Precious metals, due to their unique physicochemical properties and rarity, are the most sought-after and precious raw materials in the history of civilization. In the copper production process, KGHM obtains precious metals: silver and 14k gold.
General Information
Silver and gold have always been a durable vehicle of value.
Silver, due to its properties, is a metal that has a wide range of applications - it is treated both as an investment good and an industrial metal. It is used in, among others jewelry, numismatics, electronics, photography, medicine and the production of tableware.
In the case of gold, as much as 90% of world production is used as investment and jewelery gold, and only 10% in industry.
Production
KGHM is one of the largest producers of metallic silver . The company produces about 1,200 tons of this valuable metal annually. Cathode silver with a content of over 99.99 Ag (the so-called four nines) is produced in the form of bars (ingots) weighing 1000 jewelery ounces (32.15 kg) and granules. Metal in the form of ingots is registered under the KGHM HG brand and has a registration certificate on the New York Stock Exchange COMEX and Good Delivery certificates issued by the London Bullion Market Association. Silver is delivered in the form of granules to plants producing materials for jewelery and metal plants producing alloys with Ag content. Silver in the form of ingots (bars) goes mainly to financial institutions.
Gold with a content of more than 99.95% Au is recovered from the gold-bearing sludge produced in the process of electrorefining silver and sold in the form of bars.
The Głogów Copper Smelter holds certificates confirming that in the production of electrolytic silver in the form of ingots and granules as well as gold production, it operates on the basis of the Integrated Management System. It comprehensively meets the requirements of EN ISO 9001: 2008, EN ISO 14001: 2004 and BS OHSAS 18001: 2007.
Gold puts its holders to a solid test of patience. Neither the prospect of a blue wave of liquidity from household aid programs flooding the markets, nor the time-limited quantitative easing, nor the Fed's approval of a rise in inflation above 2% seem sufficient to stimulate gold to recover from the correction that has been ongoing since August 2020. The slippage of the gold rate is accompanied by its systematic outflow from EFTs, which proves the decline in the interest in gold of short-term individual investors, for whom it is the most popular way to gain exposure to changes in gold prices.
The reasons for the weak sentiment can be seen in the behavior of other markets, especially the stock market and cryptocurrencies. Stock indices are systematically climbing, with the involvement of individual investors reaching historical records. Bitcoin, treated by many as an alternative to gold, has increased 400% since the August peak achieved by the gold's valuation. This may have prompted many private funds to convert gold into bitcoin in their wallets.
In our opinion, the relative weakness of gold in relation to shares, bitcoin and raw materials does not mean the end of the bull's price increases. There is an enormous amount of capital in the markets today, seeking both quick speculative returns and protection against inflation, which is the inevitable consequence of the circulation of record amounts of dollars into the economy. As long as the speculative theme prevails and the markets are optimistic, gold remains in the shade. However, the flat nature of the correction, combined with the massive outflow of speculative capital from the gold market and negative sentiment, prove that gold is consolidating in "strong hands", which heralds the near end of the correction and a return to the upward path.
Strong Demand
The strong demand is evidenced by the problems with the physical delivery of gold by Comex, which sends back contract holders seeking 18k gold delivery to London, where they are also offered, instead of gold, depositary receipts for unallocated gold held in LBMA vaults. Also, the availability of smaller bars and coins has been very limited for many months and smaller customers have to take into account the need to pay high premiums above the price set in New York and London.