After giving up their early gains during the course of trading on Wednesday, both the silver price and spot gold market recovered overnight to roughly unchanged. Between continued buying of sovereign debt and reports that gold demand continues to be strong, the precious metals were steady on Thursday morning. Gold traded just shy of $1,345/oz while silver settled around $20.10/oz.
However, the Platinum Group Metals (PGMs) were each considerably in the red, with platinum and palladium shedding 1.5% and 2.75%, respectively.
Strong H1 Gold Demand
According to the World Gold Council (WGC), the global demand for gold was the second-highest on record during the first half of 2016, coming in at 2,335 metric tonnes. This was buoyed by 1,050 tonnes of gold demand during the second quarter, a 15% increase year-on-year. Better still, nearly half of the Q2 gold demand was made up by investment demand (448 tonnes) as opposed to jewelry purposes.
According to Alistair Hewitt, the Head of Market Intelligence for WGC, “The global picture for gold is dominated by considerable and continued investment demand driven by the West as investors re-balance their investments in response to the ever-expanding pool of negative yielding government bonds and heightened political and economic uncertainty."
It makes sense that investors would be aggressively adding gold to their portfolios given the current environment. Everyone is looking for safety. In fact, despite the pathetic yields offered by sovereign debt, these government bonds continue to be snapped up on the marketplace due to their perceived safety. When there is continued demand for such low-yield (or even negative-yield) bonds, the precious metals will continue to be an attractive option by comparison.
IEA Comments on Outlook for Oil
The industry experts at the International Energy Agency (IEA) are finally offering some encouraging news for the crude oil market. Following record-setting oil production from the Gulf states last month, the IEA forecasts a "rebalancing" for the global oil trade over the course of the next few months. As is the case with most markets, the increased output and build-up of a crude oil supply glut is expected to balance itself out as producers draw down their bloated inventories rather than continue to add to their idle stockpiles.
If correct, this expectation could bring to bear higher oil prices for the first time in roughly two years. With a steady rise in the production and supply of crude oil without strong demand for energy to match it, crude prices have consistently been stuck around $40 per barrel.
Brexit and the Housing Market
In the U.K., the housing market is struggling under the pressure of the uncertainty wrought by Brexit. A report by the country's Royal Institution of Chartered Surveyors showed some troubling trends, including the fastest declines in home sales since the financial crisis in 2008. Moreover, the price of houses that did sell grew at its slowest pace in three years. This naturally dragged down equities tied to the U.K. housing market.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.