May 2020 in Precious Metals, by Steven Cochran

Welcome to SurvivalBlog’s Precious Metals Month in Review, where we take a look at “the month that was” in precious metals. Each month, we cover gold’s performance, and the factors that affected gold prices.

What Did Gold Do in May?

May was a volatile month for gold. Multi-day rallies were ended by big single-day losses on several occasions.  Prices for both gold futures and spot gold started May at $1,700.

June gold futures hit a monthly high of $1756 on May 15, while spot gold hit a high of $1748 on the 20th. The May lows for gold were $1,688.50 on futures, and $1,684.10 for spot, both on May 6th.

Spot silver and silver futures began May at the $15 level. Both spot silver and silver futures hit their monthly highs on May 20th. July silver settled at $18.06 an ounce, while spot silver closed at $17.58 The lows were it on the 4th, with futures settling at $14.77 and spot silver closing at $14.75

Precious metals prices went flying on the last day of trading. Safe haven demand spiked after President Trump announced that the US would be revoking Hong Kong’s special trading status.

Silver futures had their best month in nine years, gaining almost 24% for the month. July silver ended May at $18.50 an ounce, up 53 cents for the day. Gold futures grabbed a gain of $23.40 to end the month back over the $1,750 mark. The $1,751.70 settlement put gold up 3.4% for the month

Factors Affecting Gold This Month

CORONAVIRUS
The coronavirus pandemic was still the #1 factor facing gold and the economy as a whole. Arguments over lockdown restrictions played a part, but updates on vaccine trials had the greatest effect.

Several clinical trials reported encouraging results in May. Previous estimates were looking at at least another year for a vaccine. Stocks took the news as an excuse to rally strongly. Dr. Anthony Fauci said there is a “good chance” of a vaccine by the end of the year.

He also noted that the success in “flattening the curve” makes it safer for states to end lockdown mode. “I don’t want people to think that any of us feel that staying locked down for a prolonged period of time is the way to go.”

CHINESE TAKEOVER OF HONG KONG

China was condemned by nations around the world by taking direct control over Hong Kong. The move allows the Communist government to extradite dissidents and opposition politicians to the mainland for prosecution. On May 27th, US Secretary of State Mike Pompeo declared that Hong Kong was no longer a free democracy, and recommended that its special trading status with the US be revoked. President Trump agreed, and revoked that status on May 29th.

The Chinese government has raged at the move, accusing the US of interference in its domestic affairs. Analysts note that the blowback from this provocation by China could snuff out any economic recovery they may be hoping for.

Central Banks Losing Their Minds

The COVID pandemic is dominating the news, but financial analysts are growing more concerned over the actions of the world’s central banks.

A Reuters article titled “Central Banks’ pandemic battle could stretch into an Infinity War” discusses the dangers of the current central bank policies becoming permanent. “Big central banks are buying from an expanding menu of government bonds, corporate debt and consumer loans… and no one knows whether they can stop.”

Central Bank Gold Purchases

May’s central bank gold report covered the month of March. The big buyer was Turkey, with 26.9 metric tons of gold purchased. Russia bought 9 metric tons. Uzbekistan, returning to the market, purchased 7.5 metric tons of gold.

Central bank gold purchases will likely drop through the summer, as every dollar, yen, and euro will be devoted to stopping a new Great Depression.

Central Bank Gold Survey

The World Gold Council released their 2020 Central Bank Gold Survey in May. Some interesting results:

– 75% of central banks think that the global gold reserve total will increase in the next 12 months.

– 88% say that negative interest rates will influence their actions.

– 79% say that gold’s performance during times of crisis is an important reason to hold gold reserves.

– 74% say that gold’s lack of default risk is an important reason to hold gold.

– 79% say that gold is a long-term store of value.

Gold ETFs

170 metric tons of gold flowed into the world’s gold-backed ETFs in April. Gold ETFs in the US saw more than double the demand in April than March. Demand in Europe and Asia dropped, as COVID isolation orders forced gold shops to close.

Regional breakdown:

• North America:    +144 metric tons, from +57t
• Europe            +20 metric tons, from +84.3t
• Asia            +2.9 metric tons, from +4.8t
• Other             +3.3 metric tons, from +2.6t

On The Retail Front

The Perth Mint announced yet another record month for its physical gold ETP, PMGOLD. April inflows totaled 13,500 troy ounces, bringing assets under management to 5.85 metric tons.

