Near-record level of consumer interest in precious metals

By Peter Kennedy

As gold surged above US$1,800 an ounce on Wednesday July 8, 2020 for the first time since 2011, one of Canada’s leading bullion dealers is seeing a near-record level of consumer interest in precious metals.

Robert Levy, Managing Director of Border Gold Corp. in Surrey, British Columbia, says he expects the heightened level of interest to be confirmed when the Royal Canadian Mint releases its financial results for the second quarter of 2020.

When the Royal Canadian Mint reported its first quarter results on May 22, 2020, it said overall global market demand for bullion, due to economic uncertainty surrounding COVID-19 led to higher bullion volumes. It reported that gold volumes were 198,100 ounces in the quarter (up from 123,800 in 2019), while silver volumes were 6.6 million ounces, up from 5.5 million a year earlier.

“You are going to see bullion volumes similar to the global financial crisis in 2008 and 2009,” said Levy during an interview with Resource World Magazine.

As one of the largest distributors of Gold Maple Leaf coins in Canada, Border Gold is well positioned to assess the impact of COVID-19 and other factors on consumer demand for precious metals, including gold, silver, platinum and palladium.

The private family-run company was launched by Levy’s father Michael Levy who began his career in the gold bullion business back in 1968. Through partnerships with The Brinks Co. and the Royal Canadian Mint as well as other world class and London Bullion Market accredited dealers, Border Gold offers distribution and storage services to clients not only in Canada and the U.S. but around the world.

“The number one item we sell is the Gold Maple Leaf coin,” said Levy. Other big sellers include gold and silver bars and Silver Maple Leaf coins.

The COVID-19 pandemic has helped to drive increased demand for precious metals as investors react to the increase in market volatility and economic uncertainty.

“As we have seen in the past, when you get the sell offs in the market people go to physical gold for safety,” Levy said. “When we had some [stock market] down days, people were selling gold and silver to come up with cash.”

Another consequence of COVID-19, he said, has been higher shipping costs. As bullion travels in the belly of scheduled airline flights, dealers were forced to raise their prices when U.S. President Donald Trump imposed restrictions on travel into the United States.

Customers who had previously been paying US$30 over the cost of a one-ounce gold wafer ended up paying US$60 an ounce over spot because of the reduction in flights.

On Wednesday, (July 8, 2020) gold traded above US$1,800 an ounce as mounting fears over the global spread of COVID-19 sent investors scurrying for safe havens, including precious metals and the U.S dollar.  The spread of the virus has dented hopes for a swift economic recovery by limiting consumer spending and employment gains.

On Wednesday, spot silver was trading at US$19.15 an ounce, marking a gain of 2% on the day.

In a report, Scotiabank said US$1,800 has been a key resistance point for gold. Therefore, it said any clear break above this level, if it holds, may attract interest from momentum traders, which it said could eventually push the price above its all-time high above US$1,900 an ounce.

However, while COVID-19 has resulted in increased demand for precious metals, it has only served to accelerate a trend that that was already being driven by central bank easing and record low interest rates.

Those are factors that helped to push the price of gold over the US$1,800 an ounce level on Wednesday from US$1,464.40 an ounce on November 13, 2019.

Levy said he is always leery about making price forecasts. But he wouldn’t be surprised to see gold heading towards US$1,900 an ounce in the near future.

“It could be a year or a half year before we go back there, but that to me is where this market is heading,” he said. “I think the gold market in this current environment still has momentum.”

Levy says he is also bullish on the outlook for silver even though the white metal had been locked in a bear market for a period of eight years before a recent rally which has pushed the price of silver over US$19 an ounce this week from US$12.34 an ounce on March 21, 2020.

Levy said the market is entering a period where investors in silver could do well if they buy at the right time. “Obviously timing is everything in the silver market.”

As part of its bullion business, Border Gold is a supplier of platinum to European clients who are storing the metal in Canada. Levy says he believes interest in gold will drive up the price of platinum, a metal that has been impacted in the past by supply disruptions in South Africa.

Meanwhile, Border Gold founder Michael Levy has long expressed the view that investors should have approximately 5% of their financial assets allocated in gold.

“His view is always that [gold] is a cash-like alternative and its role in the portfolio is to act as insurance,” said (Robert) Levy. “It is something that is liquid that you can sell.”