Insights

AI's Critical Impact on Electricity and Energy Demand

AI's Critical Impact on Electricity and Energy Demand

The rise of AI and data centers is likely to significantly increase global electricity demand, creating challenges for power grids but also opportunities for stable, clean energy sources like nuclear power. AI data centers are also likely to support increased demand for copper-intensive electrical equipment.

Insights tagged: Paul Wong

Global Investment Pours into Renewable Energy

Global Investment Pours into Renewable Energy

February was a lackluster month for critical materials, but the backdrop remains very positive. The global commitment to clean energy hit a new milestone in 2023 as investment in energy transition surged to an unprecedented $1.77 trillion, led by electrified transport. Over the past 10 years, investment in global energy transition has grown at a 24% compound annual rate, several times the global GDP growth rate.

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Top 10 Themes for 2024

Top 10 Themes for 2024

What forces are likely to drive energy transition materials and precious metals markets in 2024 and over the next decade? We discuss 10 critical macroeconomic and market-specific themes ranging from deglobalization and climate policy to the new commodity supercycle and a potential silver price breakout.

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Gold’s Bold Move to New Closing High

Gold’s Bold Move to New Closing High

On Friday, December 1, 2023, spot gold bullion registered an all-time high closing price of $2,072.22, surpassing the prior closing high of $2,063.54 reached on August 6, 2023. Risk assets have been helped by lower long-term bond yields, a weakening U.S. dollar and record gold buying of by central banks.

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Central Banks Support Gold & Solar PV Demand Buoys Silver

Central Banks Support Gold & Solar PV Demand Buoys Silver

Despite a pullback on gold investments, demand from sovereigns and central banks remains unwavering. Over the past decade, China has been committed to bolstering its gold reserves to enhance its economic and geopolitical standings. Silver is likely to be in high demand as the energy transition expands, given it is critical to solar PV panel technology, EV batteries and 5G cellular service. 

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Silver Demand Grows as Solar Leads Renewables

Silver Demand Grows as Solar Leads Renewables

Uranium's performance helped the energy transition complex close higher in September. From a macro outlook, solar panels are emerging as a critical player in the global energy transition. Evolving technologies in renewable energy, especially in the solar space, are driving a surge in silver demand which may likely outpace supply over the next decade.

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Geopolitical Risks Enhance Gold’s Role as a Reserve Asset

Geopolitical Risks Enhance Gold’s Role as a Reserve Asset

Gold attempted to breakout above $2,050 in early May before drifting lower as the U.S. debt-ceiling drama deepened and the U.S. dollar strengthened. At the same time, global central banks have been accumulating gold at a record pace. This highlights gold's role as a neutral reserve asset that has the potential to mitigate increasing counterparty risks amid escalating geopolitical tensions.

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The West Moves to Weaken China's Hold

The West Moves to Weaken China's Hold

Lithium and lithium miners staged a sharp rebound rally in May and were the positive exception among critical minerals. The sector was weighed down by China's faltering recovery, ongoing global growth concerns and the U.S. debt ceiling drama. China’s dominance in critical minerals poses risks to the West’s manufacturing base and national security, highlighting the need for onshoring and friend-shoring energy transition supply chains.

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Gold Rides Higher on Recession Fears

Gold Rides Higher on Recession Fears

The gold market continues to be bullish as the probability of a recession rises, regional banking stress resurfaces and the Fed seems determined "get inflation down to 2%, over time". Globally, we are entering a more challenging period featuring subpar economic growth, increasing risks to systematic financial stability, stubbornly high inflation and rising geopolitical risks. Against this backdrop, we believe gold should perform well, even if the U.S. debt ceiling disaster is averted.

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Nationalization and Surging M&A Highlight Secular Strength

Nationalization and Surging M&A Highlight Secular Strength

The long-term secular growth outlook for energy transition materials got several boosts in April, despite tepid performance for the month. Chile's decision to nationalize its lithium reserves reinforces the metal's role as a global strategic economic asset. M&A activity has heated up in the copper mining sector with lofty bids, including Glencore's $23 billion rejected offer for Teck Resources at a 20% premium.

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How Deglobalization is Changing the Dynamics of Securing Critical Minerals

How Deglobalization is Changing the Dynamics of Securing Critical Minerals

Commodity prices weakened in March in reaction to financial system stress and recession fears. As deglobalization accelerates, unfettered access to critical minerals is not likely to last. The old system of free and fair access to commodities, including critical minerals, is moving toward one marked by interregional competition, and unstable availability and pricing. China has moved aggressively to acquire critical minerals in the past 20, but we believe the West has near-unmatched capabilities and is a formidable competitor.

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Gold Bulls Run Faster as Fed Tackles Banking Crisis

Gold Bulls Run Faster as Fed Tackles Banking Crisis

In March, gold posted its highest monthly close since July 2020 and rounded out a solid Q1 2023 gain of 7.96%. Gold is now up 21.38% from last autumn's low (9/26/22) following the most aggressive central bank purchases in decades and gold investment flows catalyzed by the U.S. banking crisis. We are very optimistic given that many significant long-term bullish macro factors for gold have become stronger, while some shorter-term cyclical gold bearish factors have faded.

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Has the Next Commodities Supercycle Begun?

