MARKET OUTLOOK 2020 GOLD - Monex
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2020 GOLD MARKET OUTLOOK
Copyright CPM Group LLC 2020. These reports are produced by CPM Group for distribution by Monex Deposit Company. The rights to distribution, repro- duction, and redistribution rights are ceded to Monex Deposit Company by CPM Group for these reports. These reports are not for reproduction or retransmission without written consent of Monex Deposit Company. The intellectual content and property of these reports remain the property of CPM Group, and they are not for reproduction or retransmission without written consent of CPM Group. The views expressed within are solely those of CPM Group. Such information has not been verified, nor does CPM make any representation as to its accuracy or completeness. Any statements nonfactual in nature constitute only current opinions, which are subject to change. While every effort has been made to ensure that the accuracy of the material contained in the reports is correct, CPM Group cannot be held liable for errors or omissions. CPM Group is not soliciting any action based on it. Information contained here should not be relied on as specific investment or market timing advice. At times the principals and associates of CPM Group may have long or short positions in some of the markets mentioned here.
2020 Gold Market Outlook Page 1
Gold
Annual average gold prices rose for the fourth consecu- shorter term investors and continued healthy demand
tive year during 2019. The gains during 2019 were from central banks could drive gold prices higher in
stronger than those seen in any of the three previous the medium term.
years, with annual average gold prices up 9.8%. Gold
prices reached a six-year high on an intraday basis during Gold Price Outlook
2019 and ended the year up 18.9% from the end of 2018.
While CPM Group expected gold prices to rise over the CPM Group expects gold prices are forecast to average
course of 2019, the gains were more robust than initially $1,555 in 2020, up 11.4% over the annual average price
anticipated. Some of the most influential factors that in 2019. Gold prices are forecast to strengthen over the
drove gold prices higher during 2019 were: first three quarters of the year amid a fair bit of volatility.
While the annual average gold price is forecast to in-
The reversal in Fed policy from tightening to loos- crease 11.4% over the annual average in 2019, the swings
ening and a more accommodative posture by sev- in gold prices could be significant. Prices could poten-
eral other central banks around the world, reflective tially rise as high as $1,650 or drop as low as $1,450 over
of central bank concerns over economic growth. the course of the year. Donald Trump, who is up for re-
The escalation in trade tensions between the United election this year and also is facing impeachment, could
States and many of its major trading partners, espe- actively create distractions both positive and negative that
cially China but spread around the world. have the power to sway markets strongly one way or the
Strong net demand for gold as a reserve asset by other – or both ways - in the short term. While gold
central banks. prices could swing violently over the course of this year,
the bias for prices is expected to be upward.
CPM Group expects gold prices to continue on their
upward trajectory during 2020 and to reach new re- Factors expected to influence gold prices during 2020.
cord high levels in the medium term (over the next
two to three years). With this forecast in mind, pur- Monetary Policy
chasing gold even at today’s relatively elevated levels
should bode well for medium to long term investors. Monetary policy is expected to remain accommodative
across the globe over the course of 2020. The year
The gold price rally of 2019 was primarily driven by started with the People’s Bank of China lowering reserve
shorter term investors in futures and options, with longer requirements and there is an expectation that it will
term investors, buying physical gold bars and coins, for loosen policy further over the course of the year. Other
the most part staying on the sidelines. The resilience of major central banks already took steps to loosen policy in
gold prices during 2019 and ongoing strength in gold 2019 and have expressed their willingness to further
prices during 2020 is expected to attract these longer loosen already accommodative monetary policy if the
term investors toward gold, which when coupled with need arises.
Central banks can be expected to have a somewhat
Gold Prices: 1 December 2010to31December2019 asymmetrical policy response to economic condition
$ / Oz
during 2020, in that they are likely to loosen policy in
response to signs of economic weakness but are not ex-
2,000
pected to tighten policy in response to economic strength
1,900
or inflation at least over the course of 2020.
