Rising US-China tensions halt copper price rally

Industrial metals fell back on Friday as warnings about rising tensions between the world’s two largest economies overshadowed a massive economic stimulus announced by Beijing, the world’s top commodities consumer.

Copper trading in New York fell by 3.6% to $2.37 a pound ($5,225 a tonne) in lunchtime trade, halting a rally that saw the bellwether metal gain nearly 20% from lows hit mid-March.

Covid-19 dealt a serious blow to the Trump administration’s January trade deal which included promises by China of hundreds of billions of dollars of US imports of goods and commodities, particularly oil and gas.

China’s move this week to tighten its grip on Hong Kong torpedoed any hopes of a promised phase two trade scheduled for later this year; instead a new set of sanctions is now likely in response.

Peter Boockvar, chief investment strategist at Bleakley Advisory Group told CNBC that Trump “is listening to his hawkish advisors like trade advisor Peter Navarro”:

“The problem now is the global economy was much better when we had this tariff stuff before and was able to absorb it, and now we’re much less able to absorb it.

“Trump is acting out and deflecting and blaming ahead of the election about who got us into this pickle. China is now the archery target for this virus and Trump is going to let the world know: ‘It wasn’t me, it was them.’”

China’s “new infrastructure”

Weakness in the copper price came despite an announcement on Friday of a Chinese stimulus package similar in size than the nearly $700 billion pumped into the economy during the 2009 global financial crisis.

In a note Capital Economics says that the economic measure where more aggressive than expected and points out how China’s physical infrastructure expanded since 2009:

The network of paved roads has almost doubled in size and the freeway network has more than doubled. China has built a high-speed rail network and expanded the regular network by a third. Ninety airports have been built. And developers have built 75 million urban homes. 

Given its widespread use in transportation, electrical grids, manufacturing and construction, copper demand could receive a massive boost by the plan, which is heavily focused on infrastructure spending.

Moreover a large chunk of the investment are destined towards so-called “new infrastructure” mentioned by Chinese Premier Li in today’s announcement says Capital Economics.

That refers to among other things building out 5G networks, “next generation information networks” and charging facilities for electric cars. All of which needs copious amounts of copper.

CHART: Mining exploration spending to drop 29% this year

The rally in the price of gold will not be enough to prevent 2020 turning into the worst year in 15 for global exploration spending.

According to a new report by S&P Global Market Intelligence, outlays for exploration across the industry is set to drop from from $9.3 billion in 2019 to $6.6 billion this year.

Despite a gold price approaching seven year highs above $1,700 an ounce, money spent on drilling for the precious metal this year is likely to shrink by more than $800m compared to 2019.

Chris Galbraith, mining and metals analyst at S&P Global, says the vast majority of gold exploration is carried out by juniors and that sector remains under pressure.

According to S&P Global data, junior mining companies managed to raise $781m during the first quarter, much of it in debt form, an almost 50% drop from the $1.54 billion in financings racked up in the final quarter of 2019.

Global gold production declined last year for the first time in a decade, but before the outbreak S&P Global was expecting around 2m in additional ounces to be poured this year for a total just shy of 108m ounces.

Due to the impact of covid-19 the researcher now expects another down year for gold production with mine shutdowns resulting in almost 2.7m fewer ounces expected for the year.

Latin America and South Africa would be responsible for the bulk of the losses, although Russia appears to be in the early phase of the virus spread and its operational impact. Gold production is likely to return to positive growth next year.

Gold for delivery in June was last trading at $1,725 per ounce in New York, up more than $200 per ounce since the start of the year.

CHART: Mining exploration spending to drop 29% this year
S&P Global Market Intelligence. State of the Market: Mining Q1-2020

Copper market flashing orange

Copper budgets are also being slashed and is forecast to fall by $935m.

Galbraith points out that the copper price is still too subdued to incentivize exploration programmes by juniors while large companies are in capital preservation mode.

