MONEX

A Better Future

with Precious Metals

September 2021

2

TABLE OF CONTENTS

MARKETS IN SUMMARY

3A Better Second Half

8Gold

9Silver

10Platinum

11Palladium

3

September Monex CPM Report

As the euphoria surrounding the global re-opening fades over the course of the second half of the year, various risks are likely to gain increased attention in financial and pre-cious metals markets. Some risks like inflation have been front and center on investor minds for much of the first half of this year, while others like the resurgence of the coronavirus have started to come back into focus. Mean-while, other risks like growing tensions between the United States and China have been on the backburners. All of these factors are potentially disrup-tive to economic growth and likely to be positive for gold and silver.

Even without these risks causing any serious damage to global economic growth, growth should be expected to slow during the second half of 2021 and beyond compared to the supercharged pace observed during the first half of this year.

The global economy should be expected to grow at a healthy

pace in the coming quarters, with various risks stated above acting as headwinds to growth but none strong enough to necessarily create recession-ary conditions.

This scenario could keep real rates in negative territory for the foreseeable future. Real U.S. Treasury bill rates have been negative since around 2008, roughly 13 years. The Fed has suggested they may remain negative for at least another decade. This extended environment is posi-tive for gold, other precious metals, and commodities in general, and it is far from over.

While the Fed has indicated that it will take steps to reverse

some of the policy measures put in place during 2020, the risks stated above will deter the Fed and other major central banks from tighten-ing policy excessively. And while CPM Group has per-sistently held that hyperin-flationary conditions will not occur, inflation is expected to be stronger than that observed in the period between the Great Reces-sion and the pandemic. This should help real rates to remain negative, which is a positive for precious metals prices.

A Better Second Half

4

Coronavirus Variants of the coronavirus are a threat to the global economy. While a shutdown similar to that seen during March and April 2020 should not be expected this time around, more targeted shutdowns are occurring and even more can be expected. The negative fallout from such focused shutdowns will be less intense than the one observed last year, but nonetheless will slow economic growth and could once again hurt the travel industry.

Equity MarketsThe equity markets have been on a tear since their sharp decline in the first half of 2020. A combination of strong fiscal and monetary stimuli coupled with a reopen-ing of the global economy are all factors that have helped push equity values higher. While equity markets are not expected to crash or enter bear market territory, a correction at some point in the near future should not be surprising. This, too, could benefit gold and silver as portfolio diversifiers.

5

U.S. – China TensionsThe relation between the two largest economies in the world remains tense and is likely to continue deteriorating in the future. Worse than that, tensions between China on the one hand and Europe, Japan, and other countries compound the likelihood of reduced international cooperation and coor-dination of economic and financial responses to present and future negative developments. There is less drama and outward hostility between the two countries at this time compared with the recent past, but the relationship is problematic and both governments have signaled increased intransi-gence. This could have negative ramifications for the global economy, given the size of these two economies. As an example, the escalation of trade tensions between the two countries back in 2019 resulted in hampering global economic growth in that year.

Please see chart 1a and 1b.

HIGHLOW MODERATE

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US-ChinaTensions

DeteriorationOf E.U.Economic Data

Higher Equity MarketVolatility

U.S. HousingMarket Decline

Sharp Increase In Equity Markets

NegativeNominalU.S. Rates

DeflationaryPressures

DeteriorationOf E.U.Economic DataRisks Have Moved Toward

The Top-Right Corner SinceJune 2021

Deterioration U.S.

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StrongerThan

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DeteriorationOf ChineseEconomic Data

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NegativeReal U.S.Rates

U.S.Infrastructure

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NegativeReal U.S.Rates

SharpDecline InEquityMarket

NegativeReal U.S.Rates

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DeteriorationOf ChineseEconomic Data

U.S.Infrastructure

New WaveInfections

U.S.PoliticalRisk

U.S. HousingMarket Decline

Sharp Increase In Equity Markets

TradeTensions

StrongerThan

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DeteriorationOf E.U.Economic Data

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September 2021:

Risks, Probabilities, and Impact Of Factors Affecting U.S. Dollar Gold Price

Time Frame: Next Six Months

June 2021:

Risks, Probabilities, and Impact Of Factors Affecting U.S. Dollar Gold Price

Time Frame: Next Six Months

Note: Blue bubbles depict factors that have a positive impact on gold prices. Green bubble depict factors that have a negative impact on

prices. Gold bubble depict factors that can have a negative followed by a positive, or vice versa, impact on prices

6

The Fed

continues to

see the economy

expanding...

While monetary policy will remain accommo-dative into the foreseeable future, the market consensus interpreted Fed comments at Jack-son Hole as being more accommodative than it probably was suggesting it will be.

