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Greener Gold Miners on the Rise

Friday, November 19, 2021

For many, gold is nicknamed the ‘yellow metal’, for its unique colour. Such a resilient shine comes at a cost to the planet, however. Like many commodities, gold must be extracted from the surface of the earth as part of an energy-intensive process, emitting carbon and other pollutants in the process.

Such an impact isn’t immediately obvious when you buy gold from a reputable seller. That being said, gold is less polluting than commodities such as oil, coal and natural gas. We burn hydrocarbons for fuel, with profound impacts on the air we breathe. Gold, on the other hand, is extracted from the earth, but unless it is moved around a lot, it simply rests in one place, gaining value over time, with minimal emissions. As the National Geographic wrote in 2012: “Though we depend on energy commodities such as coal or natural gas, we have no national dependence on gold. We just have a penchant for it.”

Gold is sought not for the energy it produces, but for the intrinsic value we believe it to hold, based on historical prices and economic sentiment. Mining for oil and other hydrocarbons persists due to a seemingly insatiable demand for energy, but demand for gold can wax and wane depending on the movement on gold prices themselves. Gold miners have a definite impact on the environment, but they are also becoming aware of it, to the point where they’re moving to become more compliant with the UN’s own Sustainable Development Goals (SDGs).

Green miners dig deep

We can’t give an exact year when people first started mining gold from below the earth’s surface, but we can tell roughly which century it became a booming industry, due to the presence of specially crafted gold items in well-preserved places of great historical value. For example, the existence of gold treasure in the Varna Necropolis in Bulgaria suggests that people in Eastern Europe were actively mining gold or at the very least importing it from elsewhere roughly 7,000 years ago.

If you time-travelled back to some of the first examples of gold mining, the methods used would have seemed rudimentary. Hydraulic techniques would have been employed, helping extract seams of gold from loose sedimentary rock. Techniques evolved over time, and civilisations demonstrated their great wealth through using gold as currency and decoration. By the 19th century, the Americas and Australia became the stage for an intense scramble for fresh supplies of gold, during the so-called ‘Gold Rush’ era.

Fast-forward to the 21st century, and gold production is an energy-intensive industry. Global production was estimated to be 3,200 metric tonnes in 2020, but that wasn’t the only thing being produced by the world’s gold mines. For every troy ounce of gold, it was estimated that 0.8 tonnes of CO2 equivalent were released into the atmosphere.

Encouragingly, gold miners haven’t been carrying on their arduous task regardless of the consequences. The World Gold Council has been taking active steps to encourage a change in behaviour from the top down. In September 2019, they announced the launch of their Responsible Gold Mining Principles (RGMPs), 51 rules for miners to abide by, helping them clear up their act. For example, the RGMPs range from ensuring greater diversity when it comes to hiring mining crews to better water management, as well as ways of reducing carbon footprints across the board. The RGMPs are designed to help mines move into lockstep with one another to make good on the UN’s SDGs, which are intended to be met by 2030.

When the World Gold Council launched its RGMPs, it revealed specifically what mines could do to keep carbon emissions low, while still delivering tonnes of gold uninterrupted. One particular mine, the Newmont Goldcorp-run Borden mine, went down in history as the world’s first all-electric underground mine. Recent decades have seen an emphasis on quantity, extracting large volumes of gold with little consideration for the environment or the working conditions of some of those tasked with extracting it. Now, quality is the key component, with consumers showing an interest in whether gold is responsibly produced.

Valcambi’s green gold

Analysis from Wood Mackenzie suggests actions taken by gold miners by 2030 could be sufficient to ensure that the industry contributes to efforts stopping global temperatures rising higher than two degrees celsius above pre-industrial levels. One of the greatest factors helping the sector decarbonise the most is that some of the most carbon-intensive mines are expected to go offline by the late 2020s, but mine life extensions may need to be mitigated to keep with the two-degree climate target.

