Precious Metals Were the Winners in H1 2020… And It Wasn’t Even Close

This Could Be the “Perfect Storm” that Pushes Gold 
to a New Record High

Every year around this time, we check in with raw materials for our popular commodities halftime report. This year, it wasn’t even a competition.

Precious metals were the big winners for the first six months of 2020. Spot gold took the first place position, rising over 17 percent, followed in second place by silver, up nearly 2 percent. Palladium rounded out the top three, essentially flat at negative 10 basis points.

gold is trading higher in june 2020 than it has in june for the past 10 years
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Platinum—which, like palladium, is used in the production of emissions-scrubbing catalytic converters—trailed substantially behind its precious metal brethren for the six months as global auto sales plunged amid coronavirus lockdown measures.

However, that may be set to change. Automobile manufacturers in China, the world’s number two auto market, announced today that second-quarter sales increased more than 10 percent compared to the same period a year earlier. In fact, June sales in China hit a new record high, with 2.3 million vehicles sold.

Gold in a Secular Bull Market… Ready for $2,000 an Ounce?

Gold had a phenomenal week, notching its fifth straight week of gains as investors sought a safe haven from sinking government bond yields. On Tuesday, the yellow metal broke through the $1,800 an ounce resistance level for the first time since 2011. It touched a nine-year high of $1,828 on Wednesday before declining on profit-taking, but it’s clear to most analysts that the precious metal is in a secular bull market.

Many are now predicting all-time record highs for gold in the next 12 months, with Goldman Sachs forecasting $2,000 on an “uneven recovery.”

“Go long copper, silver and steel, and stay long gold,” Goldman analysts said in a note to investors this week.

Gold stocks and gold-backed ETFs continue to see incredible inflows during this rally. Gold mining seniors, as measured by the NYSE Arca Gold Miners Index, were up a phenomenal 145 percent for the 12-month period.

Meanwhile, holdings in total known gold-backed ETFs stood at a record 104.3 million ounces on July 9, the equivalent of more than 2,956 metric tons. To put that massive sum into perspective, 2,956 tons is more gold than any country on earth has in its official reserves, except for only two: the U.S. (8,133.5 tons) and Germany (3,363.6 tons).

gold is trading higher in june 2020 than it has in june for the past 10 years
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In a note dated July 7, the World Gold Council (WGC) commented that the long-term investment case for gold remains intact.

“The economic and geopolitical environment remains supportive for gold investment, with most of the existing gold demand drivers still relevant,” says the London-based group, adding: “The opportunity cost of holding gold remains low, as continued central bank activity keeps interest rates low or negative, while several countries continue to experience high levels of tension/unrest.”

Indeed, the amount of negative-yielding global government bond yields has surged some 81 percent since March 19 and now stands at just under $14 trillion, the most since early March.

Silver has likewise been catching a bid. The white metal touched $19.37 an ounce this week, just below its 52-week high of $19.54.