From the Heraeus Weekly Bulletin:
Gold demand could weaken. Sentiment seems to be changing in some large hypermarkets. The local price premium of $44/oz in China in March has unwound and gold is now trading at a slight discount on the Shanghai Gold Exchange, suggesting weaker domestic demand. Jewelry retail sales growth looks strong year-on-year, however the basis of comparison is very low due to last year's Covid lockdowns. Domestic retail sales fell 24% yoy in May and 44% in April. China is the largest consumer of gold, consuming 825 tons in 2022 and 276 tons in the first quarter of 2023 (source: World Gold Council). It can be assumed that Chinese consumer demand will be lower in the second quarter than in the previous year.
Investor interest also appears to be waning after failing to break through $2,000/oz on a third attempt in May. Outflows from global gold ETFs so far in June have averaged 49,000 ounces per day. Holdings are falling, especially for ETFs registered in the US and UK. Weaker consumer and investment demand as well as a breach of a technical support level are a signal that the price could fall further below current levels. Expectations of another 25 basis point US rate hike could add pressure as it should strengthen the dollar. Gold prices have traded in a tight range between $1,940/oz and $1,980/oz since mid-May. At the end of the week, Gold was still trading around $20 above the $1,900/oz mark after the price broke last week's 100-day moving average, which has been a support level so far.
Indian silver demand is weakening. India's silver demand has skyrocketed over the past year as manufacturers replenished inventories and income and consumption recovered to pre-pandemic levels. India was a key driver of global industrial silver demand, which hit a record high of 557 million ounces (17,325 tonnes). Demand (derived from net imports) has fallen sharply so far this year. Silver imports totaled just 27 tons in May. Excluding the pandemic period, this is the lowest import volume since 2006 and is 92% below the five-year average. In 2022, India was the largest market for silverware (1,667t) and jewelery making (3,472t) and the second largest market for bar and coin demand (2,470t) (source: The Silver Institute). The lower demand expected for the first half of 2023, as well as the risk that the El Nino phenomenon will affect the monsoon rains later in the year and thus also negatively affect rural incomes, could result in a further fall in demand. Still, the country will remain one of the largest end users for the metal.
Bright prospects for the PV industry. According to the National Energy Agency of China, the country added 12.9 GW of solar panels in May. China has increased installed solar capacity by 61.21 GW to about 453 GW this year. If this pace is maintained, new installations could reach 147 GW by the end of the year. With production stalled by Covid outbreaks last year, total installations in 2022 totaled 85 GW. Silver demand for PV applications is expected to grow strongly this year as demand for renewable energy is also booming outside of China. The EU passed its revised “Renewable Energy Directive” last week. This requires the share of renewable energies to be increased to 45% by 2030 (previously 32.5%). Local production is also likely to increase over the next few years as the EU seeks to reduce dependence on China for its raw material and energy needs. Despite efforts to reduce silver use in solar cells, silver demand is unlikely to fall as government-sponsored growth in new PV installations will increase proportionally.
Since the triple top in May, gold and silver have shown a reasonably sharp drop in price to as much as 56,000 euros per kilo of gold and 650 euros per kilo of silver, thus giving trust customers increasingly good purchase prices again.
This development could continue in the medium term, even if a short recovery could start now, but it may also go straight down to around $1870 per ounce of gold.
The Trust was able to increase its silver holdings to 217,132.89 g in the last week.
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The trustee wishes you a good week and lots of success.