Mined copper production this year is expected to fall by 135,000 tonnes to 19.6m tonnes, and refined output by 75,000 tonnes due to falling concentrate supply, lower treatment charges and covid-19 related cutbacks.

The market is nevertheless expected to hit 182,000 surplus for 2020 according to S&P Global, up from previous estimates of a 72,000 tonne oversupply.

Despite the impact of covid-19 the company maintained its average copper price forecast of $5,700 a tonne ($2.59 a pound) for 2020, rising to $6,233 next year and $6,425 in 2022.

Copper was last trading at $2.43 per pound ($5,355 per tonne) on the Comex market in New York, down for the day but still up more than 20% from lows hit mid-March.


RELATED CHART: Global miners have cut their 2020 capital expenditure by about $6.4 billion, (almost 19%) and copper production outlook by 8% or just under 400,000 tonnes for the year.

Iron ore price surges on Brazil covid-19 crisis

Iron ore prices were closing in on triple digits on Wednesday as optimism about a quick recovery in China, where more than half the world’s steel is forged, combined with supply fears from Brazil, the globe’s number two supplier.

According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were exchanging hands for $96.95 a tonne on Wednesday, just off 9-month highs struck yesterday. On the Dalian commodities exchanges iron ore futures climbed for sixth straight session to $107 a tonne, up 20% from early April.

Everyone’s asking the question, what’s wrong in Brazil? The first quarter you can blame weather, the wet season, but now weather is truly behind us as an excuse.

UBS global head of mining, Glyn Lawcock

Iron ore prices have been underpinned by hopes that China, responsible for more than 70% of the world’s seaborne iron ore trade, will spend massively on infrastructure and construction to revive an economy devastated by the coronavirus.

Australia’s Financial Review quotes UBS’s global head of mining, Glyn Lawcock, as saying that falling port stocks and a rebound in Chinese mill output has underpinned prices, but worries about supply from Brazil is behind the latest spike:

“Last year Brazil exported around 350 million tonnes. That’s 6.5 million tonnes a week. They’ve only had one week this year where they shipped above 6 million tonnes. The last three weeks they’ve shipped less than 4.5 million tonnes a week.

“Everyone’s asking the question, what’s wrong in Brazil? The first quarter you can blame weather, the wet season, but now weather is truly behind us as an excuse.

“Brazil is now number four globally in terms of COVID cases. It’s really escalated. So I believe absenteeism in the workplace is hurting production.

“You can’t move dirt working from home.”

Nickel, cobalt prices benefit as electric car action shifts to Europe

MINING.COM EV Metal Index tracking value of battery metals in newly-sold EVs globally rebound as nickel and cobalt-rich batteries favoured in the EU and US gain traction.

Nickel, cobalt prices benefit as electric car action shifts to Europe
Credit: Marvel Studios Spiderman

While electric car sales were crashing in China, the world’s largest EV market by a country mile, customers were still busy kicking tires in Western Europe.

Year to date sales of battery-powered vehicles in the world’s second largest car market surged 37% compared to last year to 142,000 units according to Schmidt, a market researcher.

Preliminary data from Schmidt show EVs made up 6.7% of total car sales on the continent in April – in countries like Norway seven out of 10 new cars sold are now electric (mostly thanks to radical incentives – you even pay half-price for ferry rides and until recently, free parking anywhere). In the UK it was one in three.

Total auto sales in Europe (excluding the UK) fell by 80% with cities under lockdown. EU EV sales dropped by a comparatively healthy 30% last month.

Sales in China also slumped by almost a third during last month, but that figure constitutes a bounce-back – sales of electric cars slumped 80% compared to 2019 the month before. 

Tesla’s boss may be running foul of the law, but its mass-market Model 3 continues to find buyers (despite a mysterious 64% drop in sales in China and unexplained closure of its new Shanghai factory even as covid-19 wanes in the country), not least in Europe where the Model 3 tops the charts. And with the first Model Ys being delivered, the EV pioneer looks set have a much better year than its ICE rivals. 

