Articles in Category: Precious Metals

MetalMiner’s Global Precious Metals MMI dropped two points this month to 79, from 81 in November; a 2.5% decrease. But that’s less the story than what happened within this precious metals sub-index.

The PGM Story

As we said last month, longer-term structural concerns remain for the platinum-group metals (PGMs), especially platinum and palladium. However, in the short term, one of those two precious metals that are instrumental in automotive catalytic converters kept the Global Precious MMI from falling even further for December.

Global-Precious-Metals_Chart_December-2016_FNL

Indeed, with gold and silver falling across all four geographic markets (see below), our U.S palladium bar price jumped to an 18-month high, rising a whopping 24% month-over-month. Japanese palladium also rose appreciably.

The platinum bar price, however, did the reverse. Our U.S. platinum bar price hit a 10-month low, dropping 7% since Nov. 1.

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Crossing like ships in the night, one heading north, one heading south, what should buyers make of the platinum/palladium divergence?

According to HSBC senior analyst James Steel, talking to Platts, “the platinum-palladium spread has narrowed substantially, from $375/ounce before the U.S. election. This reflects clearly tighter underlying fundamentals for palladium.”

With car sales in the U.S. and China continuing to be robust, and with Johnson Matthey predicting another supply deficit in 2017, palladium could continue its buoyancy for the near future.

The Dollar –> Infrastructure –> Gold

Raul de Frutos gave MetalMiner readers this helpful rundown in late November:

A rising dollar depresses commodity prices, especially precious metals. It does have less of an effect on more economically-sensitive groups like energy and industrial metals. Indeed, industrial metals are on the rise despite a strong dollar. This is because the dollar is rising on expectations of higher rates down the road but, at the same time, metal prices are getting an additional boost because of Trump’s plans to spend big on the nation’s infrastructure. However, gold’s demand won’t be affected by infrastructure spending. As a result, investors are left without reasons to buy gold at this moment.

That still appears to be the case here in early December, as the US gold price on our MetalMiner IndX hit its lowest point in 10 months, falling to $1,173/oz on Dec. 1 — just over an 8% drop from Nov. 1.

(Silver prices followed suit across 4 markets globally, all dropping from November to December.)

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Gold rises as a safe haven when investors fear a recession, inflation increases or the U.S. dollar plummets, making the precious metal cheaper for foreign investors.

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Well, none of these things are happening right now. Indeed, quite the opposite is happening. Gold prices fell to their lowest level in nine months. What’s driving gold’s decline?

Gold prices hit a nine-month low

Gold prices hit a nine-month low. Source: MetalMiner analysis of @stockcharts.com data.

The Case For A Bull Stock Market

To be honest, I’ve been pretty skeptical of the U.S. stock market. Markets indexes have traded sideways for almost two years. Still, they have avoided a severe bear market. The day Donald Trump was elected, markets opened sharply lower as fear consumed traders. But stock markets love to do the unexpected and indexes are now back to trading in record territory.

S&P 500 surges following Trump victory

The S&P 500 surges following the Trump victory. Source: MetalMiner analysis of @stockcharts.com data.

Such action is a hint that equity trading desks and large funds aren’t finished buying stocks yet. The question is: will Donald Trump’s presidency for the next four years be just what the doctor prescribed to keep this aging bull stock market going, even after seven-plus years of gains behind its back? Could the rise in equities even accelerate? Read more

Our November metal price trends report showed an industrial metals complex buoyed by strong Chinese demand and bullish on the future, thanks to the election of republican presidential candidate Donald Trump who promises to curtail regulations on metals producers and the energy suppliers that provide power for smelting, steelmaking and mining.

MM-IndX_TRENDS_Chart_November2016_FNL-TOPVALUE100

While some of the metals turned in a flat performance during the month of October, almost all quickly took off after the election. Now, as our lead forecasting analyst, Raul de Frutos, recently wrote, the industrial metal bulls are in full charge.

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The minor metals remained flat, but that’s no surprise to any buyer at this point. The fact that rare earth miner Lynas Corp. received a lifeline from a hedge fund and a Japanese state-owned enterprise was a minor (metals) surprise itself.

It’s a good time to be a producer of base metals as it looks like the bulls may continue to run in 2017. For more information on how to plan your purchases well into the New Year, consult our monthly metal buying outlook.