1,800
1,700 With such a monetary policy set up, real rates would be
compressed, turn negative, or become more negative
1,600
(depending on the country or region under consideration),
1,500 which would be supportive of gold prices because of the
1,400 reduced opportunity cost to investors adding a non-
1,300 income bearing asset to their portfolio.
1,200
1,100
1,000
10 11 12 13 14 15 16 17 18 19Page 2 2020 Gold Market Outlook
Return Of Inflation Equity Markets
Inflation has essentially been absent during the economic Equity markets have been on a tear, breaking new records
recovery since the Great Recession. This may start to or reaching multi-year highs every other day. While these
change over the course of 2020, with markets are expected to continue posting positive returns
during 2020, they are unlikely to repeat 2019’s stellar
Globally loose monetary policy performance. Investors have been nervous about the ele-
Ongoing economic growth vated levels these markets have reached. Investors have
Tightening labor market conditions been and should be expected to continue adding gold
Increased barriers to trade to their portfolios as a diversifier and hedge to their
And firmer oil prices equity and debt assets, which are at extremely elevated
levels.
While inflation may increase during 2020 it is not ex-
pected to rise in a problematic fashion that would de- Downside Risks To Equity Values
rail economic growth and be supportive of gold prices.
The increase in inflation will however weigh more heav- Limited fresh monetary and fiscal stimulus
ily on real rates, especially in the expected accommoda- Focus on earnings which are expected to be com-
tive monetary policy environment, which will be suppor- pressed and/or weaken because of growing labor
tive of gold prices. costs.
Potential for Democratic win in 2020 U.S. election,
which could result in at least partial reversal of the
lowered corporate taxes.
Risks, Probabilities, and Impact Of Factors Affecting U.S. Dollar Gold Price
Time Frame: Next Six Months (Solid Spheres). Longer Term (Dashed Circles)
IMPACT
LOW MODERATE HIGH
ESG Impact On Climate Change Deterioration
Mining Costs of U.S.
U.S. Political Risk economic
data
HIGH
Higher Equity Deterioration of E.U.
Market Volatility economic data
Trade Wars
Debt
Gold Market Crisis
Seasonality
PROBABILITY
Sharp Decline
Deterioration Of
In Equity
MODERATE
Chinese Economic Markets
Data
International
Politics- Policy
Missteps Stronger Than
Expected U.S.
Creation Of Asset Inflation
Bubbles
U.S. Housing U.S.
Infrastructure
LOW
Market Decline Sharp
Spending Increase In
Equity
Markets
Note: Green bubbles depict factors that have a positive impact on gold prices. Red bubbles depict factors that have a negative impact on prices. Yellow bubbles depict
factors that can have a negative followed by a positive, or vice versa, impact on prices.
The size of impact is based on the typical response of gold prices to the specific risk but also to the degree that the risk has already been factored into prices. The dashed
circles represent long-term risks, which go beyond the next six month period.2020 Gold Market Outlook Page 3
Tailwinds To Equity Markets cent weeks, there is still a lot that could go wrong and
this should be a supportive factor for gold this year.
Loose monetary policy.
Stock buybacks will continue, but it is expected to U.S. Dollar
be a waning tailwind.
The U.S. dollar is expected to move sideways with lim-
Trade Policy And The Shift Away From Globalization ited upside potential over the course of 2020. The U.S.
is expected to remain one of the best performing devel-
Trade tensions between the United States and many of its oped economies during 2020, which should provide
major trading partners (especially China) had a direct downside support to the dollar’s value. That said, eco-
negative impact on global business sentiment and the nomic growth is likely to improve in other developed
global manufacturing sector in 2019. Separately there has economies during 2020 relative to 2019, which should
been the ongoing Brexit saga, which has had a relatively cap the upside potential for the U.S. dollar during 2020.
limited impact on global economic conditions but none- The dollar may weaken more against developing econ-
theless has been a risk the market has been monitoring omy currencies because of the greater upside potential
for potential negative spillover effects. for economic growth in these countries during 2020. This
weakness against developing economy currencies and
There was some de-escalation in the tensions between the limited upside against developed market currencies
U.S. and some of its various trading partners in the mid- should help gold demand and prices.