Upstream the news is not quite so rosy.

Benchmark Mineral Intelligence, a battery supply chain pricing agency and megafactory tracker, shows a deteriorating market.

Prices for the raw materials tracked by the MINING.COM EV Metal Index are all down: The price of lithium dropped 40% year-on-year in March, cobalt (–15%), nickel (–2.4%) and graphite (–26.2%).

Nickel, cobalt prices benefit as electric car action shifts to Europe
Click for full size

That leaves the volumes of raw material in batteries of newly sold EVs to do the heavy lifting in the index. 

Indeed, data from Adamas Intelligence which tracks passenger EV and hybrid registrations (and the metals contained in their batteries) around the world, shows deployment of lithium (down just 2.7% in Q1 on a year-on-year basis), cobalt (+0.5%) and graphite (–1.3%) holding up. The tonnes of nickel in EVs joining the global car parc jumped by 10.4%.  

Overall the value of battery metals in electric cars sold globally reached $411 million during the first quarter, a drop of 14.7% compared to the same period in 2019, a record year. 

Nickel rich, unthrifty cobalt

European carmakers favour higher energy density, longer-range NCM (nickel-cobalt-manganese) cathodes, which together with Tesla’s NCA (nickel-cobalt-aluminum) technology account for over 90% of batteries in passenger EVs. 

Despite further falls in the cobalt price in March, the EV Cobalt Subindex is down just over 20% in the first quarter of 2020 compared to the same three months last year.

Consider that cobalt entering the battery supply chain was trading within shouting distance of $50,000 per tonne this time last year, but has since slumped to the low $30,000s. 

And on top of price declines, automakers continue to thrift the use of cobalt – by far the priciest raw material – in cathodes. While NCM111 (equal parts nickel, cobalt, magnesium) are being phased out in the latest models, cobalt is proving a sticky component of cathodes.

Ingolstadt vs Fremont

For example, the only electric car competing with Tesla at the luxury end in terms of volume is Audi’s e-tron.

Adamas Intelligence head of data and analytics, Alla Kolesnikova, explains that with a battery capacity of 95kWh and a NCM622 battery, the 55 Quattro, uses more than three times the amount of cobalt than Tesla’s Model 3 in the US.

In turn, the 75 kWh Performance AWD Model 3 sold in the US with an NCA battery (Tesla claims less than 1 part cobalt and around 9 parts nickel for its batteries) and the made-in China 56kWh NCM811 version, translates to 20%–30% more nickel per unit of battery capacity than the Audi.

Nickel-rich cathode chemistries like NCM811 now boasts a 9% market share worldwide from less than 2% a year ago and in China in March it captured almost a third of the market based on total battery capacity deployed according to the Adamas battery capacity tracker.

Nickel, cobalt prices benefit as electric car action shifts to Europe

The Nickel Subindex overcame the price slump entirely with the value of nickel in batteries of newly-sold EVs around the world increasing by 15.6% in the first quarter versus Q1 2019. 

That’s thanks to a 77% surge in deployment to over 6,000 tonnes in March making up for a nickel sulphate price down 30% from its peak above $4,400 a tonne in September.

Outlook 

Recovery in the Chinese auto market looks increasingly V-shaped.  

An abrupt change to incentives mid-2019 knee-capped the EV market in China, but Beijing has since brought certainty to the subsidy regime for what it terms new energy vehicles (NEVs). Some provinces have instituted their own schemes and auto manufacturing is destined to be a favoured recipient of stimulus to kickstart China’s post-covid recovery.

EV METAL INDEX - FAQ WHAT IS

In the US and Europe, EVs may escape the worst of the overall auto downturn, which even before the pandemic looked set for a dismal year. Europe’s green car incentives remain generous and a cash-for-clunkers program favouring EVs may well be on the cards.

