Market Report 3rd August 2020
Welcome to my weekly report of the things which have caught my attention over the past week.
Shockwaves reverberated around markets on Friday as the US recorded it’s biggest economic contraction in history with the economy down 32.9% for the 2nd quarter. This is very worrying as the US is yet to reach the peak of the pandemic and furlough schemes ended on 31st July 2020 suggesting unemployment will escalate.
In Europe, countries also released their GDP 2nd quarter figures with Spain down 18.9%, France 13.8%, Italy 12.1% and Germany 10.1%. Britain has not yet released it’s figures.
Gas has long been one of Russia’s biggest exports, but the surge in demand for gold has seen Russian exports in metals exceed oil for the first time. Russia’s Central Bank reported that the country’s gold exports jumped to 65.4 tons in April and May with a value of approximately US$3.55 billion. In the same period natural gas exports dropped to US$2.4 billion. The drop in demand is in line with global drops in demand due to the pandemic.
Chinese banks start banning their clients from purchasing gold. They have taken measures to prevent customers from buying gold, platinum, palladium and other precious metal-related products through them. The Shanghai Gold Exchange and Bank of China have also stopped opening new accounts for trading.
TikTok a growing video platform is broiled in controversy due to it being a Chinese owned social media company. With the ever-increasing hostilities between US, UK and China this company has come under fire with espionage claims. US Government have told China they must sell their US arm of the company or face closure.
Gold – reached an all time high before dropping back slightly to US$1975.85 but that still equates to a weekly increase of 3.85%.
Goldman Sachs has revised its 12-month gold forecast to $2300 per troy ounce. Investors in Gold remain mainly speculators although mainstream investors are likely to enter the market if gold reaches US$2000.
For the second consecutive week more than US$100 million has flowed into Gold ETC’s due to the volatility offering trading opportunities
Silver – closed at US$24.41 with a weekly growth of 7.11%
Gold:Silver Ratio – which had been steadily dropping increased slightly over the week to 81.48 indicating silver is still undervalued and offers the best investment opportunities at present.
Oil – the price has been moving sideways, at $40 a barrel, for a couple of weeks but is now going down again with WTI Crude closing $39.73. Saudi Arabia and India announce they are likely to cut back production.
Chevron Coporation reported it’s worse losses in history on Friday with a net loss of US$8.3 billion. A combination of reduction in demand due to the pandemic and US sanctions against Venezuela which force the company to close down it’s operations there.
Other oil companies are also struggling with UK, company BP has indicated it is likely to cancel their dividends. This is a huge blow to pension companies who rely on dividends to boost their revenues for the pension schemes.
Alternative Energy – After 35 years of negotiating, planning and delays the 5 year plan to build the largest fusion reactor in France has finally started. The project is funded by US, Russia, China, India, Japan and South Korea. It will be the largest tokmak fusion device capable of generating 500MW of thermal fusion energy as soon as 2025.
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