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Q4 2020 - The Golden Barometer

Wednesday, January 20, 2021

It is arguable that no period in recent history so clearly demonstrated gold’s role as a barometer of social and economic confidence as 2020 and in particular, during the final quarter of the year.

COVID-19 was the primary driver as news of the development and subsequent licensing of vaccines, production and distribution issues, the second wave (and third) wave of lockdowns, and the new virus variants, exacerbated or tempered investors’ fears. But there were other factors in play.

The first, also virus related, was dollar weakness reflecting the unprecedented fiscal and monetary stimuli applied by the US Treasury and Federal Reserve to manage the US economy and unemployment rate. The cost of these interventions prompted the dollar’s decline vs the euro of -7.8% in 2020 (including -3.15% in Q4), and equivalently -4.7% (-2.2%) vs the Japanese yen, which provided a concomitant boost for gold (in dollar terms).

A second factor was the uncertainty surrounding the outcome of the US Presidential Election of 3 November. Gold started the month at $1,886.750 and through 9 November reached $1,957.450 before reverting to the high $1,800s as the double impact of the Biden victory, and moreover, the confirmation of the first effective vaccine (Pfizer/BioNTech), prompted an intraday price fall of 4% on 9 November. The remainder of the month witnessed a slow price decline as a wave of positivity swept the global markets. The gold price turned upwards from its quarter low of $1,791.950 on 30 November to end the year at $1,891.100 - little changed in the quarter but with a gain for 24.37% for the full year.

Key Statistics: 2020 whole year and Q4:
2020 Gold     Q4 Gold  
Price High - 6 Aug $2,067.150   Price High – 9 Nov $1,957.45
Price Low - 19 Mar $1,474.250   Price Low – 30 Nov $1,762.55
Low/High range 40%   Low/High range 11.1%
Volume High - 29 Jul 89.4 mn oz   Average daily volume 31.73 mn oz
Value High – 29 Jul $174.3bn   Average daily value $60.0 bn
Average daily volume 35.1m oz      
Average daily value $62.0 bn      

The silver market exhibited a different aspect to gold in Q4. Following the March COVID drop to the low of the year ($12.005), the silver price gained inexorably through the succeeding five months to top out at $28.885 on 1 September, fading to $22.150, its low of the final quarter on 30 November.

Since then, the metal regained upside momentum closing at its Q4 high, $26.485, on the last day of the year, up 12% in the quarter and $47.8% during 2020. An exceptional statistic worth noting is that from its 2020 low on 19 March to its high on 1 September, silver recorded a price run of +140.6%.

2020 Silver     Q4 Silver  
Price High – 1 Sep $28.885   Price High – 21 Dec $26.485
Price Low - 19 Mar $12.005   Price Low – 30 Nov $22.150
Low/High range 140.6%   Low/High range 19.6%
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