Gold price rally helped by ‘fundamental’ shift in asset allocation

While gold has been on a generally positive trend for the past few years, the onset of the global pandemic has made bullion’s relevance as a hedge even more apparent – and accelerated its price performance.

During the first half of 2020, the price of gold increased by 17%, followed by an additional 10% gain for the month of July, outpacing all major assets.

Spot gold set a new all-time high on July 28, reaching $1,940.9 an ounce on the LBMA Gold Price PM (PM Price) and topping $1,981.3 intraday.

This exceeded the previous record of $1,895.0 set by the PM Price on September 5, 2011, and the $1,921.2 intraday high the following day during Asian trading hours.

The global response to the pandemic has also fuelled record-breaking flows into gold-backed ETFs and brought total holdings to 743 tonnes for H1 2020, more than any other annual year.

According to the World Gold Council (WGC), gold’s record-breaking run has been driven by a combination of high uncertainty, very low interest rates and positive price momentum – all of which are supportive of investment demand.

The Council believes the covid-19 pandemic may bring structural shifts to asset allocation, and although the recent price move, coupled with markedly weak consumer demand (down 6% in H1 2020), may lead to higher gold price volatility in the near term, there are strong fundamental reasons supporting gold investment in the longer term.

The pandemic is far from over, the Council says, and more importantly, its impact on the global economy is yet to be determined. There are indications that some countries like China, South Korea, Germany and other European nations have started to turn a corner.

However, at a global level, early hopes of a fast recovery are all but gone. Instead, market participants are bracing for a bumpy ride and a longer road to recovery, the Council speculates.

Central banks have also aggressively cut interest rates, often in combination with quantitative easing and other non-traditional policy measures. Governments around the world have also approved massive rescue packages to support their local economies.

According to the WGC, these initiatives have raised concerns that easy money, rather than fundamentals, is fuelling the stock market rally and that all the extra money being pumped into the system may result in very high inflation or, at the very least, currency debasements.

To put things into perspective, the price of gold more than doubled from about $900 in early 2008 to its high more than three years later in the aftermath of the Global Financial Crisis. In contrast, it has increased by less than 30% since the beginning of the covid-19 pandemic.

Additionally, adjusted for inflation, the gold price currently is about $200 shy of the 2011 level and well below its January 21, 1980, record-high equivalent of about $2,800 in current money value.

The latest leg of gold’s 2020 bull run has come fast, the WGC says, pointing out that it took about four months for gold to go from $1,650 to $1,800 per ounce, but less than four weeks to climb to $1,950.

While this uptick was driven in good part by a sharp depreciation of the dollar, the WGC notes that the magnitude of the change is highlighted by gold’s 14-day relative strength index, which reached a high of 88 on July 27. The Council says this is usually seen as a sign that the market could be overbought.

Frank Holmes, CEO of US Global Investors, also analyzed gold’s 14-day RSI and concluded that “the conditions at the moment are highly supportive of gold and precious metals.”

“Besides negative real yields, we also see unprecedented monetary and fiscal stimulus running into the trillions of dollars and counting. The US economy is in uncharted waters, with GDP estimated to have shrunk a whopping 34.8% in the second quarter – the most on record going back to the 1940s.”

Frank Holmes, CEO, US Global Investors

However, gold’s three-month and one-year rolling returns have moved by less than two standard deviations and are significantly below levels seen in previous periods of strong movements. According to the WGC, this alternative metric suggests that the cumulative magnitude of gold’s move is not unprecedented.

Although the WGC says nothing prevents an asset from outpacing some of these relative performance metrics, the speed of its increase may also result in a period of higher volatility.

In this regard, the Council highlights that while gold has moved sharply higher in the past month and there is enough support for gold investment, the price may experience some consolidation.

For reference, after spot gold hit a record $1,909 intraday on August 23, 2011, it suffered one of its few triple-digit losses the following day when it plummeted $105, ending the week down more than 10% from the all-time high.

Similarly, after reaching its inflation adjusted peak of $850 on January 21, 1980, prices plunged 13% the very next day to $737.50. The biggest fall in percentage terms came in February 1983, when bullion fell from $475 to $408.50 over two days, a 14% decline.