The Fed continues to see the economy expanding, notwithstanding the resurgence of coronavirus infections both at home and in various countries around the world.

And while it does plan to reduce its existing $120 billion per month bond buying program, possibly starting in the next four months, it continues to expect benchmark interest rates to remain low.

Markets seem to be less concerned about monetary policy getting tighter in part because of the Fed opinion on inflation and

Misreading The FedThe Jackson Hole Summit ended with the Fed reiterating its plans to begin reducing its bond purchases soon, without providing a specific starting date. Most major markets rose head-ing into the meeting and after its conclusion.

The broad-based gains in asset prices despite ongoing Fed communication regarding a reduction in liquidity from markets suggests that markets still are skeptical about the Fed announc-ing a withdrawal from its bond buying program in the near future.

7

in part because of the resurgence of the coronavirus. The weakness in the August U.S. jobs report has further reenforced this thinking. While the number of jobs added during August was sharply lower than expected there are other signs of strength in the jobs market, which should not be ignored, such as jobless claims or the broader U6 unemployment rate; both at the end of August were at their lowest level since the start of the pandemic.

The Fed has repeatedly said that it sees most of the inflationary pressures in the economy as transitory. With limited con-cerns regarding lasting inflation, the market sees a reduced need to scale back accom-modative policy. Another factor could be the increased coronavirus cases lately, which have pushed up concerns regarding the health of the economy in the short to medium term and is also reflected in the increase in gold prices and the decline in bond yields.

As discussed in the previous section, CPM Group continues to expect strength in gold prices driven by various economic, financial, political, as well as health related factors that are headwinds for economic growth and are positive for gold prices. Even so, in the short term there could be some correction in gold prices.

There is demand for gold as was seen from the quick recovery in prices following the sharp decline during the first several days of August. Furthermore, the gold market moves into a seasonally stronger period of demand during the last quarter of the year, which could be further supportive of prices and help to provide a floor to prices.

There is demand for gold as was seen from the quick recovery

in prices...

8

Gold Market ContinuedM A R K E T S I N S U M M A R Y

GOLD STATISTICAL POSITION TABLE

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021p

Total Supply 131.5 127.1 127.8 125.1 129.9 132.7 132.4 129.8. 128.9 131.2 % Change Year Ago 1.2% -3.4% 0.6% -2.2% 3.9% 2.1% -0.2% -2.0% -0.7% 1.8%

Total Fabrication Demand 82.6 92.0 93.5 96.7 93.6 97.0 98.1 94.0 77.3 81.4 % Change Year Ago 1.8% 11.3% 1.7% 3.4% -3.2% 3.7% 1.1% -4.2% -17.7% 5.3%

Total Official Transactions 11.4 25.0 18.6 13.6 7.9 10.6 16.9 17.3 8.0 6.0 % Change Year Ago 17.6% 119.0% -25.7% -26.9% -41.6% 33.8% 58.9% 2.6% -53.8%

Total Net Private Investment 37.5 10.1 15.7 14.8 28.4 25.0 17.5 18.5 43.6 43.8 % Change Year Ago -4.0% -73.0% 55.7% -5.9% 91.9% -11.9% -30.1% 6.0% 135.4% -0.4%

Total Stock Demand 48.9 35.1 34.3 28.4 36.3 35.6 34.3 35.8 51.6 49.8 % Change Year Ago 0.3% -28.2% -2.3% -17.3% 28.1% -2.0% -3.6% 4.3% 44.1% -3.5%

TABLE 1

Annual Reported Central Bank Changes in Gold Holdings

35

30

25

20

15

10

0

-.5

-10

-15

-25

-30 04 06 08 10 12 14 16 18 20

Million Ounces

Gross Reductions

Net Additions/Reductions

Gross Additions

Gold prices are expected to remain at elevated levels and potentially rise further over the remainder of 2021, notwithstanding some near-term weakness in prices. At the beginning of September gold prices had recovered from the losses endured during the first half of August. Prices face strong resistance at $1,835. While CPM Group expects gold prices to break above this resistance level and retest $1,900 over the next four months, the recent run up in gold prices could result in some near-term weakness first. On the downside, prices could potentially fall back to $1,770 or even $1,740. Over the reminder of 2021 prices are expected to rise, in several legs, to $1,850, $1,880, and 1,900. Please see chart 2.

U.S. monetary policy is expected to remain extremely accommodative in the foreseeable future, even with the elevated probability of the Fed beginning to pare back its bond buying program. This coupled with negative real rates, various political and economic risks, and a season-ally stronger period of demand are all factors that are expected to support gold prices at elevated levels.

