It’s been a crazy, volatile week for precious metals. The Reddit Raiders pushed silver to over $29 an ounce and the white metal took gold up with it. But the run was short-lived and we saw a big sell-off in both metals later in the week. In this episode of the Friday Gold Wrap, host Mike Maharrey tries to cut through all the smoke and mirrors and talks about the underlying fundamentals in both the gold and silver markets.
The decline was primarily driven by disruptions in mine production due to the COVID-19 pandemic. Gold mine output fell 4% on the year. More significantly, it marked the second straight yearly drop in mine production and continued a trend of flatlining gold mine output.
World gold production dropped by 5.4% in 2020 according to preliminary estimates released by GlobalData last week.
Global data projects gold production came in at 108 million ounces last year. The sharp decline was largely due to mine closures during the coronavirus pandemic. But it also fits into a broader trend of declining mine output we’ve seen over the last several years.
Last year, an Australian family found a gold nugget just laying on the ground. Needless to say, this doesn’t happen every day. In fact, finding a gold nugget is quite unusual – even a small one. But every once in a while, somebody discovers a massive nugget. The biggest nugget ever discovered was over 600 pounds!
The Federal Reserve held its first FOMC meeting of 2020. It was mostly met with yawns as the Fed held rates steady, and despite a somewhat dovish tone, indicated that it probably wouldn’t make any moves on interest rates this year. We’ve grown so used to low interest rates that it barely registers that the Fed is actually engaged in extreme monetary policy. Extreme has become the new normal. In this week’s Friday Gold Wrap podcast, host Mike Maharrey talks about it. He also touches on the Q4 GDP report and some interesting gold supply and demand trends.
Which countries produce most of the world’s gold?
Gold mine output has flatlined over the last several years and that trend appears to be continuing in 2019. Gold production rose fractionally in 2018 by about 1% totaling 3,346.9 tons. That compared with 3,318.92 tons mined in 2017 — a modest 28-ton increase year-on-year. According to the World Gold Council’s Gold Demand Trends Q3 report, on a year-to-date basis, mine production ended the third quarter at 2,583 tons. That’s virtually identical to production levels at this point in 2018.
Gold mine output has flatlined over the last several years and that trend appears to be continuing in 2019. In fact, some analysts believe we may be at or near “peak gold.”
According to the World Gold Council’s Gold Demand Trends Q3 report, gold mine output fell slightly with total mine production coming in at 877.8 tons in Q3. On a year-to-date basis, mine production stands at 2,583 tons. That’s virtually identical to production levels at this point in 2018.
Gold demand was up 3% in the third quarter, coming in at 1,107. 9 tons, according to the Gold Demand Trends Q3 2019 report put out by the World Gold Council.
Gold mine output dropped slightly, but a surge in recycling drove a modest gain in supply.
Gold is the “shining embodiment of wealth.” It is not only used to add “extra bling” to our lives; it is also an important component in expensive high-tech electronics and medical devices. Even more fundamentally, gold is money.
But why is gold so expensive — even more valuable than other rarer metals? A video put together by Business Insider offers some perspective. Simply put, it’s a matter of supply and demand. People want gold and there isn’t very much of it.
Here is a summary of some of the significant economic data/news that came out last week.
Third-quarter 2019 new orders for durable goods remain on track for a second annual decline. August 2019 Real New Orders for Durable Goods showed a monthly gain of 0.2% [1.0% ex-Commercial Aircraft], but an annual decline of 4.9% [down by 2.1% (-2.1%) ex-Commercial Aircraft].