Last night, Republican nominee and developer Donald Trump was elected the 45th President of the United States.

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Gold jumped nearly 5% to $1,337.40 an ounce early Wednesday to its highest in six weeks as investors snapped up safe havens. This was gold’s biggest single-day gain since June 24 when it rose as much as 8% when Britain decided to leave the European Union. It closed up 4.8% that day. However, prices almost immediately began to retreat this morning. It’s back below to $1,281.50/ounce as of this writing (10:45 AM Central), near its closing yesterday of $1,275.80/ounce.

A Trump win, which many believe leads to economic and global uncertainty, may also push the  Federal Reserve to hold off from raising interest rates next month.

MetalMiner’s Global Precious MMI dropped 5.8% to a value of 81 for November, the sub-index’s lowest level since June.

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In the midst of worries over the U.S. presidential election and the Federal Reserve‘s interest rate moves, precious metal prices have been on the rise over the past week.

Global-Precious-Metals_Chart_November-2016_FNL

Many investors are girding for a Brexit-like jump if Republican contender Donald Trump wins; the U.S. palladium price, for example, coming off $700/ounce-level highs from early October to just around $600/oz at the start of November, jumped back up to $630 mid-last week.

Focus on Palladium Prices

While some more short-term spikes are undoubtedly coming, longer-term structural concerns continue to swirl around the PGM markets in particular.

In just last month’s analysis of another MetalMiner monthly sub-index (the Automotive MMI), my colleague Jeff Yoders brought up excellent points about the state of the platinum group metals:

“The increasing cost of PGMs was keeping the Automotive MMI in positive territory for most of the first three quarters of 2015. The pullback in precious metals prices could pull the rug out from under automotive, too. The catalyst metals never took off for investors the way that gold did and that’s bad news for their prices as supply was never really in much doubt without more investor interest.”

Now, it looks as though that’s coming true.

Bloomberg reports that palladium futures “tumbled to the lowest in more than three months amid signs of weakening investment and physical demand for the metal used in auto pollution control devices.”

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Phil Streible, a senior market strategist at RJO Futures in Chicago, told Bloomberg that “demand is really starting to fall.”

“You’re going to see that as interest rates go up in the U.S., auto loan rates will rise and you’re probably going to see automobile sales decline,” according to Streible.

The Rest of the Precious Metals

Platinum, silver and gold prices fell across the board from October to November, across geographies including the U.S., China and India.

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Our monthly MMI saw a boost in October as three metals tied for the biggest gain and markets seemed to tighten as manufacturers started to make decisions for their end of year and early 2017 spending.

MM-IndX_TRENDS_Chart_October2016_FNL-TOPVALUE100

There seemed to be a Q4 tightening across most of the metal markets we follow. Sure, the Rare Earths and Renewables MMIs were flat as a board yet again, but Copper, Aluminum, Stainless and Raw Steels all saw strong gains. Our Global Precious MMI gained again but almost immediately suffered a pullback after talk of a Federal Reserve interest rate hike in December and renewed strength from the U.S. dollar.

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As always, we exercise caution when buying. Today’s gain could be tomorrow’s loss.

Many believe gold will again reach $1,300 an ounce next year and China now imports more crude oil than the U.S.

Gold Above $1,300/Ounce? Next Year, Poll Says

Gold is likely to recover to above $1,300 an ounce next year as a pickup in physical demand counters more potential U.S. rate increases, a Reuters poll at an industry event showed.

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The precious metal had lost nearly 9% from July’s two-year highs to trade around $1,255 an ounce on Tuesday, hit by expectations the Federal Reserve would raise interest rates in December for the second time in a year.

China Overtakes U.S. as Top Crude Oil Importer

China imported record volumes of crude oil last month, eclipsing the U.S. as the world’s top buyer of foreign oil as Beijing’s state reserves shipped in cheap crude to fill new storage tanks.

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September’s crude imports rose 18% from a year earlier to 33.06 million metric tons or 8.04 million barrels per day (bpd) on a daily basis, customs data showed.

Financial markets are beginning to believe the Federal Reserve is finally serious about increasing interest rates.

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At least, that’s the simplest explanation for rising treasury yields and the U.S. dollar index, which measures the greenback vs. a basket of major currencies, hitting the highest level in seven months.

US Dollar Index hits 7-month high

The U.S. dollar Index hits a seven-month high. Source: @stockcharts.com.

