Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
Gold price recovered Monday from last week’s drop as investors keep embracing safe-haven assets during a tumultuous economic environment hit by the covid-19 pandemic.
The logistics of transporting physical gold have also been impacted by the pandemic, with the precious metals industry scrambling to keep the market moving. Transportation costs have surged about 60% as a result of the worldwide lockdowns, increasing the premiums paid for metals.
Spot gold bounced back above the $1,700 an ounce mark early on Monday, rising 0.2% to $1,703.57 as of 2:30 pm EST. Gold futures for June delivery were up 0.6% on the Comex in New York.
UBS Investment Bank strategist Joni Teves believes the price of gold could “break the highs” seen earlier this year, with the scale of the global pandemic and its potential economic fallout driving up demand for safe haven assets like gold.
Recent moves in gold have been mostly driven by investor interest, particularly institutional investors
“Gold is becoming attractive in this environment where uncertainty is very high, growth is expected to weaken, and at the same time you have negative real rates which make gold attractive to hold as a diversifier in investor portfolios,” Teves said.
There is “growing potential” for the gold price to break $1,800 per ounce, said Teves, whose firm has set a target price of $1,790 per ounce.
She added that the recent move in gold has been mostly driven by investor interest, particularly institutional investors.
Last week, the World Gold Council reported that investment demand for gold surged 80% during Q1 2020, highlighting the coronavirus outbreak as the “single biggest factor” influencing demand, even offsetting a sharp decline in consumer activity in the sector.
Large government expenditures to reinvigorate economics hit by covid-19 have raised concerns over the value of currencies relative to real assets in the future.
“Fiat currencies post covid-19 will not be the place to be invested,” said David Lennox, resource analyst at Fat Prophets, referring to government-issued currency that is not backed by a physical commodity.