Central BanksAfter a slow start, central bank net purchases have picked up during 2021. While still lower than the 7.6 million ounces in net purchases during the first seven months of 2020, central bank net purchases stood at 7.2 million ounces at the end of July 2021. The uptick in central bank demand has helped to fill gaps in other sources of demand and provided downside support to prices. Please see chart 3 and table 1.

CHART 2

F-21 M-21 A-21 M-21 J-21 J-21 A-21 S-21 O-21 N-211

2000

1950

1900

1850

1800

1750

1700

1650

1,835

1,900

1,720

1,740

1,8101,835

1,786

Three-Month Gold Price Projections

CHART 3

9

Please see chart 4.

Silver prices have been ticking higher since the middle of August and this trend is expected to con-tinue over the remainder of the year. Silver prices could rise back toward $28 by year end but need to break past several critical resis-tance levels at $25.80 and $26.40. A combination of seasonal strength coupled with accommodative monetary policy as well as relatively inelastic demand from sources like solar panels are all factors that are expected to keep silver prices sup-ported.

Please see chart 5.

That said, short term weakness in prices should not be ruled out, following the recent run up in prices. Silver prices could fall back toward $23.70 before resuming their move higher.

Please see table 2.

Silver Market

M A R K E T S I N S U M M A R Y

CHART 5

Silver Statistical Position Table2012 2013 2014 2015 2016 2017 2018 2019p 2020p

Total Supply 1,002.6 981.8 1,012.9 1,005.4 1,004.9 977.4 978.1 993.2 1,012.4% Change Year Ago 4.4% -2.1% 3.2% -0.7% 0.0% -2.7% 0.1% 1.5% 1.9%

Total Fabrication Demand 804.4 836.8 854.4 873.9 901.3 927.2 936.9 941.1 950.1 % Change Year Ago -2.0% 4.0% 2.1% 2.3% 3.1% 2.9% 1.0% 0.5% 1.0%Net Surplus or Deficit 198.2 145.0 158.6 131.5 103.6 50.2 41.3 52.2 62.2Addenda Coinage 105.9 140.3 140.0 145.74 137.9 84.8 78.4 55.0 50.0

SILVER STATISTICAL POSITION TABLE

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021p

Total Supply 1,000.3 978.3 1,010.4 1,011.0 1,029.6 975.1 988.1 966.6 954.7 1,004.8. % Change Year Ago 4.4% -2.2% 3.3% 0.1% 1.8% -5.3% -1.3% -2.2% -1.2% 5.2%

Total Fabrication Demand 804.4 836.8 854.4 872.3 892.5 918.9 927.9 926.9 874.6 885.6 % Change Year Ago -2.0% 4.0% 2.1% 2.1% 2.3% 3.0% 1.0% -0.1% -5.6% 1.3%

Net Surplus or Deficit 195.9 141.5 156.1 138.6 137.2 56.3 60.2 39.8 80.1 119.2

TABLE 2

photo: michael-dziedzic

Three-Month Silver Price Projections

30

29

28

27

26

25

24

23

21

F-21 M-21 A-21 M-21 J-21 J-21 A-21 S-21 O-21 N-21

23.97

26.0

28.0

23.00 2350

24.55

25.88

Annual Silver Demand for Photovoltaic Solar Panels

Mln OzProjected Through 2021

120

100

80

60

40

20

000 02 04 06 08 10 12 14 16 18 20

CHART 4

10

Platinum prices weakened during August, from the end of July. Platinum prices have been in a declining trend since the middle of May. Prices seem to have bottomed out and are likely to move higher over the remainder of 2021. Prices have ini-tial resistance at $1,030, which if broken should help prices rise toward $1,140 and then $1,180. That said a broad market sell off could result in prices slipping, with ini-tial support at $960 and stronger support at $915.

Please see chart 6.

Seasonal weakness in demand during the summer months, an uptick in corona-virus cases, and lost auto production at various manufacturing facilities has hurt investment demand for platinum, which is sensitive to the fabrication demand for the metal.

There are various medium to long term fundamentals, like the deep discount of platinum to palladium, increased use of the metal in gasoline auto catalysts, and ongoing supply side concerns, which still are supportive of platinum prices.

Please see table 3.

Platinum Market

M A R K E T S I N S U M M A R Y

CHART 6

PLATINUM STATISTICAL POSITION

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021p

Total Supply 7,071 7,415 6,108 7,344 7,199 7,241 7,296 7,285 6,402 6,824 % Change Year Ago -10.2% 4.9% -17.6% 20.3% -2.0% 0.6% 0.8% -0.1% -12.1% 6.6%

Total Fabrication Demand 7,177 7,222 7,015 7,017 7,054 7,093 7,203 7,058 6,123 6,713 % Change Year Ago 1.7% 0.6% -2.9% 0.0% 0.5% 0.6% 1.6% -2.0% -13.3% 9.6%

Net Surplus or Deficit -107 194 -907 328 145 148 93 227 280 111

TABLE 3

Prices seemed to have bottomed out and are likely to move higher over the remainder of 2021.

