The Ascent of Aurum – Long Gold

Exactly a year ago, in May-2016, we published our analysis of Gold demand trends provided by the World Gold Council. We wrote:

Gold price charts and physical gold demand trends offer a dichotomous view on the future of gold price. On the one hand, the extremely lose [sic] monetary policies of the world, and the phenomenal 1st quarter performance of gold relative to every other major asset in the world makes for a very compelling bullish case and on the other hand the physical gold demand trends paint a very bleak, if not scary, picture.

The World Gold Council recently published their 1st quarter 2017 report on gold trends but this time our analysis of that report leaves us with anything but a bearish outlook on gold. We have turned massively bullish on gold and we will outline our reasons below.

Our thesis rests on three reasons:

  1. Declining global mine production in years to come — a result of past, massive, haircuts to capex by some of the largest gold miners around the world. Gold miners’ Capex has declined 65% from 2012 to 2016.
  2. Gold is a safe haven asset and according to world Gold Council’s most recent report on demand trends, current uncertainties in China and Europe are driving these flows.
  3. Technical analysis of gold price chart reveals a strong bullish set-up at a time when this trade is far from being crowded.

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Platinum, Ain’t So Precious!

Platinum has been steadily gaining its share of investment demand from precious metals investors, alongside gold and silver. As per the World Platinum Investment Council, investment demand for Platinum was 150 koz in 2014, 260 koz in 2015, and 505 koz in 2016 but the possibility of a declining industrial demand going forward will make it a tough battle for precious metals investors to continue justifying platinum’s preciousness. Of the 7,780 koz of platinum consumption demand forecast for 2017, 3,245 koz, or roughly 41%, is forecasted to come from the automotive sector (especially the diesel segment) for use in catalytic converters. This is the largest single component of platinum demand and that might be a big problem going forward.

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