Following a tumultuous week in the stock market, gold continues its downtrend from $1,803/oz the week before to $1,711 today, losing almost 5% in 7 days. Even worse, Silver which has been on a slow uptrend in recent months took a big hit in the past week. The white metal’s price dropped from a high of $28.26/oz to $26.24 demonstrating a loss in value of 6.3% in the last 7 days alone. Less affected by the current market trend was palladium which had a smaller loss of 3.2% from $2,478/oz to $2,398. Platinum on the other hand was hard hit this week presenting a 7.8% drop in value from its high yearly highs. The metal dropped from $1,265/oz to $1,166/oz in the last week. Continuing to defy all market trends, Rhodium drew another massive rally this week soaring to a new all-time high. From $24,300/oz last week, Rhodium surged past $28,000 sitting at a new all-time high of $28,900.
In the last week, U.S. 10-Year Treasury yields past the psychological levels of 1.300% to 1.486% today. The increase in yields has made non-interest paying gold a relatively unattractive investment in recent times. According to holding releases from multiple hedge funds, the amount of gold futures being held has been cut to its lowest since May 2019. In most cases, the rise in yields is a direct indication of economic optimism, but, as we aren’t living in normal times, many are speculative in the nature of this increase. Some believe that with the massive US stimulus package in addition to rising yield, borrowing costs and inflation will increase.
GOLD FUTURES (COMEX) (3 MONTHS
image by Tradingview; Gold Futures COMEX @2021
In contrast, Rhodium has been continuing its massively bullish run soaring 18.9% in the last week. The main cause of this remains that Rhodium sits on an extremely tight supply relative to the demand it faces. Worldwide, strict emissions regulations have been implemented slowing down the speed at which Rhodium can be extracted. In fact, much too slow for the demand pouring in from China and Europe. The Chinese market remains the largest producer and consumer of vehicles in the world. With strict nitrogen oxide restrictions put in place worldwide, auto-makers turn to Rhodium to construct catalytic converters in order to reduce emissions. According to the S&P, the COVID-19 Pandemic hugely disrupted the South African supply of Rhodium, demonstrating a loss of about 130,000 oz. To put into perspective, that represents about 22% of the yearly global supply.
The huge drops in the electrical vehicle (EV) market all week long, increase in yields, insecurities around COVID-19 economic recovery and vaccinations have all attributed to this week’s massive swings in prices. It is hard to tell where the market will swing next. Many believe that if gold can move upwards of the $1820/oz resistance, then another upwards trend will be likely. On the other hand, the drops in the EV market have raised questions on its readiness and its current value, causing a rework around the metal prices that supply its production.