Raw material prices however are destined for more distress. 

Lithium prices look most vulnerable with covid-19 disruptions in major producing countries Chile, Argentina and Australia doing little to alleviate global oversupply.  

Benchmark lowered its lithium demand projections by 9% to just under 316,000 tonnes on the back of a slowdown in battery manufacture and traditional end markets including glass, ceramics, and lubricants. 

Benchmark’s covid-19 impact assessment lowered its 2020 demand projections for cobalt by 8.6% to 121,000 tonnes with a declining and small market surplus to end-2022.  

Graphite forecast was lowered by 10.2% to 749,000 tonnes with the market deficit emerging only in 2023 from an earlier estimate of undersupply next year. 

Nickel sulphate demand is expected to reach 169,000 tonnes this year and the market to remain in surplus through 2023, despite further delays to projects in Indonesia producing nickel suitable for the battery market. 

The London-HQed company lowered its expected EV penetration rate for this year to 2.7% from 3.1%. That’s the equivalent of 550,000 fewer units in 2020 than previous projections.


Simon Moores, Managing Director of Benchmark Mineral Intelligence will present the keynote: The Global Battery Arms Race: What Next? at the company’s online EV Supply Chain Festival.

The sessions are free, dates are: World Tour East, Tuesday 26 May, 8am London and World Tour West, Wednesday 27 May, 4pm London.

Copper price jumps as Chinese imports surge

UPDATED FRIDAY, MAY 8 @ 2pm EST.

Copper rallied again on Friday after a rebound in Chinese imports of the metal indicated the country’s manufacturing and construction sector may be emerging faster than anticipated from the covid-19 slump.

Copper trading in New York rose by more than 2% to $2.43 a pound ($5,355 a tonne) in early afternoon trade, on track to close at an eight-week high. In March, the bellwether metal briefly traded below $2.00, levels last seen during the global financial crisis of 2008-2009, but has now recovered by more than 20%.

Customs data released Thursday showed China’s refined copper imports in April rose 14% from a year ago to just under 442,000 tonnes, as factories and construction activity continues to ramp up.

Demand in China will continue to improve but there will be some supply risk for unwrought copper as well as for concentrate

Argonaut Securities analyst Helen Lau

For the first four months of the year, copper imports are up 10.4%, also boosted by a drawdown of stockpiles in warehouses overseen by the Shanghai Futures Exchange and arbitrage opportunities for traders between LME and SHFE prices. 

China consumes more than half the world’s copper and last year cargoes totaled just shy of 5 million tonnes, down 6% from a record high of 5.3 million tonnes in 2018.

April imports of copper concentrate rebounded, topping 2 million tonnes for only the third time. Cargoes for the month soared by 22.5% over the same month last year as shipments from South America recover following production halts and logistics problems.

For the first four months of 2020 imports total 7.58 million tonnes, on pace to surpass last year’s record-breaking tally of 22 million tonnes.  

Argonaut Securities analyst Helen Lau told Reuters there may be supply issues for copper concentrates as Chinese demand grows:

“Smelting facilities in South America and Africa will be affected by the pandemic, so certainly I think going forward, demand in China will continue to improve but there will be some supply risk for unwrought copper as well as for concentrate.” 

Lithium price: One in three cars sold in UK now electric

2020 was going to be the breakout year for electric vehicles in Europe as Volkswagen’s affordable ICE killer, the ID3, and other entry-level models propel the continent into becoming an EV mass market.

Instead early data for April show markets across western Europe coming to a standstill as new car sales in Europe, Italy and France fall by 90%. Stunningly, the UK saw the lowest sales total since 1946.

South American export prices for lithium carbonate fell hardest, to half of what brine producers fetched a year ago. 

Battery metals producers can take some cold comfort from the fact that 32% of cars sold in the UK last month were electric, boosted by online sales of Tesla Model 3. 

