June 2021 Roundup - Precious Metals

June 2021 Market Roundup 

Economic Impact 

In the first week of June, US employment and service sector data was released which proved to be more favourable than some had previously predicted. This data boosted expectations of a promising economic recovery in many sectors. As a result, the gold price fell by more than 2%, while silver and platinum fell by 4.3% and 3.7% respectively.  

Despite the positive news around US employment rates, inflation continues to be a concern globally.  After reaching a two-year high of 2.1% by the end of May 2021, The Bank of England’s former Chief Economist, Andy Haldane, predicted that UK inflation rates will surpass 4% by the end of the year, which will result in higher prices in restaurants, for household and DIY goods and fuel. Rising rates of inflation have traditionally been a driver for increased gold demand due to the precious metal’s role as a store of value - the price of gold has traditionally outpaced consumer price inflation. 

Many individual investors are using the current price dip as an opportunity to buy gold, especially as there are indications of continued positive performance in the months ahead. In June, the World Gold Council revealed that demand for bullion coins and bars is still greater now than it was last year, and the average price of gold is forecast to hit $1,974 per ounce in 2021; 11.5% higher than the average price in 2020. 

Central Bank Purchases 

Central Banks continued to add gold to their reserves throughout June - as has been the trend for 2021 so far. In fact, the sector added between 150-200 tonnes of gold to reserves in total. A significant portion of this increase came from banks in central and eastern Europe. Hungary reported that they had tripled their gold reserves to a total of 95 tonnes and Poland confirmed that they had added over 200 tonnes to their national reserves over the course of the last two years.  

International Update 

The World Gold Council’s ‘Gold Demand Trends’ report for June explained how German consumers had bought more gold bars and coins in 2020 than in any previous year, even when compared to the period following the global financial crisis of 2007-2008. It also cited a survey whereby 40% of German gold-buyers revealed they intended to purchase more gold in 2021, citing the coronavirus pandemic as their main driver. 

In India, it was reported that as a result of ongoing virus case rates, demand for gold was still falling short of expectations in June. ‘Brick and mortar’ retail is the most common method of purchasing gold in India and various lockdowns have prevented customers from visiting these stores during the pandemic. These physical shop-owners commonly use discounting as a tactic to drive interest in the metal and the start of June saw discounts of up to $12 an ounce offered, the largest seen since September 2020. Furthermore, whereas gold purchases would traditionally take place in smaller, family-run stores in India, many consumers are now turning to larger, retail-style chain stores that are less crowded and afford more space and distance to shoppers. 

Platinum Predictions 

June saw a positive outlook from the World Platinum Investment Council regarding future demand for platinum, especially in industry. They suggested that “platinum industrial demand in 2021 is expected to rebound by 25% over the 2020 level, to 2.4 million ounces, 13% above pre-pandemic levels, driven principally by demand from the petroleum refining, chemical and glass sectors”. The industrial uses and demand for platinum are often said to be overlooked in favour of demand trends in the automotive and jewellery sectors. However, platinum plays an important role in industry as it is used in the manufacturing process for a variety of items including glass fibre insulation in the construction sector and even as part of the glass production process.

Cryptocurrency Volatility 

A World Gold Council report released at the beginning of June suggested that gold has proved to be one of the most stable asset classes from a volatility perspective; both during the market disruption seen throughout the pandemic and during the subsequent rebound. This is because the value of gold in recent months has remained more or less stable, especially when compared to other investment options such as cryptocurrencies, which have demonstrated significant volatility over the last two years. For this reason, the World Gold Council continue to advocate gold as a safe haven and an effective diversifier, particularly within portfolios that also hold riskier assets. 

In China, efforts continue to pursue a crackdown on the cryptocurrency industry, which resulted in a decline of around $400 billion off the value of the cryptocurrency market over the course of just 3 days. This decline was seen following an announcement on Friday 18th June, that authorities in China’s Sichuan province ordered cryptocurrency miners to shut down their operations. In addition to this, the People’s Bank of China applied further pressure on financial institutions not to provide services related to cryptocurrency activities including clearing and settlement. 

The Royal Mint Update 

The Royal Mint continued to experience elevated demand for bullion products and digital precious metals from customers all over the world during the month of June, with particular interest from the US, Europe and the UK. Popular products included the iconic 1oz Bullion Britannia coin in both silver and gold, along with DigiGold - which allows customers to purchase portions of physical gold bars which are stored within The Royal Mint’s vault. 

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