Valcambi is a Swiss gold producer aware of the growing demand for more environmentally friendly sources of gold, and it has obliged by beginning to produce its ‘Green Gold’ range. Here at the Gold Bullion Company, we stock a number of Green Gold 20g bars, which have a fineness of 999.9, or near-purity. Based in Balerna, Switzerland, Valcambi produces Green Gold bars in a distinctive green casing, with certification to prove the veracity of origin. The bars are refined, assayed and manufactured, protecting the human rights of mining crews, while maintaining environmental standards and policies, which are supervised independently.

That means the workforce producing each bar is paid a fair wage, and great care is taken to protect their health and safety, while ensuring a minimal impact to the planet during extraction. It’s a gold bar unlike any other, and a tangible sign of more sustainably produced gold products to come. Buying into green gold is an investment in the future of sustainability. To learn more about this exciting new path towards sustainability for the industry, get in touch with us today and see what can be gained from buying green gold.

Copyright: zentilia

A Golden Touch in Uncertain Times

Monday, November 1, 2021

Traditionally, gold has been cited as a hedge against inflation, a precious metal that rachets up in value when prices rise out of control. Such an assumption misses the reality, which is that gold actually appreciates in value in the long term, a window of time few have time to consider, allowing it to maintain its value. Rather than reacting instantaneously upon news of higher inflation, gold captures a mood.

The perception of higher inflation is a far greater driver of gold prices than actual inflation data, creating many of the volatile upswings and downswings in the gold price itself over time. It’s easy to get lost in the short-term numbers with inflation, but it’s better to look at it as an incremental phenomenon. One year of high inflation is one thing, but the perception that high inflation could persist for a decade changes the mood entirely, and has a profound impact on the direction of gold prices.

The inflation threat

Higher inflation on a consistent basis changes the psychology of households, as it involves the ultimate erosion of the pound in your pocket. Past episodes of high inflation have often stemmed from policy error: governments and central banks overstimulating growth while trying to manufacture booms or allow recoveries to occur. An erosion of a currency’s value creates heightened political uncertainty, as the currency’s value can begin to fall.

During the 1970s, the last great bout of high inflation, a mood persisted throughout that rising prices would persist for a lengthy period. The decoupling of the US dollar from the gold standard in 1971 saw currencies such as the dollar no longer fixed to a specific unit of gold. Instead, currencies like the pound and the US dollar would endure greater swings in value, as this value was determined by the amount of paper currency printed. More dollars or pounds printed would devalue the currency, raising the chances of higher inflation.

Gold was an effective barometer of this prevailing mood in the economy, rising in value consistently during the 1970s. It would be a mistake to think those buying gold were reacting to specific releases of data on inflation during the period. In actual fact, the perception of prices rising out of control was enough to justify the upward trajectory of gold prices. It was fed by the view that the government of the day was unable to take the decisions to rein in inflation properly, and gold was a useful way of filling the vacuum and protecting wealth.

While the UK gold price drifted for a few years after the peak in 1980, the financial crisis of 2008 and further policy mistakes were enough to propel gold to new all-time highs during the 2000s and 2010s. A feeling that governments and central banks weren’t doing enough to stimulate economies fed into an atmosphere of fear, especially over a possible collapse of the Euro and slow growth in industrialised economies. After peaking in 2011, gold prices drifted lower for a few years, but from 2015 onwards, a mood of pessimism returned, allowing gold to rise in value once more.

Between 2015-20, prices doubled, as Brexit and the COVID-19 pandemic created unprecedented levels of uncertainty and economic volatility. Gold prices hit a new record high in the summer of 2020, before levelling out in more recent months. To an observer looking at the gold markets over the short term, stable prices in recent times might not seem like preserving value, but when comparing where gold prices were in 2015, the metal has managed to price in a large amount of negative sentiment during the last half-decade.

The inflationary wave

As the economy recovers from COVID-19, concerns are now turning to how policy makers cope with supply constraints in the wake of Brexit. After the economy was effectively switched off for many months at a time, demand has returned but bottlenecks in supply remain, putting upward pressure on prices. Higher inflation or even the fear of it could push people out of being able to access credit so easily, dissuading them from putting money into stocks, housing or bonds.