dle of December 2019, with a reformed trade deal be-
tween the United States, Mexico, and Canada replacing U.S. Elections
the North American Free Trade Agreement with the US-
MCA agreement. At the same time there also was a re- There is potential for heightened market volatility ahead
duction in a ‘No Deal’ Brexit outcome, with Boris John- of the U.S. presidential election in November 2020,
son securing a majority vote in favor of the Withdrawal which should provide some support to gold prices.
Agreement Bill for the UK to exit the EU. There was
The volatility in markets could come from:
also some meeting of the minds on a so called ‘Phase
One’ trade deal between China and the United States. Various ploys played by the Republicans to create
The latter was still to be signed at the time of writing this distractions in the public away from the President’s
report. ongoing impeachment proceedings and other legal
issues.
Even if an initial trade agreement is signed between
China and the United States it is unlikely to have a These distractions from the impeachment could take on
major lasting positive impact on business sentiment. both a positive as well as negative garb. An example of a
The deal is not expected to solve some of the long positive distraction would be the efforts being made to
standing sticky issues in the relationship between secure some sort of deal with the Chinese or North Kore-
these two extremely large and extremely different ans and an example of a negative distraction could be the
economies. bombing of Iran. The U.S. economy is on a strong foot-
The lack of clarity on how these larger issues will be re- ing and the President would not want to upset that ahead
solved and the potential for reinstating and possibly add- of the election, which suggests that he is likely to take
ing new punitive tariffs over the course of the negotiation every step possible, ahead of the election, to ensure that
process are likely to weigh on business investment and the U.S. economy continues on such a solid footing.
thereby economic growth, adding to the positive environ- Concerns of a Democratic candidate coming to
ment for gold. power, which would result in at least some of the
Similarly, while there has been some positive develop- Trump fiscal stimulus being reversed hitting U.S.
ments on the Brexit issue there still is the likelihood that stocks hard.
the UK and EU will not be able to negotiate a deal by the
end of 2020. This was the view of the EU leadership in Factors expected to influence gold prices beyond 2020.
mid-January. It could result in the EU trading without a
deal, which could hamper economic growth in Europe. Investor interest in gold is to a very large extent driven by
the macroeconomic and political environment. This sec-
The bottom line is that while there have been some tion discusses some of the longer term issues that CPM
positive developments on various trade issues in re- Group believes will influence gold prices.Page 4 2020 Gold Market Outlook
Economic Recession While CPM Group does not expect Financial Crisis of 2007 - 2011, and the consequent trans-
an economic recession in 2020, there is a 100% probabil- formations in global financial markets.
ity that there will be recessions in the future.
These developments, which began in a response to
When future recessions will occur, as well as how deep the Great Recession and Global Financial Crisis of
they will be and how long they will last, is extremely 2007 – 2011, have wrought trends in monetary pol-
treacherous and difficult, if not impossible, to project icy and economic trends that were unforeseen by
monetary officials.
That being understood, for the purpose of long-term pro- These trends have included a period of slower real
jections of global, regional, and national economies, let growth, lower interest rates, lower inflation, and a
alone individual commodities markets and other macro- continued bifurcation of credit availability between
economic trends, it is important to have a realistic view large governments and corporations on the one
of future economic trends. The historical practice among hand and smaller corporate and individual consum-
economists of projecting an annual average rate of real ers on the other.
economic activity over a number of years does not pro- These structural changes still are evolving in ways
vide a sufficiently granular economic forecast on which that are unknown and have not been predicted by
to base commodity market supply, demand, and price monetary and government authorities, nor by main-
trends. stream, academic, or other economists.
Ergo, recessions are built into the economic projections This on-going ‘new financial era’ makes predicting
CPM uses, giving potential timing, depth, and duration. recessions that much more uncertain.