Has the Next Commodities Supercycle Begun?

February saw energy transition materials/critical minerals markets correct, but the secular story remains strong. As the global energy transition "arms race" heats up, the drive to secure supply is fast becoming more important than price. All signs indicate the 40-year bond bull market has likely ended and the next great secular bull market in commodities has begun.

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First Gold Dip  Since Central Bank Buying Spree

First Gold Dip Since Central Bank Buying Spree

Gold fell in February, closing the month at $1,827 in a correction characterized by a stall in buying, but not selling. Since gold's autumn 2022 low of $1,622, global central banks have been buying gold at record rates; more than three times their long-term averages. The current scale of central bank buying is massive — an annualized rate of 1,724 tonnes vs. an average of 512 tonnes over the past decade. Central bank gold purchases as a percentage of global gold demand have also tripled to 34% from their average of 11% over the past several years.

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Critical Materials Start 2023 With a Bang

Critical Materials Start 2023 With a Bang

We believe we are in the early stages of an energy transition materials secular bull market and favorable supply-demand dynamics are likely going forward. The upward revision in global growth, the timing effect of the China credit impulse and the surprise ending of China's zero-COVID policy have provided a tailwind for the metals market. For energy transition metals, we see this as a cyclical boost on top of the robust secular demand that is in play.

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2023 Top 10 Watch List

2023 Top 10 Watch List

This year’s top 10 list offers Sprott’s thoughts on what will likely drive markets in the coming year and decade, from a macro perspective and the vantage of our asset classes: Precious Metals and Energy Transition Materials. We believe the global clean energy transition will grow more urgent as energy markets continue re-ordering and energy security becomes synonymous with national security. The signposts point to a commodity-intensive, inflationary and capital-intensive decade where energy transition materials and precious metals will become far more valued than in the prior market regime.

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Signs of Capitulation Everywhere

Signs of Capitulation Everywhere

July was another difficult month for most asset categories and was characterized by selling capitulation into exhaustion. Much more aggressive Fed rate hike expectations relative to other global central banks were a significant cause of U.S. dollar (USD) strength and rising real yields, which adversely affected gold. Although gold bullion lost ground, it remains relatively better off than many other assets for the year at -3.46% YTD through July 31, 2022.

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Gold Holds in Worst First Half in Decades

Gold Holds in Worst First Half in Decades

Gold continued to perform as a safe haven store of value in what has been one of the most challenging six-month periods for markets in decades. Gold has managed to stay above the $1,800 support level despite the broader market carnage. By contrast, equities (as measured by the S&P 500 Index) recorded their worst first-half start to a year since 1970 and bonds (U.S. Treasury Index) registered their worst first six months since 1973 (based on available data).

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Gold, Steady in its Purpose

Gold, Steady in its Purpose

May saw selling across most asset classes and scant appetite for safe haven assets such as gold. However, gold bullion has outperformed many other asset classes YTD and continues to do its job. Gold held its value with low correlation to the S&P 500 and lower volatility than other assets.

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April Pressures Risk Assets

April Pressures Risk Assets

Gold lost 2.09% in April, a month marked by across-the-board outflows in many asset classes as volatility surged. By contrast, gold held in ETFs has increased sharply this year as the safe-haven flight continues. April was tough on many investment sectors, with the S&P 500 Index down 8.80%, the Nasdaq Composite Index declining 13.37% and U.S. Treasury bonds falling 3.10%. The U.S. dollar was one of the few beneficiaries as it neared multi-year highs.

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Gold Investment Demand Returns

Gold Investment Demand Returns

Gold posted its all-time highest quarterly close on March 31, 2022, ending a volatile month that helped gold climb above $2,070 on March 8. By contrast, the U.S. Treasury Index suffered its worst quarter since 1973 and the S&P 500 Index posted its first negative quarter since Q1 2020. While gold may have climbed back to its highs on safe-haven flows, other positive gold supports are definitely in play.

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Gold Bullion Breaks Out on Safe-Haven Flight

Gold Bullion Breaks Out on Safe-Haven Flight

The precious metals complex rebounded strongly in February as other assets faltered. Gold bullion is up 4.36% YTD through February 28, 2022, and silver bullion has increased 4.90%. Gold mining equities rallied and have gained 10.17% YTD. Investors sought safe-haven assets given the heightened concerns over the economic/market risks from rising interest rates and the escalation of the Russia-Ukraine conflict.

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Fed Applies Hawkish Shock Treatment

Fed Applies Hawkish Shock Treatment

Gold reached a high of $1,848 in January, but slid following the Fed's exceptionally hawkish statements at the January FOMC meeting. Market risks are rising and we believe that gold, as it did in 2018, is likely to stage a breakout given its safe haven characteristics.

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 2022 Top 10 Watch List

2022 Top 10 Watch List

For 2021, the gold price averaged $1,799 compared to $1,770 for 2020, up $29, despite losing 3.64% for the twelve months. Gold traded in a narrow range for most of last year as markets were ping-ponged by inflation and rate hike expectations. Based on historic patterns, gold's lengthy consolidation indicates that prices have the potential to rally sharply and quickly in the coming year. We explain why in our List of Top 10 things to watch for gold investors. 

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