Click Fraud
  • FAQ
  • Cart
ABC Bullion

The Precious Metal Outperforming Gold and Silver

10 September 2021

Friday 10 September 2021

In this week's market report:

  • Gold goes up…gold goes down

  • Australian dollar buffers gold’s fall

  • Gold lags real yields

  • Inside our office this week…

  • The precious metal outperforming gold and silver

  • Before you go

Shae Russell

Shae Russell,
Group Communications Manager

Dear Investor,

US dollar gold price [XAUUSD]
Daily chart

US dollar gold price Daily chart

(Click to enlarge)

Source: Trading View

Gold goes up…gold goes down: Gold giveth then taketh away. The yellow metal was buoyant on the back of Jackson Hole. Not long after we hit the publish button, gold got its second wind from disappointing US jobs data for the month of August. Au banged its head on the pesky US$1,830 level…again…and traded back down around US$35 per ounce, to US$1,797.

Dismal US nonfarm payroll employment data: The dismal US jobs data looked promising for gold:

  • Economists were expecting the numbers to show 700,000 – 750,000 jobs added to the US economy in August.
  • The nonfarm payroll number was in fact, 374,000.

What does this tell us? Perhaps all is not well within the US economy, and that ‘if’ the Federal Reserve Bank do taper, it’ll much slower than first thought.  

  • Tapering was expected to start in November or December this year, but the August jobs  data means it’s highly likely tapering will start  early  2022.
  • The Fed have moved away from their 2% inflation and full employment mantra, in favour of full employment first while allowing flexibility in the inflation numbers.
  • In other words, they’ll tolerate higher inflation data for as long as possible.
  • Kitco charts Au’s reaction to the jobs numbers via the gold futures December 2021 contract:


US dollar gold price [XAUUSD]
Daily chart

(Click to enlarge)

Source: Kitco

The bulls grow quiet: Gold bull to gold bull, I understand this is perplexing…and frustrating. The world’s ‘mother’ central bank is openly allowing loose monetary policy coupled with a ‘transitory’ inflation narrative.

  • The fundamental back drop is positive for gold. Gold is a traditional safe haven asset from inflation and turbulent markets, but…

The technical set up favours the bears: Gold continues to hit and retreat from US$1,830. Failing to break through this level — three times, no less — paints a technically bearish picture for gold. More sideways action ahead.

Australian dollar buffers gold’s fall: Again, the Australian dollar is supportive to the gold price. US dollar gold fell while the Aussie dollar rose, so the Australian dollar gold price is less volatile right now, and sitting at AU$2,434 per ounce.

A word on the Reserve Bank of Australia: Much digital ink space has been dedicated to the Federal Reserve Bank (because of its large impact on the gold price), however today I’d like to briefly share some comments from the Reserve Bank of Australia (RBA’s) monthly meeting.

  • The RBA kept the cash rate at 0.10%, though this article here says that 1 in 7 Australians would struggle to pay their mortgage rates rises…
  • RBA governor Philip Lowe has warned that gross domestic product (GDP) for Australia is expected to ‘decline materially in the September quarter and the unemployment rate will move higher’ however;
  • Lowe suggests the Australian economy will bounce back from the east coast lockdowns, saying:  ‘This setback to the economic expansion is expected to be only temporary. The Delta outbreak is expected to delay, but not derail, the recovery. As vaccination rates increase further and restrictions are eased, the economy should bounce back.’

Gold lags real yields

Many investors have asked why gold isn’t rallying when real yields move further into negative territory. Well, the World Gold Council answered this earlier in the week, writing:

‘Real government bond yields via the US-10-year TIPS yield hit all-time lows in early August, which is normally a positive for gold as its opportunity cost improves. Despite the very strong correlation over recent years, we’ve seen the gold price lag this move at times, which appeared to be the case in August. This was likely a product of a stronger US dollar. We would not be surprised to see an uptick in the price of gold should real rates hold below -1%, particularly as month-end jobs data was weaker.’

The short answer is, there is often a lag between real yields and the gold price. The divergence we are witnessing right now — while unusual — has happened in the past. As you can see below, gold generally catches up.

Real US Treasury yields hit low in early August

(Click to enlarge)

Source: Bloomberg; World Gold Council

Inside our office this week

Inside our office this week…is a quick palladium lesson! Over the past few months, we’ve noticed increasing investor interest in this mysterious precious metal.

Thanks to our relationship with Valcambi, ABC Bullion has been able to secure a supply of palladium.

Even among precious metal investors, palladium isn’t well known. It’s extremely rare, and supply is constrained. Russia is the largest producer, with South Africa close behind. Canada and the United States are a distant third and fourth respectively.

1oz Palladium Valcambi Minted bar

Global mine production of palladium 2010 - 2020

(Click to enlarge)

Source: Statista

Palladium has significantly outperformed gold in the past three years. However overnight the palladium price fell to a 12-month low. The reason? Palladium is a critical metal in catalytic converters (used to reduce exhaust emissions in vehicles), and automakers are announcing that production of vehicles will slow down — taking the palladium price with it.

US dollar Palladium price [XPDUSD]
Daily chart

(Click to enlarge)

Source: Statista

Palladium has outperformed gold silver and platinum
May 2015 – September 2021
Daily chart

(Click to enlarge)

Source: Statista

Is the palladium price merely pausing before it’s next rally? Perhaps. The fortunes of palladium are tied to car manufacturers at present, so we will likely see the price whir to life when automakers get back to full production capacity. The question is, will you be prepared?

Before you go…

What is the one thing you must know about gold?

Today, author and gold expert John Butler, explains his theory of money, currency debasement, empires in decline and how no portfolio is complete without owning gold. John provides some remarkable insights on the yellow metal as an anchor to the monetary system. This is one interview you don’t want to miss.

Until next time,

Shae Russell
Group Communications Manager, 
For ABC Bullion