Insights: Posts from June 2021

Costs in the gold mining industry increased for the second consecutive quarter in Q1’21, with the global average All-in Sustaining Cost (AISC) up by 5% q-o-q to US$1,048/oz, reaching its highest level since Q2’13.

The Shanghai-London gold price spread again turned negative in June after being positive since early 2021, falling to -US$6.7/oz on 2 June and remaining negative most days during the month.

Last month, we held a webinar with S&P Global and our Members at which S&P presented their Corporate Sustainability Assessment (CSA). Many of our Members already submit the CSA and this was an opportunity to review industry data from past assessments and discuss how elements of the RGMPs could potentially be incorporated into their methodology going forward.

Joining us for this episode in our Strategic Edge video series is Alasdair McKinnon, Manager at The Scottish Investment Trust, in conversation with John Reade, our Chief Market Strategist.

Gold’s price has dropped by almost 7% since the end of May. Most of the move can be attributed to an increase in interest rates following last week’s US Federal Reserve (Fed) FOMC meeting. Gold’s reaction is not surprising given that it has experienced higher sensitivity to interest rates over the past year

Summary

• The domestic gold price ended 5.1% higher in May at Rs48,993/10g 
• Retail demand collapsed amid COVID-induced lockdowns in the country 
• Indian official imports slowed and the local market flipped to discount 
• Monthly inflows into gold ETFs slowed as higher returns lured investors towards the equity market. Total holdings for Indian gold-backed ETFs (gold ETFs) reached 33.2t by the end of May; a net inflow of 0.1t (Rs2.9 bn; US$39mn)
• The Reserve Bank of India (RBI) added 0.9t of gold to its reserves in the month increasing its total gold reserves to 696.2t.
   

Explore China's gold market in May - gold price, consumer demand, outlook and more!

Celia Dallas, Chief Investment Strategist at Cambridge Associates, is the latest industry expert to join us for our Strategic Edge Video series. In a dynamic discussion with our Head of Americas, Joe Cavatoni, she shares incisive and timely insights. 

As Krishan Gopaul’s blog post last week pointed out, central banks have been buying gold during the first four months of 2021. Over that period, we estimate that the official sector has added 150-200 tonnes of gold. 

The World Gold Council is launching the Central Bank Dashboard, an innovative web-based tool that allows the comparison of central bank gold reserve holdings across regions, income levels, foreign exchange arrangement and other qualitative and quantitative indicators.

The Central Bank Dashboard provides users with the flexibility to visualise trends in gold and foreign exchange reserve holdings across a multitude of vantage points. 

As Basel III comes into force, we look at the impact of the Net Stable Funding Ratio (NSFR) on the gold market.

There has been much debate about the implications of Basel III on the bullion industry. What is clear is that the under the current rules the cost to banks of holding gold on balance sheet will increase – the NSFR requires 85% of required stable funding. 

Our short-term gold performance model enables investors to dissect monthly gold returns into key drivers of investment demand. Different estimation windows provide additional insights on the varying influence of drivers over time. During May, our model shows gold’s performance was only modestly impacted by rates but they still remain a relevant driver this year.

There has recently been a lot of discussion and debate around the possible similarities and differences of gold and Bitcoin (and, by implication, other cryptocurrencies), and this has often included consideration of their relative environmental impacts and, specifically, their carbon footprints.

We have written before about how, after a more inconsistent picture for central bank demand in the second half of 2020, our expectation was for continued net purchases in 2021 but at a more moderate pace than in previous record-setting years. So, how is that expectation holding up?

Listen to this podcast ‘Back to the gold fold’ for topics including US real rates, gold demand trends in consumer and investment markets, the COMEX market dislocation and the differences between gold and cryptocurrencies

Investor confidence in Germany recently jumped to a 21-year high, cheered by an acceleration of the domestic coronavirus vaccine programme and concomitant slowing of the domestic third wave of coronavirus. But while optimism for an economic upturn runs high, it brings with it growing fears of rising prices among inflation-wary German investors.