Across Europe, EV penetration rates are also climbing rapidly showing the consumer shift away from diesel and gasoline has some real momentum. Despite showroom shutdowns beginning early March, first quarter EV sales reached a record high of 217,000 units or 6.5% penetration. 

Lithium oversupply

But that would not be enough to rescue 2020 for lithium producers says Benchmark Mineral Intelligence, a battery supply chain researcher and price discovery company, in a new report.

The London-HQed company, which also tracks battery megafactory (>1Gwh capacity) construction around the globe, believes the pandemic will shave a little over 9% from its previous demand estimates.

Benchmark forecasts lithium demand to reach just under 316,000 tonnes in 2020 on the back of a slowdown in battery manufacture and traditional end markets including glass, ceramics, and lubricants.

As a result Benchmark expects  the market surplus to persist through to 2023. In its April price assessment Benchmark recorded another 5.3% decline in its sales-weighted lithium index, bringing the year-on-year decline to more than 40%.

South American export prices for lithium carbonate fell hardest to the mid-$6,000s – half of what brine producers fetched a year ago. 

China’s V-shape

China, the world’s number one market for EVs, is only now emerging from the pandemic slump, but a quick and robust recover may be in the offing.

China’s Passenger Car Association reported preliminary passenger car sales in the second half of April up by double digits compared to last year, signalling a V– rather than a U-shaped recovery.  

Chinese EV sales are also benefiting from changes to purchase incentives  announced last month.  Subsidies were extended to the end of 2022 and the new phase-out approach may persuade buyers to bring purchases forward. 

CHART: Covid-19 disrupts $6.9 billion of global mining output

Covid-19 has impacted the mining industry across the globe as governments enforce lockdowns and quarantines and companies halt operations because workers and contractors can’t get on site.

S&P Global Market Intelligence in a new report tallies the impact of these mine closures showing Africa and the Americas hardest hit in terms of the number of suspended operations.

South Africa had closed 54 mines as at the end of last week, the US 42 and Mexico and Canada 29 and 28 a piece. In total production at 260 mines in 33 countries have been halted since early March.

Covid-19 disrupts $6.9 billion of global mining output

Most affected commodity in terms of the percentage of annual output suspended is uranium with nearly 12% at 21 mines affected. Platinum closures at 12 mines have affected 3.3% of output over the period while 100 mines producing silver has already impacted 2.4% of global annual production.

S&P Global points out however that at-risk production has started to level off without the notable exception of platinum.

The US-based mining analytics firms cautions that it is “too early in the pandemic’s spread to fully quantify impacts on the supply of commodities”:

Miners are making additional announcements daily, companies continue to withdraw 2020 guidance in light of the uncertainties, extensions to many suspensions are likely, and limited disruptions at certain mines may not even impact full-year production.

New China EV incentives fresh boost for cobalt, lithium price

China yesterday announced changes to purchase incentives for electric and hybrid cars, locally referred to as new energy vehicles (NEV) which earlier this month was extended for two years until the end of 2022. 

Under the modified policy, subsidies are reduced year-on-year through to 2022, starting at a 10% cut this year.

While at first blush this may be a negative BMO Capital Markets, a bank, points out that “there is now an incentive for buyers to bring forward their purchase, whereas previously they may have delayed, supporting both lithium and cobalt markets”:

China is proactively looking to support the auto market, but in a way that aligns with their agenda to reduce pollution. If these new measures are deemed ineffective, China will simply revise policy again in the mid-term.

Any increase in minimum range to receive subsidies may force a rethink at Tesla which often touts the sportiness of its vehicles

Apart from increased government support, covid-19 may boost the vehicle market in other ways: BMO research shows that Chinese living in cities are shunning public transport in favour of car journeys with nationwide expressway traffic up 35% year-on-year. In contrast subway volumes in Shanghai and Beijing have halved.