This is done with full knowledge and disclosure of the Additionally, there are structural changes occurring in
enormous probability that the projections most likely will global labor markets due to the increase in part time labor
not be accurate. and automation, trends which accelerated following the
In 1978 CPM’s analysts projected a recession for Great Recession and are compounding the “problem” of
1979. The double-dip recession did not occur until low inflation forcing central banks to keep monetary pol-
1980 – 1982. icy loose and precipitating some of the problems men-
In 1987 CPM projected a short and shallow reces- tioned above.
sion in 1990. It occurred in 1991. Since around 2014 CPM has been projecting a short,
In 2000 CPM projected a short and shallow reces- shallow recession, perhaps limited to the United States,
sion for 2001. This proved correct. the United Kingdom, and a couple of other countries in
In 2007 CPM projected a deeper recession in 2009. the 2019 – 2021 time period, followed by an over-
The recession began in 2007 and lasted into 2009. charged recovery for a couple of years that then would
Recessions begin for a variety of reasons. lead to a deeper and longer recession in the 2023 – 2025
time frame.
Sometimes they are precipitated by monetary or
fiscal constraints brought on by too strong of eco- CPM now expects the global economy will avoid the
nomic activity: The economy overheats, monetary short, shallow recession previously projected, but experi-
policy overly tightens, economic capacity contracts ence an extended period of sub-par economic growth
as a result, or a combination of these factors leads punctuated by a recession around the middle of the pre-
to a recession. sent decade.
At other times economies slow or stagnant levels of Global Debt
economic activity lead to the economy seemingly
‘rolling over’ into recession. The rise of debt, both sovereign and private sector, to
And at yet other times, asset bubbles precipitate unprecedented levels at unprecedented rates, presents
recessions. major concerns about the sustainability of long-term eco-
nomic growth and the potential for combinations of:
Projecting ‘the next’ recessions has been further com-
pounded by the major structural changes that have oc- a. deep, disruptive recessions,
curred in monetary policies practiced by central banks b. a new global financial crisis, and
around the world since the Great Recession and Global c. increased deterioration of international cooperation.2020 Gold Market Outlook Page 5
The enormous mountain of sovereign and private debt decades before that, perhaps measurably to 1981 al-
and its rapid growth are seen as being unsustainable by though already in the late 1970s there were endless warn-
most observers, including CPM, suggestive of some im- ings of the coming economic collapse and the need for
minent ‘day of reckoning.’ CPM has that resolution at a investors to shield their wealth through ‘crisis investing.’
distance of four years from the present, further out than
many. It must be understood that such a view, that gov- Many observers have repeatedly warned about an inevita-
ernment and private debt will lead to an inevitable finan- ble squaring up of accounts, with a special focus on the
cial disaster, has been prevalent since at least the 1970s, enormous rise of government and private debt, and the
with many financial and economic Cassandras having explosive 12% per annum average growth in ‘paper’ as-
been proven wrong their entire careers. We all may be sets including a host of derivative products since the
wrong again. The phobic fear of large numbers aside, it is 1980s.
possible that monetary policies may have been devised to These problems may persist for years yet. There could be
prolong the present debt-fueled period of positive eco- a time when they lead to a more severe recession and fi-
nomic growth indefinitely. nancial crisis, as described earlier. Investors are wise to
Ultimately a deeper recession coinciding with a global pay heed to the risks inherent in such profligate debt ex-
financial crisis is expected, even noting the just-made pansion, but they also are wise to invest fully aware that
exposition as to how the changed financial management for nearly a half century the dire warnings of imminent
of global currency markets may preclude this. For the and complete financial collapse have not come true.
purposes of needing to place these in time, the period of There have been two major recessions since the 1970s
2023 – 2025 has been maintained. and a wide range of lesser financial and economic crises,
but each time the monetary authorities and banking sys-
Near-Term Slow Growth tem have found ways to repair the damage and restore
economic growth.