Rising interest rates would push more people to save than to borrow or spend, but unless interest rates are higher than inflation, savers will see their wealth eroded over time. Gold doesn’t have a yield, and wealth is protected through simple upward moves in price alone during times of inflation. Last summer saw gold prices rising to new nominal highs, showing how much scope there is for wealth to be conserved or even built up in times of economic uncertainty. The next year and decade ahead could be full of shocks in much the same way as the 2000s and the 2010s, meaning gold might have more upside than some expect.

If you’re looking to preserve your wealth in the year ahead, you’ll be pleased to know the latest range of 2022 dated gold and silver Britannia coins are now available, and the Gold Bullion Company, as an Official Partner to The Royal Mint, will be adequately stocked to fulfil your requirements. The 2022 gold Britannia is VAT-free, and follows a long line of Britannia coins from years gone by, holding not just great intrinsic value as a gold item, but also from its historical significance. The Full Britannia weighs one troy ounce, with its price reflecting a valuation close to that you would expect from buying a troy ounce bar of gold or silver.

All gold requires for another bull market is the entrenched expectation that inflation could exceed projections and that policy makers are ill-equipped to tackle it. Gold has already outperformed stocks and bonds for the last 20 years or so, and in such a scenario, this could be repeated for many years to come. All it takes is determining when the right time to buy truly is.

Is Silver a Good Investment for 2022?

Thursday, October 28, 2021

There is no doubt that there has been growing demand for physical silver and arguably the strongest investor interest in silver we have seen in several years – could this set the scene for another silver price rally?

Undoubtedly, as an investment, physical silver is often overlooked and overshadowed by its lustrous counterpart physical gold.

However, the price of silver jumped more than 70% in recent times, amid growing investor interest and industrial demand for the white metal.

Some analysts have gone as far to predict that the silver rally is likely to continue, especially at a time when the global economy is reopening after the pandemic.

So, what is the future looking like in terms of the silver price and could silver open new opportunities for investors? 

Let’s delve into this!

What are the silver price trend and forecast?

There is no denying that there is an element of risk, and turbulence can be met, when investing in silver sometimes, as the silver price is usually much more volatile than gold. There is some truth behind the joke that silver is “gold on steroids” as it tends to rally much higher and faster compared to its more expensive peer.

There are a few reasons that explain why silver is much more volatile than gold. One being that the silver market is much smaller than that of gold, therefore there is lower market liquidity. Thus, meaning buyers can struggle to find sellers willing to sell at their set price (or the contrary) which can lead to intense upward or downward movements.

Secondly, industrial demand for silver tends to fluctuate, which can cause the price to bounce back and forth.

What is the silver price trend?

Upon focusing on the volatility of silver its best to look at the price dynamics for silver in 2020 and 2021:

  • In 2020, in the period from mid-March to mid-August silver skyrocketed 142.8% in only 4.8 months!
  • In 2021, silver started the year at £19.81 an ounce before reaching an eight-year high at nearly £21.79 and falling back to £17.43 an ounce in late March.

Commodity strategists believe the silver price rally is highly likely to continue due to the Covid-19 pandemic.

“The rally can last as long as the world remains concerned about the impact of Covid-19 mutating and concerned about the impact of Covid on the services industry. Both of these concerns can […] sustain [silver] investment demand at high levels,”
Max Layton, managing director of Commodities Research at Citi Global Markets, said.

What is the silver price outlook for 2022?

Nicky Shiels, Head of Metals Strategy at MKS PAMP GROUP, sees three possible scenarios for the silver price:

  • Base case: the average silver price will increase to roughly £20 an ounce.
  • Bullish case:  the average silver price will increase to around £25 an ounce.
  • Bearish case: the average silver price will drop to about £10 an ounce.

However, she puts the probability of the Bearish scenario to only 30%, while she gives a 70% probability to the Bullish case.

