Articles in Category: Precious Metals

When people talk of Luxembourg you could be excused for first thinking of the European Union.

Last Week For The January 2016 MMI Report

Luxembourg houses the Court of Justice of the EU, is one of three seats for the EU parliament along with Brussels and Strasbourg, and co-hosts the European Commission, along with plenty more organs of EU bureaucracy.

Or for thinking of the tiny state as the home of ArcelorMittal the world’s largest steelmaker, and the European headquarters of Skype, Amazon and Paypal to name but a few multinationals — encouraged, no doubt, by Luxembourg’s status as a tax haven in the heart of Europe.

Maybe it has paid off. Luxembourg has, by some measures, the highest GDP per capita in the world, with less than half a million citizens and all that wealth there’s plenty to go round. But while you are unlikely to think of Luxembourg as a leader in the space race, according to the Financial Times, Luxembourg has a longstanding space industry. The state played a significant role in the development of satellite communications a generation ago, including setting up SES, one of the world’s largest satellite operators.

Luxembourg’s Asteroid Mines Plan

In collaboration with US and European commercial partners, Luxembourg now aims to help create a space industry to exploit asteroids for metals and other materials that are scarce on Earth, but plentiful in “near-Earth objects” (NEOs). The intention is that Luxembourg will collaborate with, and invest in, one or more space resources companies, although no names have been mentioned. The tiny landlocked state sees a potential asteroid mining industry worth trillions in time.

Asteroids are made from material left over from the formation of the solar system, the FT explains. They are richer in valuable metals than the Earth’s crust, where heavier elements sank into the planet’s core as it cooled. Indeed all of the platinum group metals we mine today either come from magma that has welled up from the deep in the earth’s mantle or following the impact of asteroids in the distant past, they do not occur naturally in the crust.

Source Financial Times

Source: Financial Times

PGMs in Space

Asteroid mining has two potential categories. The most valuable materials, such as heavy metals in the platinum group, would be brought back to Earth after preliminary processing in space. But other materials, including metals such as iron, nickel and tungsten, would be manufactured in space into spacecraft and tools for further exploration of the solar system, while water from the process would be split into its constituent elements of hydrogen and oxygen and used in rocket propellant according to Planetary Resources, a leading pioneer in the field.

Luxembourg’s enthusiasm, no doubt, shows that this is a long-term proposition, not only to develop the technology — the first successful asteroid “landing and return to Earth with samples” space probe, Japan’s Hayabusa, is only due to return in June of this year — but metals need to be, at least sufficiently, in short supply so prices justify the expense.

Free Sample Report: Our February Metal Buying Outlook

At the moment, anyone in the commodities market can affirm the world is not short of metals. Still, the day will come when prices rise due to shortages and, by then, the technology, and Luxembourg, will be ready.

After hitting an all-time low in December 2015 – dipping down into the 60s – the Global Precious Metals MMI rebounded a bit and is now hovering at 70 for the second consecutive month.

Free Sample Report: Our February Metal Buying Outlook

Of the three heaviest-weighted metal price points within this precious sub-index, gold bullion in both the U.S. in China, and silver ingot/bars in the U.S. all increased over the the last month, the primary drivers buoying the February MMI reading.

Global-Precious-Metals_Chart_February-2016_FNL

Gold Price Outlook

The longer-term outlook, though, may not be all that rosy for gold prices. “Despite talks of China and Russia buying gold, I still see main factors such as a strong [U.S.] dollar and a bear commodity market keeping a lid on gold prices,” Raul de Frutos, metals procurement specialist for MetalMiner, told me. “The price rally seen in January is way too small to consider that something is changing in the long-term picture.”

“I still have a neutral/bearish view on gold,” he concluded.

The Bigger Price Story: Palladium Downtrend

However, in a more interesting trend on the industrial metals side of the precious sector, two of the PGM price points we track on the MetalMiner IndX – for U.S. platinum and palladium bars – dropped 1.7% and 8.1% (!), respectively.

The U.S. palladium price has ticked up for a few days in a row since we took our MMI reading on Feb. 1, but it’s lost a whopping 26.3% in value since the beginning of November 2015.

So what’s going on in the palladium market?

The recent stock market selloff in China, which caused global tumult, is the real culprit hurting both palladium and platinum. A strong dollar is not helping matters, either.

Compare Prices With The January 2016 MMI Report

Strong car sales globally – in Europe, China and the U.S., with the latter two hitting all-time highs – did not correspond with stronger performances for platinum and palladium prices.

Despite analysts calling again for deficits in palladium and platinum markets this year, Raul has written that “it’s hard to imagine these two metals rising while China keeps driving everything down.”

Exact Precious Prices, Trends

For exact prices, log in or sign up below!

