Gold Catches A Bid!
Friday, 16 April 2021
We commented in recent market updates the battle between physical investors who are buying in droves at these levels VS ETF investors who have been liquidating since August. The key level for gold was $1,680, and we had to hold that level from a technical perspective to remain in the uptrend since 2019. With the benchmark 10-year Treasury yield sliding back to a one month low this week, we saw gold catching a bid to rise back above $1,750 USD.
Much of the action in financial markets has been focused on the crypto space in the past few weeks with bitcoin making new highs yet again. We will cover some of the moves in crypto this week as well as the continuing development in the silver market of investors standing for physical delivery.
Gold rose 1% this week after 10-year Treasury yields dropped back to 1.57% as the obsession with 10-year yields continues. In the short-term it looks like the sell-off in the bond market has taken a pause, as yields start to roll over. If we continue to see the trend in the 10-year yield move lower this should support gold and silver prices, however the long-term outlook does not necessarily require lower yields for gold to perform well, as inflation will likely be a big part of the gold story in the years to come. Silver also had a positive week this week, rising back to USD$25.80 per ounce, but no doubt there is some attention and money flows heading the way of the crypto market that might otherwise be moving in to precious metals.
Bitcoin managed to break out into new all-time highs this week, with seemingly everyone getting on board the crypto train once again in the hope of cashing out some valuable fiat. Coinbase listing on the US stock exchange is somehow seen as bullish by the market, despite the owners literally selling the business for a big chunk of fiat currency. The fact that a crypto exchange has been listed on the Nasdaq does not add to the credibility of crypto currencies, it is simply a business that has strong earnings in fiat, listing on the stock exchange. The buy/sell spread on cryptocurrencies makes exchanges very profitable business models, obviously those businesses would be attractive to investors.
What would add to the credibility of crypto currencies would be an explosion in their use VS conventional currencies, and despite seeing some business slowly starting to accept cryptos as payment, hardly anyone investing has any interest in actually using the currencies in their everyday life. It’s all about the gains in fiat and selling to someone else at a higher price.
Even ripple which had the most absurd bubble in 2018 looks to be repeating itself. No doubt the market is taking some of the shine away from precious metals, as the gains in some of the alt coins have been incredible in the past 12 months. One lesson from the market is never underestimate the stupidity of the masses. Ripple for example is doing a mirror image of the 2018 spike and it will eventually end the same way.
To silver again now, and there is a significant number of investors that are contacting us about moving metal out of other forms of storage here in Australia to an allocated and segregated solution at Guardian Vaults. It comes about after the #silversqueeze movement has been growing online, with stories around delays in physical supply of metal out of storage accounts globally. We have seen a big increase in demand for our larger safe sizes such as the 100 and 200 series for those looking for complete piece of mind.
Perth Mint has been offering clients the 1,000-ounce silver bars for delivery, but arguably, these should not be a bar size for retail investors. One thing to note about the 1,000-ounce bar size, it actually creates quite a few problems, so it would most likely be better to wait until you can be supplied with more reasonable sized 100 ounce or kilo bars. Firstly, you have the problem of shipping. Many high value cargo companies won’t touch these bar sizes as they are an OH&S issue weighing 30 kilograms each. So sometimes you can’t get a good rate on shipping them interstate, if any at all. Then you have the issue yourself of dealing with these bars yourself, which again is back breaking work, and very inconvenient when you want to find a safe deposit box that actually fits them. Finally, after all this, if you do manage to get them stored away safely, comes the issue of selling. Guardian Gold for example currently do not buy these 1,000-ounce bars from investors, as they are a nightmare to then on-sell to new clients, especially during normal times where other bar sizes are readily available. They are also an OH&S issue which come at extra danger for those handling them.
What you could find is you end up in a scenario where it is very difficult to find a retail bullion dealer willing to buy them from you, without charging additional fees. So before requesting delivery of these items there are definitely a few things to consider which may impact your investment further down the line. If you need help or guidance on this topic, feel free to contact our office.
Lastly, we continue to have very tight supply when it comes to bullion, however we do have various options for investors, which changes daily. You can keep an eye on our specials page for the latest updates. We also improved our buyback rate for both gold and silver this week to -3% below spot for gold and -4% below spot for silver.
Until next week,
Guardian Gold Sydney
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