There are several sorts of products to cast crusher blow bars. Various working scenarios require different material blow bars. Based on abundant experience, H&G Machinery aids you to evaluate the different products for crusher blow bars.

Manganese Steel
This is generally manganese steel. This alloy is used in main crushers or crushers that have vagrant iron in the feed. Manganese steels will certainly be utilized whenever extremely high shock resistance or some elongation is required. The impact bar life is not easily foreseeable and relies on many aspects. Manganese crusher strike bars are generally utilized main crusher applications and also give high shock resistance as well as are offered in both Mn14% and also Mn18% material grades. They are well-matched to applications where vagrant iron is feasible in the feed material. Manganese bars are frequently made use of as a ‘risk-free’ selection, however, other materials readily available can supply significant life price advantages. For recognition functions, manganese steel strike bars are repainted black or red and also significant with the respective worldly grade. Likewise, inquire about our unique high-performance material that is proven to exceed other grades of manganese impact bars.

Martensitic Steel
Martensitic steel will certainly be made use of whenever hardness and influence resistance are both required, i.e. in all the applications where use of white (chromium) irons can cause breakage. Normally, martensitic steel has a higher lifetime than Mn steels in more unpleasant applications when the feed size is listed below 900mm. It is used in primary as well as reusing applications. Martensitic steel strike bars are generally utilized where the application requires the impact resistance manganese gives and also the hardness and put on resistance of chrome irons. Typically used in both quarrying and also reusing, martensitic would generally be anticipated to surpass manganese steel in unpleasant applications.

Chromium Steel
White irons are used when the shock degree is instead reduced and also the spreadings rather thick. Feed to the crusher need to be well prepared as far as top dimension as well as needs to be devoid of tramp iron. As a result of the breakable nature of this alloy, tramp iron will create devastating failure of the strike bars. This product is used in secondary, tertiary as well as asphalt reuse applications where there is no vagrant iron. Cast white chromium iron is extensively used in ‘timeless’ horizontal effect crushers and is available in medium 20% and also high 26% chromium web content products. White irons can provide high performance in the appropriate application giving NO vagrant iron is present in the feed product. The fragile nature of chrome irons indicates considerable damages can happen if vagrant iron or large large-scale product is fed right into the crusher.

Chromium Steel+ Ceramic.
This is a structure impact bar consisting of tough ceramic particles on the wear surface in a chromium iron matrix. This composite has the effect of integrating the extremely tough surface of ceramic with the valuable mechanical residential properties of chromium iron. These (chromium/ceramic) blow bars can have 2 to 4 times the life of common mono-alloy blow bars. Chrome Iron with ceramic is a costs composite metallic matrix iron with difficult ceramic alloy inserts on the wear surface area. The tough alloy porcelains combined with either tool chrome or high chrome iron matrix gives a considerable functioning life advantage over standard chrome iron bars. Whilst this material can be very successful in secondary applications, it needs to not be used for main squashing or extremely hard and rough applications.

Martensitic Alloy Steel + Ceramic.
Martensitic alloy steel with ceramic is a premium composite metal matrix steel with difficult ceramic alloy inserts on the wear surface. The difficult alloy ceramics combined with either martensitic steel matrix supplies a substantial working life advantage over conventional martensitic steel bars. This material is generally used in recycling markets and primary squashing in quarries. Certain applications are unsuitable for this product, consisting of limestone squashing as well as slag recycling. This blow bar including tough ceramic fragments on the wear surface area in a new martensitic steel matrix. The ceramic inlay is much deeper and also larger than basic Xwin and will supply a greater lifetime. These are high-performance impact bars for recycling applications.

Chromium Steel + Titanium Carbide Bars.
MGS Casting has actually succeeded to develop a new material for crusher strike bars users. Titanium carbide bars put the working face of impact bars to increase the blow bars cover life. Compare with typical chromium steel or martensitic steel, it’s period of life can greater than 3-5 times. Nonetheless, the rate for TIC insert impact bars simply a little pricey than others, so it is one of the most competitive products for crusher strike bars.

@Nick Sun      [email protected]