The current period of slower growth in real economic
output in many parts of the world may continue over the Interest Rates
next few years without too many major countries dipping
into statistically outright recessions. Immediately after the Global Financial Crisis and Great
Recession of 2007 – 2009 CPM had written that it ex-
Slower growth in real economic activity, accompanied by pected interest rates would likely rise sharply at some
cyclically strong employment in some countries, low in- point.
flation, low interest rates, and relatively strong equity
markets may last into 2021 or 2022. Around 2013 CPM changed its economic outlook and
began writing that monetary policies and practices had
Economic constraints normally associated with late changed in fundamental ways that:
stages of economic expansion in the past may not apply
such limiting forces as they have previously, given com- (a) were not fully understood by virtually everyone at that
puterization of both manufacturing and service industries, point, including central bankers, and
continued globalization of business (even within the con- (b) may keep interest rates very low for a very long
text of increased trade disputes), and other secular trends time.
toward surplus labor, manufacturing capacity, commer- CPM still adheres to that view, but thinks that at some
cial real estate, and retail capacity. Transformed mone- point the current set of fiscal and monetary policies could
tary policy may allow growth to persist and to accommo- fail, at which time interest rates might spike.
date excessive fiscal stimulation by many governments.
Given the nature of the factors behind both low interest
A Bigger Recession Later rates now and higher rates ‘at some crisis point in the
future’ CPM expects that both current low rates and a
As time progresses the risks building up in economic
future crisis-driven spike in rates could be good for gold
conditions, fiscal policies, monetary policies, currency
but could potentially hurt the industrial precious metals -
markets, and political conditions present real risks to on-
platinum and palladium.
going economic stability.
Interest rates may stay low for an extended period of
These risks have been pushed forward in time not only
time, but at some point there could be a lenders’ strike on
for the past decade, since the Global Financial Crisis and
U.S. Treasuries and other sovereign borrowing, at which
Great Recession of 2007 – 2011, but really for several
point interest rates might spike sharply higher.Page 6 2020 Gold Market Outlook
The concept of a lenders’ strike on sovereign bor- used by these two countries. This will matter to the global
rowers is highly disputed, given the self-destructive economy in the future because of sheer size of these two
consequences such an action could have on finan- economies.
cial asset holders should it become uncontrolled.
A ‘controlled’ or restrained strike could occur, Climate Change
however.
One argument against such a possibility relates to Climate change is a systemic risk to the global financial
the absence of alternative investment opportunities. system. While it does not get the sort of attention as
Where would investors put their money should they growing global debt does, climate change nonetheless has
decide government debt levels have reached unten- the potential to create disruptions on the scale of the
able levels. There are in fact alternatives, with fi- Great Recession. While large piles of global debt are
nancial markets already having shown tremendous likely to worsen a bad economic situation, climate change
capacity to develop higher yielding derivative secu- is likely to perpetuate a bad economic situation.
rities to more than compensate them for receiving
low sovereign interest levels or even paying nega- An increase in the number and magnitude of natural dis-
tive interest rates for the ‘privilege’ of holding debt. asters is putting unprecedented strains on the insurance
(The answer to the question of why any financial industry. Insurance providers are highly integrated into
institution would park its cash in sovereign debt for the global financial system and very little has been done
which it must pay interest lies in the ability to col- so far to determine how these entities would perform un-
lateralize such assets and use them to acquire der severe stress condition. Furthermore, the withdrawal
higher yielding derivatives.) Additionally there are of the United States from the Paris Treaty and U.S. poli-
certain institutional investors like pension funds cies that accelerate the deteriorating climate change only
that require predictable future cash flows that are increase this risk in the medium to long term.
therefore tied to these debt investments.
Investment Demand, Central Bank Buying, & Supply
Unresolved Cross Border Tensions
All of this factors into CPM Group’s gold outlook.
