May was a big month for metals, with lots of interesting developments. Here’s the current state of gold, silver, copper, platinum, and palladium.
For weeks, gold has shown increasing signs of stirring to life. Like most metals, it has seen rising production in 2021, as mines open up and COVID restrictions begin to ease, but because the amount of the material being recycled has gone down, there’s still a huge gap in supply and demand. A weakening dollar and inflation fears are also helping lend support to gold’s price.
Earlier this week, the precious metal broke past $1,900/oz and stands at $1,906.50/oz, as of Thursday. Guggenheim CEO Scott Minard thinks it might ultimately hit $5,000-$10,000/oz. In an interview with CNBC he said that “as money leaves crypto and people are still looking for inflation hedges, gold and silver are going to be much better places to go.”
He also highlighted gold and gold miners.
For example, the Sprott Physical Gold Trust (PHYS) holds physical gold bullion. For gold miners exposure, the Sprott Gold Miners ETF (SGDM) offers active exposure gold miners while the Sprott Junior Gold Miners ETF (SGDJ) tracks junior gold miners.
Silver prices have been lagging in the last few weeks, even as gold has been enjoying a two-month rally, but silver’s unique position as both a precious metal and an industrial metal makes it an important commodity for investors to keep an eye on.
Analysts at Metal Focus recently issued a report saying: “In spite of growing concerns about new variants of the virus, ongoing fiscal and monetary stimulus measures will help to support economic growth and so continue to benefit industrial commodities. These accommodative measures and their impact on economic growth raise the prospect of growing inflationary pressures. This, in turn, points to real interest rates remaining depressed, which will be supportive of investment in both gold and silver.”
The analysts indicated that given silver’s smaller market size and gold’s likelihood of strengthening throughout the year, silver should outperform to the upside. Silver is also a key component in solar panels and other environmentally friendly technologies, so there’s reason to believe silver is going to be in demand in the coming years.
Copper prices have had a wild, bullish May exploding to $10,747.50 per ton at their high points this month. Previously, copper prices bottomed out at $1.94/lb (or $4,296.76 a ton) in 2016. The last time copper enjoyed a similarly sized bull market was between 2001 and 2011, where the metal increased its value from $.60/lb to $4.62/lb.
Analysts from Goehring and Rozencwajg noted the following in a report: “We would not be surprised to see copper prices again advance a minimum of seven-fold before this bull market is over. Using $1.95 as our starting point, we expect copper prices to potentially peak near $15 per pound by the latter part of this decade.”
Investors interested in copper can look at the United States Copper Index Fund (CPER), an ETF that tracks the performance of an optimized blend of copper futures; or the iPath Series B Bloomberg Copper Subindex Total Return ETN (JJC), an ETN that tracks the price of a single futures contract along the curve.
Palladium and Platinum
Both palladium and platinum have exhibited remarkable performance throughout the COVID crisis, each recovering from early blows at the start of the global pandemic. That is likely to persist. Demand continues to greatly exceed supply for palladium, despite record recycling numbers from automotive scrap and higher mining output from South Africa.
Automotive manufacturing took a sharp dive of 15% in 2020, and is expected to rise significantly in 2021, which will also buoy the price for both metals. Palladium prices are sitting near $3000, which is benefiting platinum as manufacturers look to sub out palladium for its more affordable cousin. These metals are expected to continue to strengthen throughout the year.
Sprott Physical Platinum and Palladium Trust (SPPP) is a closed-end trust that invests in platinum and palladium bullion.
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