April 2021 Market Roundup
Throughout April 2021, the gold price ranged from a low of $1,715.85 at the start of the month to a high of $1,798.20 by the third week - a range of nearly 4.8%. The silver price was also active throughout the month, ranging from a low of $24.31 at the start of the month, to a high of $26.30 – again by the third week.
The price of gold saw an initial boost towards the end of the first week of April as a weaker dollar - coupled with a drop in yields from US bonds - boosted demand. Michael McCarthy, market strategist at CMC Markets suggested that "strong U.S. economic data has eased concerns and have softened the dollar as a safe-haven asset, and gold is being supported". US Treasury yields moved from a 14-month peak, which was achieved towards the start of April, and reduced the opportunity cost of holding gold. This was coupled with reports that economic results from the US were better than predicted, which in turn lifted hopes of a swift recovery, driving investors towards riskier assets.
Figures released in April showed that despite the ongoing Covid-19 pandemic, imports of gold into India, one of the largest global consumers of the precious metal, surged to 160 tons during March. This was an increase of over 470% compared to the same period in 2020, and was said to be due to cuts in duty of 7.5%, coupled with a reduction in gold prices and a rise in demand in both India and overseas.
A similar positive outlook for gold was seen in China, another key international consumer, as the Shanghai Gold Exchange (SGE) reported that gold withdrawals for March 2021 were more than double those reported in the same month in 2020. Although this is promising news, withdrawals are still running behind those reported for 2019, and even lower than in previous years. However, this news is another signal that the economy in China is continuing its strong recovery and could be set to grow by as much as 8.4% this year, according to data from the IMF. As both India and China are the top consumers of gold internationally, any increase in demand could mean a positive outlook for gold in the year ahead.
Towards the end of April, the World Gold Council released the quarterly gold demand trends report for Q1 of 2021. In the report, it was suggested that Q1 gold demand was 815.7t, which was virtually on a par with Q4 2020, but was down 23% compared to Q1 2020. This decline was due to strong outflows from global gold ETFs, and reduced levels of buying by central banks across the world.
However, demand for gold in the consumer sector appeared to have increased, as jewellery purchases were reported to have risen by over 50% year on year. This strong improvement contrasted with the decline in sales witnessed during the global lockdowns in Q1 2020, and was suggested to be an indication that consumer sentiment was increasing as economies emerge from lockdown and head towards recovery.
In addition, the gold price in US dollars was recorded to have fallen by 10% during Q1. This downward trajectory was suggested to be fuelled in part by outflows from ETFs, coupled with a reduction in net long positioning in the futures market.
Lastly, in physical bullion, demand for gold bars and gold coins was recorded to have seen a third successive quarter of growth, as investment in physical bullion continued to prove an attractive option. Investment in these products reached 339.5t, which represented the highest quarter in over 4 years.
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