In recent years there has been an escalation in the hostili-
ties between various countries and a breakdown in inter- It is CPM Group’s expectation that in the medium to long
national cooperation. This is likely to continue in the me- term these three gold market fundamentals –investment
dium to long term and could in fact get worse before it demand, central bank purchases, and supply - will come
gets better. As U.S. hegemonic capacities diminish new together in a way that would be very positive for gold
allegiances and alliances are being formed by other coun- prices.
tries. The U.S. government meanwhile has pursued poli- Investment demand is forecast to rise in coming
cies that are at best reducing its ability to influence the years in response to the various factors reviewed
course of future international affairs, and possibly could above.
severely preclude U.S. participation in future global deci-
sion making.
GoldStockDemand
One major relationship that is going to put ongoing strain Annual Data, Projected Through 2029
Central Bank Demand
on the global economy in years to come is the power Million Oz
Private Investment
Million Oz
struggle between the United States and China. The esca- 60 60
Ne t Purchases
lation of trade tensions between these two countries since
2018 and the consequence it had on the global economy 40 40
provides some flavor of what can be expected going for-
20 20
ward. There has been a de-escalation in the short-term
tensions between these two countries at the time of writ-
0 0
ing this report, but not a resolution to the problems. All of
the bigger, long-term tensions remain, and possibly are in
-20 -20
worse condition now than they were. There are numerous
extremely difficult issues that need to be resolved and it
-40 -40
will be very difficult to resolve them given the com- Central Banks Not Expe cted To Be A
pletely different approaches and ideologies followed and Ne t Sales Source Of Supply As In T he Past
-60 -60
1950 1959 1968 1977 1986 1995 2004 2013 2022p2020 Gold Market Outlook Page 7
Central banks meanwhile are expected to remain increase in gold prices and changing trends in jewelry
net buyers of gold over at least the next decade. styles as well as jewelry buying patterns neither of which
Supply meanwhile, is expected to linger near re- are supportive of higher gold demand from jewelry.
cord high levels in the near term, but it is expected
to start declining in the medium term, around 2022, Investment Demand is forecast to pick up in 2020
for several years. This decline in supply is expected reaching 13.7 million ounces, up 19.7% from 2019 lev-
to be driven primarily by a reduction in mine sup- els. While the cumulative amount of gold absorbed by
ply. investors is not particularly high, a near 20% gain in de-
mand from this sector is expected to bode well for gold
Weakness in supply coupled with a tussle between inves- prices during the year. As mentioned before in this report,
tors and central banks for the reduced amounts of newly the gains in gold prices during 2019 were driven primar-
refined supply is expected to squeeze gold prices to new ily by investors in derivatives and exchange traded funds,
record high levels in the coming decade. with little participation from investors in bars and coins.
This is expected to change to some extent during 2020,
Bringing the discussion back to 2020, total supply is with more longer term investors that typically invest in
forecast to rise to 130.3 million ounces in the current gold bars and coins entering the market.
year, up from 128.8 million ounces in 2019. The increase
in total supply during 2020 is expected from an increase Central Banks (Official Transactions)
in both mine supply and secondary or scrap supply. The
growth in mine supply during 2020 is expected to be Central banks have been a strong source of demand for
marginal (up 0.2%) as the positive effect on mine supply gold during 2019. They are estimated to have added
from the capacity expansion following the last gold bull around 20 million ounces of gold to their holdings on a
market fades. Much of the increase in total supply during net basis. This would be the strongest level of net demand
2020 is forecast to be driven by scrap recovery, which is since 2015, when these entities reported net additions of
expected to benefit from the projected gains in gold 27.8 million ounces of gold to their holdings. That said,
prices this year. central bank demand for 2015 was skewed higher by the
one-time movement of gold purchased between 2013 and
Gold fabrication demand is forecast to reach 96.6 million 2015 from a separate account into official monetary re-
ounces in 2020, up 0.3% from 2019. The gains in fabrica- serves by the People’s Bank of China in the middle of
tion demand are expected to be driven by a possible re- that year.
covery in Chinese demand based on expectations of sta- Central banks are expected to continue diversifying their
bilization and possible improvement in Chinese eco- reserve assets in 2020. They are expected to remain large
nomic growth as the year rolls on, ongoing global net buyers of gold during 2020, potentially accumulating
growth, albeit at a slower pace, and weakness in the U.S. around the same level of gold that they did in 2019. This
dollar relative to emerging market economies. These level of net accumulation of gold by these banks in com-
positive factors are, however, expected to be offset by an bination with an increase in gold investment demand
should help to push gold prices higher.