Three-Month Platinum Price Projections

1,350

1,300

1,250

1,200

1,000

950

900

850

800

750

F-21 M-21 A-21 M-21 J-21 J-21 A-21 S-21 O-21 N-21

1,040

1,000

1,180

1,004

915

960

1,140

11

Palladium prices are down from the highs reached earlier this year, but nonetheless remain at extremely elevated levels. The loss in auto manufacturing capacity is expected to weigh on palladium prices. Addi-tionally, renewed concerns about the coronavirus and the partial substitu-tion of palladium with platinum in gasoline auto catalysts are all factors that are expected to act as headwinds to palladium prices. On the downside, palladium has support at $2,300 and then at $2,260.

Despite all of these negatives, the palladium market is expected to be in a deficit of roughly 80,000 ounces during 2021, which coupled with healthy investment demand is expected to keep prices at elevated levels. This is the second year that passenger vehicle sales are being hurt. This is expected to result in pent up demand for these kind of vehicles in 2022. The potential for stronger demand for passenger vehicles in 2022 could drive investors to get ahead of the trend, providing

Palladium Market

PALLADIUM STATISTICAL POSITION

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021p

Total Supply 8,723 9,031 8,925 9,371 9,307 9,450 9,548 9,709 8,964 9,157 % Change Year Ago -2.0% 3.5% -1.2% 5.0% -0.7% 1.5% 1.0% 1.7% -7.7% 2.1%

Total Fabrication Demand 8,546 8,801 9,041 9,242 9,380 9,761 9,960 9,897 8,480 9,235 % Change Year Ago 5.0% 3.0% 2.7% 2.2% 1.5% 4.1% 2.0% -0.6% -14.3% 8.9%

Net Surplus or Deficit 177 229 -115 129 -73 -311 -411 -188 484 -78

M A R K E T S I N S U M M A R Y

TABLE 4

added support to prices during the fourth quarter of this year. During this period, palladium prices could rise with initial resistance at $2,880 and then $2,940.

Please see chart 7 and table 4.

CHART 7Three-Month Palladium Price Projections

3.100

3,000

2,900

2,800

2,700

2,600

2,500

2,400

2,300

2,200

F-21 M-21 A-21 M-21 J-21 J-21 A-21 S-21 O-21 N-21

2,5502,400

2,850

2,524

2,260

2,300

2,700

Despite all of these negatives, the palladium market is exped to be in a deficit.

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For more information on precious metals investing and on specific gold, silver, platinum, and palladium investment products, please contact:

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CPM Group LLC

CPM Group is a fundamentally based commodities research shop. We develop our own proprietary estimates of gold, silver, platinum, and palladium supply and demand on a global basis, drawing on every resource we can find, including our own extensive list of contacts involved in precious metals around the world. We have been doing this sort of research and analysis since the 1970s, far longer than anyone else in the business. We also undertake research in specialty metals, base metals, energy and agricultural commodities. We are known for our basic fundamental research, a wide range of financially oriented consulting services, and our expertise in using financial derivatives to structure financing for producers, refiners, industrial users, and investors interested in either hedging or investing in commodities.

Our investment philosophy is simple: We are value investors who base our decisions on what to buy, sell, hold, or avoid on the fundamentals of each asset, and the macro-economic, financial and political environmental factors that we expect will affect that asset’s value. We have concerns, expressed in this report and elsewhere, about long-term imbalances in government deficit spending, public and private debt, and a wide range of other economic and political factors. We don’t expect the world’s financial system to collapse, however. That is not the way the world tends to work. More likely economic outcomes in the real world lie between the extremes of cataclysmic collapses and nirvana. We advise our clients – and practice what we preach – to have some of their wealth in gold and silver as an insurance policy against a catastrophic failure, but we also advise them to invest other portions of their money in precious metals and other assets based on the assumption that that sort of failure does not occur. We focus on investing based on likely scenarios, but with an eye always open to outlying events that take the world’s markets by surprise. We have watched investors who were so worried about a collapse that they missed some of the largest stock and bond market rallies of all times over the past 30 years, while watching their safe haven assets fluctuate eight-fold in value up and down, and then up and down again. We prefer our clients to buy and sell precious metals and other assets based on cyclical and other developments, while also maintaining that long-term insurance policy in case the levee breaks.

CPM Group LLC | 168 7th St., Suite 310 | Brooklyn, NY 11215 USA | T. 1-212-785-8320 | www.cpmgroup.com | info@cpmgroup.com