This chart highlights one major driver behind the Gold rally. The rise in negative-yielding debt >$15 trillion has helped take gold to a new record.
Central banks added a net of 39.8 tons of gold in May, according to the latest data from the World Gold Council. May purchases maintained the pace we’ve seen through the first four months of the year and was slightly above the four-month average of 35 tons.
So far in 2020, central banks have added a net of 181 tons of gold to their reserves. That’s about 31% lower than the total through the same period last year. The lower rate of purchases in 2020 was entirely expected given the strength of central bank buying both in 2018 and 2019.
The world’s second-largest silver producer saw its mine supply fall by one-third due to lockdowns stemming from the global contagion. When the Peru Ministry of Mines released its metals production figures last month for April, the country’s domestic silver mine supply fell by a stunning 74%.
Then on July 3rd, Peru released its production figures for May. While the decline in Peru’s silver mine supply in May wasn’t as bad as April, it was still down 66% versus the same month last year. Peru’s silver production fell to 85 metric tons (mt) in April and 116 mt in May:
The data from Peru’s May Mining Statistical Bulletin shows that during the first five months of 2020 (Jan-May), domestic silver production is down 485 mt, or 32%, compared to the same period last year. Already, Peru has lost 15.6 million oz of silver production in 2020.
Secretary of State Pompeo told Fox News earlier in the day that the US was mulling the possibility of banning social media app TikTok in the US, but tonight Bloomberg reports that some top advisors have suggested the Washington should undermine the Hong Kong dollar’s peg to the US dollar.
According to people familiar with the matter, Bloomberg reports that the idea of striking against the Hong Kong dollar peg - perhaps by limiting the ability of Hong Kong banks to buy U.S. dollars - has been raised as part of broader discussions among advisers to Secretary of State Michael Pompeo but hasn’t been elevated to the senior levels of the White House, suggesting that it hasn’t gained serious traction yet.
Citi raised its gold price forecast this week. It now projects a three-month price of $1,825 per ounce and for the yellow metal to head into record territory in 2021. Citi analysts expect gold to eclipse the $2,000 mark early next year.
Citibank joins several other mainstream players that now project record gold prices in the coming months. Last week, we reported Goldman Sachs now forecasts record gold prices within the next 12 months and Bank of America released a note saying gold could break its US dollar record by the end of the year if it continues to breach key resistance levels.