Total GoldS
upply Gold Fabrication Demand
Annual, Projected Through 2020 Annual, Projected Through 2020
Mln Oz Mln O z
140 140 Million Ounces
Secondary Supply 120
Other Uses
Transitional Economies Exports to Market
120 120 Dental/ Medical
Economies 100
Market Economy Mine Production Electronics
100 100
Developed Country-
80 Jewelry
80 80 Developing
Country-
60
60 60 Jewelry
40
40 40
20 20 20
0 0 0
73 76 79 82 85 88 91 94 97 00 03 06 09 12 15 18 77 80 83 86 89 92 95 98 01 04 07 10 13 16 19Page 8 2020 Gold Market Outlook Gold Statistical Position MillionOunces Supply 2012 2013 2014 2015 2016 2017 2018 2019 2020p Mine Production China 13.0 13.8 14.5 14.5 14.9 13.7 12.9 13.8 14.5 Australia 8.1 8.6 8.8 8.9 9.0 9.1 9.3 8.6 8.9 United States 7.6 7.4 6.8 6.8 6.8 7.4 6.6 7.4 6.8 Russia 5.9 7.4 8.0 8.0 8.0 8.2 8.4 7.4 8.0 South Africa 5.0 5.4 4.9 4.6 4.5 4.3 3.9 5.4 4.6 Peru 5.2 4.9 4.5 4.7 4.9 4.9 4.6 4.9 4.7 Indonesia 2.2 1.9 2.2 3.1 2.6 3.2 4.2 1.9 3.1 Canada 3.4 4.0 4.9 5.1 5.2 5.5 5.9 4.0 5.1 Other Market Economies 30.6 32.2 35.3 34.2 36.7 36.2 35.2 39.0 36.5 Total 80.9 85.6 90.0 90.0 92.7 92.7 91.0 92.4 92.3 % Change Year Ago 3.2% 5.9% 5.1% 0.0% 2.9% 0.0% -1.8% 1.6% -0.1% Secondary Supply 47.2 39.3 35.1 30.2 30.1 30.1 30.3 31.0 32.1 % Change Year Ago 0.9% -16.8% -10.7% -13.9% -0.4% 0.1% 0.8% 2.3% 3.5% Transitional Economy Sales 3.5 2.2 2.8 2.9 4.3 5.0 4.9 5.2 5.5 % Change Year Ago - - - - - - - - - Total Supply 131.5 127.1 127.8 123.1 127.0 127.7 126.2 128.6 129.9 % Change Year Ago 1.2% -3.4% 0.6% -3.7% 3.2% 0.6% -1.2% 2.0% 0.9% Fabrication Demand Industrial Demand Electronics 9.7 9.8 10.0 10.0 10.3 10.7 11.4 11.6 11.7 Dental/Medical 2.1 2.0 1.9 1.9 1.9 1.8 1.8 1.8 1.7 Other 1.8 1.6 1.7 1.7 1.7 1.8 1.7 1.8 1.8 Total 13.5 13.4 13.6 13.6 13.9 14.4 15.0 15.1 15.3 % Change Year Ago -0.4% -1.0% 1.3% 0.4% 1.7% 3.8% 4.3% 1.0% 0.9% Jewelry Developed Countries 7.9 7.8 7.9 8.0 7.7 7.7 7.7 7.6 7.7 Developing Countries 61.2 70.8 72.1 75.1 72.0 74.9 75.4 73.5 73.6 Total 69.1 78.6 80.0 83.1 79.7 82.7 83.1 81.2 81.3 % Change Year Ago 2.2% 13.7% 1.7% 3.9% -4.0% 3.7% 0.5% -2.3% 0.2% Total Fabrication Demand 82.6 92.0 93.5 96.7 93.6 97.0 98.1 96.3 96.6 % Change Year Ago 1.8% 11.3% 1.7% 3.4% -3.2% 3.7% 1.1% -1.8% 0.3% Stock Demand Total Official Transactions 11.4 17.7 16.7 5.3 7.0 10.9 16.2 21.0 20.0 % Change Year Ago 17.6% 54.8% -5.3% -68.4% 33.5% 55.0% 47.9% 30.0% -4.8% Net Private Investment Official Coins 5.6 8.2 6.1 7.0 7.3 5.5 5.4 4.0 5.0 Bullion 29.2 6.8 9.3 12.1 16.0 12.3 6.1 4.8 5.3 Medallions 2.7 2.4 2.2 2.0 3.0 2.0 0.5 2.5 3.0 Total 37.5 17.4 17.6 21.1 26.3 19.8 12.0 11.3 13.3 % Change Year Ago -4.0% -53.5% 0.8% 20.1% 24.8% -25.0% -39.5% -5.1% 17.1% Total Stock Demand 48.9 35.1 34.3 26.4 33.4 30.7 28.1 32.3 33.3 % Change Year Ago 0.3% -28.2% -2.3% -23.1% 26.5% -8.1% -8.4% 15.0% 2.9% Total Demand (Fabrication Plus Stock Change) 131.5 127.1 127.8 123.1 127.0 127.7 126.2 128.6 129.9 *Million Ounces; Source: CPM Group; Notes: There may be discrepancies in totals and percent changes due to rounding; Net official sales are indicated by negative numbers; Longer term projections are available in CPM Group's Gold Supply, Demand, and Price: 10-Year Projections report; e -- estimates; p -- projections; NM -- Not meaningful;
