remain a feature of investor psychology for many months ahead until an effective COVID-19 vaccine is widely available – and that figures to be 12-18 months out.

As for mining supply, it’s going to be a long road ahead before mines are fully operational again. Platinum and palladium production is largely offline in South Africa. Mexico’s giant Peñasquito mine, one of the country’s leading sources of gold and silver, suspended operations on Monday.

The silver supply picture is complicated by the fact that few primary silver mines exist. Most silver is produced as a byproduct of mining other metals (copper, lead, zinc, gold).

Base metals producers are shutting down. As Reuters reported, “Copper prices advanced on Tuesday, with London copper touching a four-week high, as more virus-related mining disruptions in key producing countries sparked global supply concerns.”

Best-Case and Worst-Case Scenarios

Given the extreme dynamics setting up in supply, demand, and monetary expansionism, market conditions are likely to remain volatile. We do think we have seen “peak fear” in this cycle – but not the end of uncertainty surrounding the virus and the economic damage it could continue to inflict.

In a best-case scenario, COVID-19’s spread steadily declines into the summer and the economy embarks on a V-shaped recovery. In a worst-case scenario, the virus makes a devastating resurgence in the fall, the economy locks down all over again, and markets descend back into chaos.

If the optimistic outlook prevails, then rising industrial demand for copper, silver, platinum, and palladium can be expected to drive those metals higher. Demand can recover faster than supply, which can’t simply be turned back on like a switch.

If the pessimists prevail, then all bets are off. Rounds of asset deflation will lead to accelerating hyperinflationary monetary responses. Social chaos, martial law, and possibly a postponement of elections could result.

In such a scenario, no investment could be counted on to perform well. But gold, the ultimate money, can always be counted on retain value even during the worst of times.

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2020 Stefan Gleason - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules