October 07, 2020

Q3 2020 Precious Metals Report - The end of a long hot summer?

Daily London OTC Gold trading volume averages 36.3m oz equivalent to some $69.3 bn.

During the third quarter of 2020, the London gold price rose from $1,768.10 per troy ounce, to $1,886.90 at end-September, a gain of 6.7% over the quarter, and 23.89% year-to-date. But these impressive, although straightforward statistics mask arguably the most momentous run in the gold price since daily records began a little over a century ago.

During five days in August, reflecting serious concerns about the global economic collapse prompted by Covid-19, London gold traded above $2,000, topping out at $2,067.25 on August 7, a level just below the highest prediction ($2,080) in LBMA’s 2020 Precious Metals Forecast Survey of professional analysts (published end-January).

The breach of the $2,000 price milestone first occurred at the London pm gold auction on August 5 but had been flagged by exceptional turnover volumes in preceding days, most notably on July 29 when a record 89.4m oz changed hands to a value of $174.3bn. By comparison average daily gold trading during the quarter was 36.3m oz with an average value of some $69.53bn.

The heady record days of August, however, faded as summer turned to autumn. The last time gold traded above $2,000 was August 18; since then the price has eroded some 8.6% below the peak, with turnover volumes dropping to below 2020’s daily average, as September came to an end.

It is debatable whether September’s price moves reflected profit-taking, or perhaps better than expected (although still dire) economic statistics from the US and elsewhere, but if so the equity markets were unimpressed as the S&P 500 fell some 4% during the month. Or perhaps investors and traders are coming to view the ongoing pandemic as the new normal, and inertia is creeping in – a depressing thought.

Lest we forget, longer-term investors in silver have had a better run through 2020 ytd than their more high-profile gold colleagues. Again there were five big summer days when the London price exceeded $28 per oz – four in August and one on September 1 when the price peaked at $28.885 per oz (a level not seen since Q1 2013), a gain of 60% on the year. As the quarter ended, silver, like gold, faded somewhat to close at $23.725.

The table below highlights the London gold price highs as well as the volume and value of gold trade data.

Date Price Date Volume Value
Aug 5 $2,048.15 pm Jul 29 89.4 mn oz $174.3 bn
Aug 6 $2,067.15 pm Aug 8 52.1 mn oz $101.1 bn
Aug 7 $2,061.50 am Jul daily av 38.5 mn oz $71.7 bn
Aug 10 $2,044.50 pm Aug daily av 36.8 mn oz $72.4 bn
Aug 18 $2,008.75 pm Sep daily av 33.6 mn oz $64.7 bn