Published 2/1/2020 CPM Group LLC CPM Group is a fundamentally based commodities research shop. We develop our own proprietary estimates of gold, silver, platinum, and palladium supply and demand on a global basis, drawing on every resource we can find, including our own extensive list of contacts involved in precious metals around the world. We have been doing this sort of research and analysis since the 1970s, far longer than anyone else in the business. We also undertake research in specialty metals, base metals, energy and agricultural commodities. We are known for our basic fundamental research, a wide range of finan- cially oriented consulting services, and our expertise in using financial derivatives to structure financing for producers, refiners, industrial users, and investors interested in either hedging or investing in commodities. Our investment phi- losophy is simple: We are value investors who base our decisions on what to buy, sell, hold, or avoid on the fundamentals of each asset, and the macro-economic, financial and political environmental factors that we expect will affect that as- set’s value. We have concerns, expressed in this report and elsewhere, about long-term imbalances in government deficit spending, public and private debt, and a wide range of other economic and political factors. We don’t expect the world’s financial system to collapse, however. That is not the way the world tends to work. More likely economic outcomes in the real world lie between the extremes of cataclysmic collapses and nirvana. We advise our clients – and practice what we preach – to have some of their wealth in gold and silver as an insurance policy against a catastrophic failure, but we also advise them to invest other portions of their money in precious metals and other assets based on the assumption that that sort of failure does not occur. We focus on investing based on likely scenarios, but with an eye always open to outlying events that take the world’s markets by surprise. We have watched investors who were so worried about a collapse that they missed some of the largest stock and bond market rallies of all times over the past 30 years, while watching their safe haven assets fluctuate eight-fold in value up and down, and then up and down again. We prefer our clients to buy and sell precious metals and other assets based on cyclical and other developments, while also maintaining that long-term insur- ance policy in case the levee breaks. CPM Group LLC 168 7th St. Suite 310 Brooklyn, NY 11215 USA T. 1-212-785-8320 www.cpmgroup.com info@cpmgroup.com
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