Golden Eye On Precious Metals | The Corona Correction | Refinitiv
Welcome to the Corona Correction Series in association with Refinitiv. I'm your host, Roger Hirst. Gold is obviously a huge topic at the moment. It has performed very well for most of the last 12 months as investors of all types have treasured its safe haven qualities. But, during recent sessions, the gold price has also succumbed to the volatility that has infected global asset prices. Cameron Alexander is director of Precious Metals at Refinitiv. I asked Cameron to compare the current price action with the longer term outlook. Hi, I'm Cameron Alexander, Manager of Precious Metals Research for Commodities and Content and Research Team. Gold is generally a very good safe haven asset, and we tend to see gold used as a hedge against the uncertainty in the marketplace. And we saw that in the last couple of weeks. We saw gold pushed up to a seven year high over the last year, a week or so ago. But things have changed quite dramatically this week over the last couple of days we have seen significant falls in the stock markets globally. And that's just really given a push, a rush on gold. We've seen heavy sell off in gold market over the last couple of days. Why is that? It's mainly because gold is easy to sell. It's very liquid. And so what we're seeing is gold being sold off so they can make margin calls on stocks that are being pushed downwards. So traders are forced to begin selling their their assets and gold is being one of them. So they can meet these margin calls. We've seen significant downside for precious metals right across the board. We saw a 5% drop last night on gold prices, pushing gold prices back to where we saw them back in November. We've seen a 12% fall in gold prices in just the last week or so. Other metals in terms of silver, platinum and palladium have been hit even harder, mainly because they are classed as industrial metals, more so. Physical markets, I think it's worth touching on, have been incredibly weak over the last three months really this year. The main markets in India and China have been very, very soft and we've seen these markets trading at a discount to the international spot price. And even though the prices today are trading below fifteen hundred dollars, I'd be very surprised if bargain hunters come into the market with the market really quite risk-averse at the present time. So what's the outlook? You know, I think really if we look at gold now, I think gold still is quite vulnerable to further downside pressures as the stock markets are at high risk. That said, I think if the markets can stabilise, then it's more likely the fact that we could see gold moving back to a safe haven asset. And I think the market will look to gold as a way of protecting further, further downside. The gold has come up a lot. So I think that we could see some good flows of gold over the next few weeks and months coming forward. I think that, you know, now we have a situation of very high uncertainty in the economic world, the potential for very low interest rates, historically low interest rates in terms of negative in many countries, which are going to really stimulate gold demand over the long term. So even though we've seen quite a big fall in the gold price in the last week or so, I think the long term view is very positive. And we will not be surprised if we take history as any guide, that we will see record, potentially record prices towards the end of this year and even into to 2021. Cameron again highlighted that even safe haven assets aren't immune from margin calls and the need to raise cash from the winners in order to pay for the losers. The rest of the precious metals complex has experienced even greater price swings. And for now longs in the gold futures market remain extremely high, which acknowledges Cameron's view that the potential remains for more liquidation. But the longer term outlook should be supportive. Gold has generally been ebbing and flowing with real yields, and that's inverted real yields, for the last five years. And those real yields are expected to stay low or negative for the foreseeable future. We'll see you tomorrow with another update.