Gold has maintained its safe haven status, with prices now having reached eight-year highs at about $1 800/oz on a fresh wave of Covid-19 infections that has been reported in parts of the US, the UK and China, integrated business enterprise Mitsubishi Corporation states.

It notes in its '2020 half-year precious metals' report that the fresh wave of infections in the US is prompting certain states to delay their reopening measures and is fuelling fresh fears of the economic impact of Covid-19.

A spike in new cases in Texas, Florida and California appeared to confirm the risks of emerging too quickly from lockdown, and sent stock markets into reverse at the end of June, says Mitsubishi.

The report adds that, with inflation-adjusted US yields remaining in negative territory, this is “fertile ground” for nonyielding precious metals to make strong gains.

Mitsubishi notes that investors have continued to stay long on gold, silver and platinum in the current “extremely uncertain and potentially volatile” environment.

Gold holdings in exchange-traded funds (ETFs) are currently at record highs of 103-million ounces, with inflows of 20-million in the year to date. Silver ETF holdings are also at all-time highs of 767-million ounces and platinum ETFs are at 3.2-million ounces, a level exceeded only by the record levels of earlier this year.

However, risk aversion is not the whole story, says Mitsubishi, adding that this is a quarter in which the Standard & Poor’s 500 equity index has increased by 22%, the best performance since the 1930s as expectations of a V-shaped economic recovery abound, driven by unprecedented fiscal and monetary stimulus.

PLATINUM GROUP METALS

Mitsubishi notes that platinum drifted lower for much of June, falling below $800/oz towards the end of June, a level which attracted some opportunistic buying and has helped prices recover some lost ground.

In addition, with much of South African mining capacity still affected by force majeures caused by the Covid-19 national lockdown measures, metal for immediate delivery remains at a significant premium to the forward price.

Mitsubishi also notes that platinum ingot continues to trade at a large premium to sponge as investors remain well disposed to the metal at these price levels.

Investment into ETFs, which are physically backed by platinum ingot, has increased by 250 000 oz (8%) since mid-May while NYMEX warehouse inventory has increased by 50 000 oz in the same period.

Palladium prices remained subdued for much of June, on a downwards trend of limited buying interest despite signs of recovery in the car market on relatively low prices compared with the pre-Covid-19 highs.

Palladium drifted lower throughout June, falling to three-week spot lows of $1 835/oz at the end of June.

The backward trend has, however, eased considerably as shutdowns in the automotive industry have limited physical demand from that sector while mined output from Russia and the US has continued uninterrupted.

Rhodium prices eased back in the second half of June with limited bids in the market, notes Mitsubishi.

GOLD & SILVER

Gold is in a “perfect storm” moment of huge uncertainty as prospects for economic recovery are set against a new spike of Covid-19 infections, says Mitsubishi.

Real interest rates remain in negative territory, the dollar is on the back foot and investors are looking for a risk hedge even as they continue to pile into stock markets. Mitsubishi notes that it is “unsurprising then”, that gold is heading for $1 800/oz value.

Gold has had an impressive quarter, says Mitsubishi, noting that it was up 11% at the end of June, making it the best performance since the first quarter of 2016.

Silver prices meanwhile, traded largely sideways in June, and remained generally below the $18/oz resistance level.

Starting June at a more than three-month high of $18.38/oz, silver lost its way and traded generally in a $1 range of $17/oz to $18/oz for much of the month.

Despite the limited action in the outright price, physical metal was highly in demand by both investors and industrial users. Investors piled into physically backed ETFs, with holdings reaching fresh all-time highs of 767-million ounces, while physical holdings of silver on the Comex exchange also reached record highs of over 320-million ounces.