Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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