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 April?
Gold started April around the $1,720 mark, and spent the first half of the month in choppy trade below $1,750.
This changed on April 15, when Joe Biden unloaded a pile of sanctions against Russia for cyber espionage and election interference. This gave gold the breakout it had been looking for. Gold hit a six-week high early, breaking heavy resistance of $1,760 an ounce. That $1,760 barrier became a solid floor for the rest of the month.
The gold breakout and risk-off mood on the 15th finally pushed the yield on the 10-year Treasury note below 1.6%.This removed a psychological barrier which gold prices had been fighting for weeks. Gold rallied more than $40 an ounce on the 15th and 16th, for the best week of 2021 so far.
Gold jumped to a seven-week high of $1,789 the following Monday, which finally triggered a wave of profit taking. Two days later, markets made a run at the $1,800 level, falling a mere 80 cents short. Futures ended the day at $1,793, settling above the 50 DMA.
Gold prices quieted down for the rest of the month, trading around the $1,775 – $1,780 region.
Factors Affecting Gold This Month
COVID
COVID continues to be the major factor suppressing the world economy. EUROPE seems incapable of stopping the surge of infections and deaths, putting the EU further behind the curve economically. The EU economy as a whole fell back into recession in April, mostly due to mass lockdowns as vaccination efforts failed.
It’s a different story across the English Channel, where the UNITED KINGDOM has vaccinated more than twice the number of people than Germany or France. Forty million Britons have gotten at least one COVID vaccine shot, putting the UK in fourth place worldwide. The British government has started reopening their economy, joining the US, China, and Israel as the only nations getting back to normal.
The US is doing the second-best job in the world at beating the virus, if we accept Chinese reports that put them in first place. Most theaters, restaurants, and other venues fully opened for business in April.The FDA in late April relaxed most restrictions on people who have been completely vaccinated, saying that they could attend gatherings and public outside events like concerts.
The major COVID-related impact on gold prices in the near future will be in INDIA, where the virus has gotten completely out of control. The major COVID strain there is what scientists are called a “double mutant”. Two mutated strains have combined into a version that has both enhanced contagiousness and higher lethality.
The number of daily deaths has overwhelmed the nation, with around 3,500 people dying of COVID every day. India is out of vaccines, hospital beds, even oxygen. Mass cremations of bodies are taking place in makeshift funeral pyres set up in major cities.
With no possible estimate of when life in India will return to normal, gold demand from the world’s #2 gold importer will be weak.
ECONOMY
The pace of economic recovery in the US quickened in April as the month progressed. Blowout non-farm payrolls for March showed 916,000 new jobs were created. This was far more than the estimate of 675,000. Retail sales in March (up 9.8%) were fueled by new stimulus checks for consumers. This threw a lifeline to the bars, restaurants, and small businesses that have managed to survive. Manufacturing reports also beat estimates across the board.
Industry hasn’t been able to completely take advantage of the unexpectedly strong demand. Shortages of everything from microprocessors for automobiles to softwood lumber to build homes has resulted in shortages and higher prices. If you don’t absolutely need a new car or a new home, you will be better off waiting for supply to catch up to demand.
These supply-related shortages are causing higher prices at the retail level, and supporting physical gold and silver demand. Precious metals have historically been the preferred hedge against growing inflation. Speaking of which…
FEARS OF INFLATION SPIKE
There was plenty of inflation to keep track of in April. Inflation as measured by the Personal Consumption Expenditures (PCE) index spiked in March. (The Fed prefers using the PCE over the CPI to track retail inflation when making policy decisions.)
PCE rose by 2.3% as measured year to year. Core PCE, which removes food and energy, was up 1.8% y/y. Personal income was up 21.1%, thanks to the latest stimulus checks. Wage growth for the first quarter of 2021 was the most since 2001!
This is bringing forward estimates of when the Fed will start tapering its Quantitative Easing policies. Where many observers had penciled in “late 2022”, these economic reports now have analysts expecting the Fed to start tapering before Christmas.Continue reading“April 2021 in Precious Metals, by Steven Cochran”