Feb 2020


Feb 2020

Weekly markets round-up for StoneX Bullion

By StoneX Bullion

Welcome to a very brief overview of the recent performance in the markets. The essentials are captured in the table below and each week we will show a chart of interest.

The COVID-19 virus remains the focus of the international markets and a number of natural resources companies are reporting their results this week; it will be revealing to see what some of them have to say about the conditions in China and the impact on the supply chain. Among the most informative will be Australia-based giant BHP, which reports on Tuesday 18th. Meanwhile much of the country remains in lockdown with some companies not now coming back to work until March and schools closed until 16th March.

The gold market in China is of course non-existent at the moment, and demand over Chinese New Year, before the virus had closed its grip on the country, was poor by comparison with normal conditions. Last week the Chairman of the Hong Kong Jewellery Manufacturers Association said that he was expecting a 70% fall in Q1 jewellery demand and that in 40 years in the business he had never seen a situation as bad as now. Greater China’s jewellery demand in Q1 2018 was approximately 198 tonnes, or 41% of the world total so we could easily see a shortfall this quarter of 140 tonnes.

On the other hand, gold ETF demand remains healthy, with 26 tonnes added this month and 65 tonnes in the year to date, for a net dollar inflow of $3.3Bn. They now stand at a record level of 2,599t, with a value at today’s current price of $1,580 of $132Bn. Holdings in Europe are not far behind those in North America; as of the end of January (the latest date for which we have a breakdown) they stood at 1,355t against North America’s 1,468t. Since the start of last year the European funds have added 221t against 232t in North America (see chart below).

In the professional markets conditions are quiet and essentially gold is trading a range between $1,550 and $1,580 with good buying appearing on any dips towards the lower level. With geopolitical risk still an important factor, and China, Hong Kong and Singapore all talking of adding fiscal stimulus, plus Mme. Lagarde in the ECB and now also Mr. Powell of the Federal Reserve calling for fiscal stimulus in their own regions, the dynamics behind the gold price remain positive rather than negative.

Thought for the day

If the world’s gold ETFs were a central bank they wold be the fourth largest I the world in terms of gold holdings, behind the United States, Germany and the IMF.

Chart: Gold Exchange Traded funds (tonnes); January 2003 to end-January 2020