Taking these scenarios into account, even in the base case scenario the silver price is expected to climb upwards.

As previously mentioned, there is a lot of extensive price volatility to deal with when investing in silver. It can also surprise investors with big and fast price gains, as was seen in 2020. Granted, there were unusual factors that effected this year and many other sectors outside of the precious metal markets, however the potential for volatility that silver offers is particularly attractive for investors who are prepared to accept some risk in their portfolios.

Why is there a high industrial demand for silver?

One of the key drivers likely to support this positive momentum for silver is its ever-growing industrial demand, exemplified by China’s plans for a giant 400-gigawatt wind and solar “megaproject”, adding as much renewable capacity as currently exists in all of Europe.

Silver has several unique properties that make it especially valuable in the industrial sector. Silver’s main sought-after properties for industrial use:

  • Silver works particularly well as an electrical and thermal conductor. This makes it ideal for a wide range of electrical applications.
  • Silver is the most reflective of all metals. Because of that, it is used to make most mirrors. Its reflective properties are also used for high-tech scientific equipment such as microscopes, telescopes, and solar panels.

Silver plays a major role in photovoltaic energy (solar energy), water filtration, mobile phones, nuclear reactors, electric vehicles, medicine, and more.

What is the outlook for silver’s use in electric cars?

Nearly every electrical connection in an electric vehicle (EV) uses silver, which helps us understand the importance of silver within the electric car industry.

In total,?the car sector uses around 55 million ounces of the metal annually. From the looks of it, it doesn’t seem like it is going to decrease either.

Overall, silver’s use in electric vehicles is projected to increase to more than 89 million ounces by 2025, based on data from the World Silver Institute.

What is the outlook for silver’s use in solar energy?

With climate change at the forefront of most people’s concerns currently, there has been a shift in finding and securing decarbonised, sustainable and renewable sources of energy.

Renewable energy is the fastest growing energy sector, with its growth capacity jumping 45% in 2020 as part of an “unprecedent boom” in the wind and solar energy sector.

“Silver’s use in Photovoltaic (PV) power is the leading current source of green electricity…Despite COVID disruption, the PV market proved its resilience in 2020. Newly added solar capacity saw further growth, with the total estimated to have surpassed 130GW for the first time ever,” The Silver Institute said in a note.

Alongside this, solar power generation is expected to nearly double by 2025, providing an important and consistent source of industrial demand for silver over the next decade.

This unsurprising, given that more and more countries have recently been shifting to renewable energy sources, with China taking the lead in the solar energy sector.

The Chinese government have huge plans for game-changing projects in renewable energies as they slowly move away from coal and are likely to create extensive demand for silver as a key component in these industries.

Are retail investors turning to silver?

According to Ole Hanson, head of Commodity Strategy at Saxo Bank, although around 50% of the demand for silver was industrial, the rest came from investors.

Flashback to #silversqueeze

The famous silver squeeze, that we saw took place not once, but twice this year is a good example of growing retail investor interest in silver.

In late January – early February 2021, retail investors, encouraged by the online forum site Reddit, pushed the silver price to an eight-year high.

The second silver squeeze which we witnessed in early May, was slightly slower than the first round, as investors got the idea to buy physical silver bars and coins, this did eventually push the price of silver up.

It seems that the demand for physical silver is only going to grow, with Nicky Shiels predicting that “retail coin demand could reach a 5 year high in 2022”.

So, what could make silver an interesting investment?

It all depends on the individual’s goals, investment strategy and risk appetite. However, there are several reasons why silver could be an attractive investment:

  • Silver’s accessibility to small investors: If you have a smaller budget, silver is a good option for those looking to begin their investment into precious metals. Silver is roughly 75 times cheaper than gold
  • Good portfolio diversifier: As it has that element of risk it can bring some volatility to one’s precious metals portfolio, and it is also nice to have a mix of gold and silver
  • Silver is a key component in green and sustainable technologies: This is likely to support demand along with the positive silver price mom
Copyright: perig76