TESLA and LFP

Another positive for cobalt and nickel prices, are rules announced by the finance ministry to raise the requirements for the driving range and energy intensity of vehicles in order to qualify for the subsidies.

More stringent range requirements favour batteries with NCM (nickel-cobalt-manganese) or NCA (nickel-cobalt-aluminum) cathodes over LFP (lithium-iron-phosphate) which while substantially cheaper, are bigger and heavier and offer lower range.

In a surprise move Tesla opted for LFP batteries for its entry-level Chinese Model 3s over NCA, despite the fact that in order to qualify for the subsidy in its current guise the car must have a range of at least 250km (155 mile).

Light passenger cars fitted with LFPs already struggle to attain this which means any increase in minimum range may force a rethink at Tesla which often touts the sportiness of its vehicles.  

Another obstacle for Tesla’s success in China is that subsidies will only apply to passenger cars costing less than 300,000 yuan ($42,376).  Reuters reports the Model 3 is currently priced at 323,800 yuan before subsidies. 

Incentivized in China

The Chinese auto market, the world’s largest accounting for some 28% of passenger cars sold globally, is particularly sensitive to government subsidies to encourage switching from gasoline-powered cars.

After growing at more than 60% before, NEV sales contracted in 2019 to 1.1m vehicles after Beijing made changes to the scheme mid-year. 

China has set a target for NEVs to account for a fifth of overall car and truck sales by 2025, compared with the current level below 5%. 

The EV industry is a pillar of the ruling communist party’s controversial Made in China 2025 program to dominate hi-tech fields globally.

Cobalt price, nickel usage limit damage to EV Metal Index

Cobalt price, nickel use limit damage to EV Metal Index
Image: Volkswagen.

2020 was supposed to be the breakout year for electric vehicles around the globe.

After a serious dent mid-2019 when Beijing cut subsidies, the Chinese EV market, the world’s largest by a country mile, was expected to return to steady growth. 

Volkswagen’s affordable ICE killer, the ID3, was forecast to propel Europe into becoming an EV mass market (software problems notwithstanding).

And in the US, Tesla’s Model Y compact SUV was set to convince a new cohort of Americans of the benefits of going electric. 

EV METAL INDEX - FAQ WHAT IS

Instead, we have Chinese production down 57% in March and sales down by almost as much, which counts as recovery because over January and February it was down 80% year-on-year. 

European car factories may or may not reopen next week, but the industry’s own predictions for 2020 is an annual sales drop of at least 20% for the overall market and lower penetration rates for EVs as new model launches are delayed. 

Tesla had a great first quarter partly because it was late in closing down its California plant, but 2020 may well herald a return to overpromise and underdeliver for Musk.

Given this backdrop, the MINING.COM EV Metal Index came off fairly lightly going into 2020 with the value of battery metals in electric cars sold globally reaching $154 million during January and February. 

Cobalt price, nickel use limit damage to EV Metal Index

The combined numbers show a 19.1% drop in the index compared to last year. Keep in mind 2019 held the best January and best February in EV industry history. 

On a per vehicle basis, the index in fact reached a four month high in February, not only due to a firmer cobalt price, but also a new peak for the average amount of cobalt and lithium used in batteries on a global sales-weighted basis.

Europe electrified

Cobalt and nickel use in the batteries of newly-sold cars got a boost from the fact that European showrooms were still busy early in 2020 (very busy – some estimates put EV sales growth in Q1 at 56%) while China was gearing down for the lunar holiday and then brought to a standstill by the coronavirus outbreak.

European carmakers favour higher energy density, longer-range NCM (nickel-cobalt-manganese) cathodes, which together with Tesla’s NCA (nickel-cobalt-aluminum) account for the vast majority of batteries in passenger EVs. 

The continued adoption of nickel-rich cathode chemistries like NCM811 also boosted raw material values per vehicle with the January-February nickel sub-index up 32.1% year-on-year to $24.5 million.