While the Fed has repeatedly pronounced its intentions to raise rates, markets took those announcements with a grain of salt, pricing in a lower future rate than what the Fed was promising.

Fed Turns Hawkish

However, since October, the 10-year Treasury yield has risen significantly as markets now see a 67% chance of a rate hike in the December meeting. Higher interest rates make the dollar more attractive to yield-seeking investors. Moreover, the dollar rose as most other major world currencies slid, particularly the British pound, which was depressed by Brexit concerns.

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A rising dollar has a negative impact on metal prices. Metals are priced in dollars and when the value of the dollar rises, it takes more more of them to buy metals. Another reason is that when the value of the dollar rises, foreign buyers have less buying power, typically causing demand for metals to shrink.

Gold plunges as dollar rises

Gold plunges as the dollar rises. Source: MetalMiner analysis of @StockCharts.com data.

This is particularly true in the case of gold and something we mentioned in September. Recently, gold prices fell to a four-month low as the dollar rose.

What This Means For Metal Buyers

The dollar is not the only thing that moves metal prices but it is important. If the Fed raises rates this year that would likely strengthen the dollar, adding pressure to metal prices. On the other hand, if future Fed decisions disappoint, that would weaken the dollar, having a bullish effect on metal prices.

Major automakers posted lower September U.S. sales this week despite big consumer discounts, as pickup truck volumes fell for market leaders General Motors and Ford.

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With the top six U.S. market leaders reporting, deliveries fell 0.6% from last year, but sales were still strong at 17.8 million vehicles on a seasonally adjusted annualized basis.

GM, the top-seller in the U.S., posted a 0.6% decline. Ford reported an 8% drop, and Fiat Chrysler Automobiles was down 1%.

Automotive_Chart_October-2016_FNL

The drops for individual automakers weren’t as steep as last month‘s and our Automotive MMI held its value from September despite the drop-off in end-use sales. Automakers are still on track to sell the second-most cars and trucks in any year in U.S. history, but evidence that sales plateaued in August is affirmed in the September numbers. There’s little chance that 2015’s sales record will fall in December.

Investors Abandoning PGMs?

More troubling for automotive metals is this week’s fall in investment demand for the catalyst metals, platinum and palladium. People are not snapping up the incentives that automakers are offering and inventory is, naturally, piling up. The average industry incentive increased by more than $400 in September compared with the same month a year ago, according to executives at two automakers.

The increasing cost of PGMs was keeping the Automotive MMI in positive territory for most of the first three quarters of 2015. The pullback in precious metals prices could pull the rug out from under automotive, too. The catalyst metals never took off for investors the way that gold did and that’s bad news for their prices as supply was never really in much doubt without more investor interest.

Steel and aluminum both posted increases this month, but face stronger headwinds as the year winds down. Construction, another market that uses similar metals and products, saw new home sales, which usually correlate closely to pickup truck sales, fall 7.6% in August, the Commerce Department said on Monday.

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The focus of automotive buyers, it seems, should be on how long this plateau will last and how quickly it might turn into a slope.

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According to SIMA data, steel imports fell in September and gold is seeing a bounce back as bargain hunters take advantage of its low price.

Steel Imports Fall

Based on the Commerce Department’s most recent Steel Import Monitoring and Analysis (SIMA) data, the American Iron and Steel Institute (AISI) reported today that steel import permit applications for the month of September totaled 2,846,000 net tons.

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This was a 7% decrease from the 3,066,000 permit tons recorded in August and a 5% decrease from the August preliminary imports total of 2,989,000 nt. Import permit tonnage for finished steel in September was 2,090,000 nt, down 9% from the preliminary imports total of 2,307,000 nt in August.

For the first nine months of 2016 (including September SIMA permits and August preliminary data), total and finished steel imports were 24,808,000 nt and 19,691,000 nt, down 20% and 22%, respectively, from the same period in 2015. The estimated finished steel import market share in September was 25% and is 25% year-to-date.

Bargain Hunters Buy Up Physical Gold

Physical gold demand in London jumped after this week’s big price drop, dealers said yesterday.

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Bargain hunters came to the market because of the metal’s technically-driven slide. Online gold trading platform BullionVault.com saw its heaviest trading day on Tuesday since its all-time record on June 24, the day of the U.K. referendum result on European Union membership.