During this year’s third quarter, the Precious Metals Index dropped by 3%. The latest report released by the World Bank notes that this drop was caused by reduced physical demand, a stronger U.S. dollar and decreasing investor sentiment from rising real interest rates.
The World Bank projects that in the short term, the average price of these metals will increase heading into 2022, with many expecting a tightened monetary policy. Some risks to this outlook include more persistent inflation, intense geopolitical tensions and the threat of new variants of the coronavirus.
The report also notes that the price of gold declined partly due to the drop in investment demand amid the increase in interest rate yields. Last month, the yield on 10-year TIPS (Treasure Inflation-Protected Securities) rose by 10 basis points. At the same time, the U.S. dollar strengthened after the Federal Reserve announced that it would start to taper off its bond purchases before 2021 ended.
The report also found that central banks had decreased gold purchases these last few months, while the holdings of gold-backed ETFs (exchange-traded funds) also declined sharply in the third quarter of this year. A reprieve to the falling price of gold was the jewelry demand in India and China, which remained firm during this period.
The World Bank expects that the price of gold will average at 1.4% higher this year, before declining by about 2.4% next year due to higher yields. The price of silver also began to drop as its industrial demand declined. In its report, the global financial institution notes that the drop in silver was caused by the similar factors that led to gold’s decline.
This includes the Purchasing Managers’ Index (“PMI”) reading in Japan, which has been trending well below the international average. The manufacturing PMI in China also dropped to less than 50 in August and September, which signals a reduction in industrial activity. Japan and China are major producers of products that contain silver such as photographic equipment, solar panels and various electronics.
Another precious metal that saw a drop in price was platinum, which struggled to remain steady as the demand from the auto sector waned. A semiconductor shortage has brought about a decrease in global auto production, which has in turn impacted autocatalyst demand. Autocatalyst demand makes up over one-third of platinum demand. Manufacturers of automobiles warn that the semiconductor chip shortage, which is affecting companies around the globe, may extend into next year.
These periodic dips in price are unlikely to faze established precious metals companies such as Asia Broadband Inc. (OTC: AABB), which are resilient enough to ride out any significant volatility in the market for different commodities.
NOTE TO INVESTORS: The latest news and updates relating to Asia Broadband Inc. (OTC: AABB) are available in the company’s newsroom at https://ibn.fm/AABB
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