Cobalt price, nickel use limit damage to EV Metal Index

The battery mix is likely to change this year, with LFP (lithium-iron-phosphate) units making a comeback, not least because Tesla has opted for this technology for its Chinese Model 3s where range is less of a concern for motorists. 

LFP batteries are significantly cheaper than NCM, but not likely to catch on outside China, meaning market share growth should not come at the expense of cobalt, nickel and manganese demand.

Outlook

Looking ahead, there is still reason for optimism about the EV raw material market in 2020. 

EVs may get support from general stimulus measures to revive the world economy, particularly in Germany and China where automanufacture and specifically EVs are a focus of government industrial policy

On April 1, the Chinese government announced the extension of its state subsidy program for electric vehicles for two years until the end of 2022. 

Yesterday the country’s finance ministry announced revisions to the scheme, including higher requirements for minimum driving range which should also boost uptake of NCM technology.

Cobalt price, nickel use limit damage to EV Metal Index

Faced with the potential of $36 billion in fines (95 euros per vehicle for every gram over the emissions limit!) Europe’s carmakers are desperate to push EVs onto consumers. 

German marques have made such big bets on going electric that they even opposed the relaxing of the continent’s draconion emissions rules, a request made by the automakers’ association under the cover of covid-19 relief.

The US may stay in the slow lane again.

The US auto industry was lukewarm about the roll-back of auto emissions and fuel efficiency targets by the Trump administration, but gasoline at rock bottom prices have rendered the electric car argument about lower total cost of ownership moot anyway. 

But then again, no-one is going to base their cyberpunktruck purchase decision on potential gas savings.  

Gold price rally back on track

The gold price rally resumed on Wednesday as wild swings on financial markets intensified, oil surged by a fifth and physical demand for the metal continued to build.

On the Comex market in New York, gold for delivery in June, the most active contract, jumped by as much as $49.20 an ounce, or nearly 3% to $1,737.00 reversing Tuesday’s decline entirely.

Year to date gold has risen by more than $210 an ounce or 14% as investors flock to safe haven assets.

“Everybody wants to reexamine gold and it’s not a fringe asset anymore. We’ve been run off our feet.”

Peter Grosskopf, CEO of Sprott Inc

A week ago, gold futures peaked at $1,788 an ounce, a seven-and-half year high as central banks around the world pumped trillions of stimulus dollars into the financial markets to prop up economies brought to a standstill by the covid-19 pandemic.

Peter Grosskopf, chief executive officer at asset manager Sprott, a pioneer of the gold-backed ETF industry, told Bloomberg demand for gold “dwarfs the spike seen during the last financial crisis”:

“Everybody wants to reexamine gold and it’s not a fringe asset anymore. We’ve been run off our feet.

“Even though we’re operating virtually, we cannot keep up with the demand to speak with new clients or interested clients. It just keeps climbing.”

Gold 3,000?

Bloomberg reported yesterday Bank of America raised its 18-month gold price target by a full $1,000 to $3,000 an ounce in a report titled “The Fed can’t print gold”:

“As economic output contracts sharply, fiscal outlays surge, and central bank balance sheets double, fiat currencies could come under pressure,” analysts including Michael Widmer and Francisco Blanch said in the report. “Investors will aim for gold.”

That compares to an all-time high just above $1,900 an ounce struck in August 2011 in the aftermath of the global financial crisis.

ETF boom

Global gold-backed exchange-traded funds (ETFs) had $23 billion, or 298 tonnes of net inflows in Q1 2020 – the highest quarterly amount ever and the largest tonnage additions since 2016, the World Gold Council said in its latest report.

During the past year, gold ETFs added 659 tonnes, the highest on a rolling annual basis since the financial crisis, with assets under management (AUM) growing 57% over the same period.

For the month of March, gold ETFs added 151 tonnes for a net inflow of $8.1 billion, boosting holdings to a new all-time high of 3,185 tonnes.