On the retail side, Perth Mint sold 120,504 troy oz of gold and 2,123,121 troy oz of silver in April. CEO Richard Hayes says he would not be surprised to see gold break its all-time high in dollars by next year.

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The Royal Canadian Mint reported that gold volumes were 198,100 troy oz. silver volumes were 6.6 million troy oz over the first quarter. Even though the Mint was closed for part of the quarter and ran at reduced production levels after reopening, it managed to beat last year’s 1Q gold and silver sales totals.
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The U.S. Mint saw huge drops in bullion sales in April. 105,000 ounces of Gold Eagles and 28,500 ounces of Gold buffalos were sold. Only 750,000 Silver Eagles were sold. This is partly because the West Point Mint was shut down twice for disinfecting for coronavirus, disrupting Silver Eagle and Gold Eagle production.

240,000 bullion Silver Eagles were struck at Philadelphia to meet demand while the West Point Mint was closed. These  “Emergency Production” coins became an instant rarity. We have these special coins in stock at Gainesville Coins, for interested coin collectors.

Market Buzz

Citibank expects gold to average $1715 in 2020, $1,925 in 2021, and go higher than $2,000 an ounce afterwards.

Credit Suisse expects gold to consolidate after hitting $1,800, then push to $2,000.

UBS sees “growing potential” for gold to break $1,800 an ounce this year.

A JP Morgan analyst notes “Gold remains a winner, in our view, as it is a hedge on quite fat tails on both sides – both deflation and more aggressive reflation.”

SWISS GOLD FLOWS AGAIN
Three major Swiss gold refineries — Valcambi, PAMP and Argor Heraeus — resumed full production May. All three were forced to close in April due to the pandemic.

SO DOES SOUTH AFRICAN GOLD
South Africa’s Rand Refinery resumed production in May after a month-long shutdown during the nationwide coronavirus lockdown.

GLOBAL RUSH TO GET GOLD TO NEW YORK
Brinks and other shippers are working around the clock to get the gold to the COMEX gold vaults.in time to meet futures contract deadlines. Since late March, some 550 tons of gold — worth $30 billion  — were added to Comex warehouse stockpiles. Traders stood for delivery on 2.8 MILLION ounces of physical gold at the June contract settlement.

GOLD SELLING IN ITALY
A record number of Italians were hitting the pawn shops and jewelry stores to sell their gold in May, after two months of being locked in their homes with no income. On the other side of the coin, rich Italians are furiously buying gold as a hedge against additional turmoil and recession.

PRECIOUS METALS MANIPULATION PROVEN?

Lawrie Williams at Sharps Pixley shares some economic research that seems to confirm that, yes, there is widespread manipulation in precious metals (and bitcoin).

THE USUAL SUSPECTS
Joe Foster at VanEck expects gold to hit $2,000 in the next 12 months, with a possibility prices could go “much higher”.

At Sprott, CEO Peter Grosskopf expects gold to end between $1,900 and $2,000.

Jan Nieuwenhuijs (Koos Jansen) notes that Germans now own an estimated 9,000 metric tons of gold. More than 80% of Germans say that they buy gold for preservation of value and protection against inflation. .

Jared Dillion says “Gold as an investment is made for times like these” He says “We’re stuck in a world of unlimited quantitative easing (QE) and other Fed funny business. Which means this is a world where you want to own gold.”

Rumor Mill

GOLD CONFISCATION

Hedge fund manager Crispin Odey warns of an impending multinational gold confiscation. The thing is, governments all run fiat currencies, so don’t need your gold. A central bank can now print as much money as it wants, because there’s nothing backing it.

THE GLOBAL SURVEILLANCE STATE

The State now has complete knowledge of the location and movements of billions of people, under the umbrella of tracking the spread of the coronavirus. Think they’re going to give up that surveillance power after the pandemic is over? Yeah, me neither.

Looking Ahead To Next Month

Three big questions will affect gold prices in June:

1. “Will COVID infections rise again, as the nation removes lockdown restrictions?”
2. “Is a coronavirus vaccine coming soon?”
3. “Are relations between the US and China going to get worse?”

See you next month!

– Steven Cochran of Gainesville Coins

This column is intended for educational purposes only. It is not intended as investment advice.