For full access to this MetalMiner membership content:
Log In |

Real gross domestic product expanded by just 0.7% (seasonally adjusted annual rate) during the fourth quarter of 2015. This follows a 2% increase during the year’s third quarter and a 3.9% increase during the second quarter. For the year, GDP expanded by just 2.4%, matching the slow rate of growth seen in 2014. Without any support from real GDP growth, our Construction MMI keeps falling.

Free Download: Compare with January 2016 MMI Report

With no GDP growth it shouldn’t come as a surprise that prices of construction materials are still falling. Low prices are always the solution to low prices… except when they’re not.

Construction_Chart_February_2016_FNL

In the fourth quarter, overall inflation came in at just 0.8% with sharp declines in both import and export prices. The Federal Reserve’s benchmark Personal Consumption Expenditures Price Index (commonly known as the PCE deflator) came in at just 0.1% with both durable and non-durable goods’ prices registering a decline.

“The economy did not end the year well,” said Associated Builders and Contractors Chief Economist Anirban Basu. “Today’s GDP data adds weight to the argument that the US is in a corporate profits recession, an industrial recession, and was experiencing a softening of investments. With the exception of the residential building sector, business capital outlays have declined as corporations deal with a combination of sagging exports, competitive imports, declining energy-related investments, rising wage pressures and healthcare costs.”

All Construction-Sector Metals, Materials Down?

With the exception of scrap, no single product tracked in our Construction MMI showed much of an increase this month, a worrisome trend that’s carried on since the beginning of last year, except for a small increase in June.

New tariffs by the European Union on Chinese rebar might help producers there recover some market share, but won’t likely move prices on international exchanges. Globally, the deflationary environment is worse than it is for US producers.

Free Sample Report: Our January Metal Buying Outlook

Steel and aluminum markets are still not seeing anything close to a bottom and that’s being felt acutely in construction.

For full access to this MetalMiner membership content:
Log In |

Our Automotive MMI held steady for the third month in a row at 68.

Free Sample Report: Our January Metal Buying Outlook

Considering that other metals prices are still falling, it’s quite a feat that automotive has been able to even hold steady for this long. Prices of stainless, aluminum and copper are all down in their individual MMI sub-indexes this month and our Raw Steels MMI was flat.

Automotive_Chart_February-2016_FNL

Low prices simply have not been enough to entice larger raw material purchases by automakers. U.S. auto sales fell slightly in January because of the East Coast snowstorm, but analysts say end user demand remains strong and buyers will likely head back into dealerships this month. Sales fell less than 1% to 1.1 million, according to Autodata Corp.

Low gas prices and even lower interest rates are continuing to fuel sales and most automakers are optimistic that they can break last year’s sales record by the end of the year. The problem facing metal producers is that there is still so much oversupply out there that even the market hunger for new cars, trucks and SUVs can be sated several times over by the stockpiles that currently exist.

Producers Targeting Automotive

Automotive is still a coveted market for most producers. Nucor Corp. recently opened an office in Detroit as part of a push to increase its sales to the auto industry by 40% to 50% over the next two years. Charlotte-based Nucor saw its sales to the automotive industry increase 20% last year — 1.4 million tons of steel products — over 2014’s numbers.

Alcoa, Inc. is even coming closer to realizing its previously announced split by naming new directors for its new automotive and aerospace company, all of them with experience in the fields.

Free Download: The January 2016 MMI Report

The fundamental strength of the sector will likely still be there when stockpiles finally dwindle and we see prices rise. Many are predicting that rebound for later this year, but there’s very good reason to believe 2016 could be another low-price year as there is still no definitive deal to reduce oil production and many miners and metal producers are not curtailing production.

For full access to this MetalMiner membership content:
Log In |

The World Platinum Investment Council (WPIC) recently commissioned a report by Dr. David Jollie via his research vehicle Glaux Metal to look at the supply-demand fundamentals for platinum and report on the likely price direction over the next six years through to 2021.

Free Download: The January 2016 MMI Report

We are always a little wary of research commissioned by industry bodies as the pressure to produce a favorable analysis has been known in the past to overrule sound analysis, so in this instance we have compared the findings with this month’s Metals & Mining Quarterly Review by HSBC bank by way of a counter view.

The Glaux Perspective

Glaux concludes, and I quote, that the platinum market is likely to be in deficit for each of the years from 2016 through 2021 at an average annual deficit of 250,000 ounces. As a result, prices will rise over the period. Mine supply is not expected to rise significantly with older established mines declining, particularly as investment has been depressed due to low prices in recent years but also as part of a longer-term trend.

New mine production will rise with three new mines in South Africa coming onstream and modest increases forecast in Zimbabwe. Supply from recycling has been on the rise, as it is with all PGMs and this trend is expected to continue in spite of currently low prices. Supply from end of life recycling has become an increasingly important source of platinum supply with supply levels relatively unaffected by modest changes in prices.

Source WPIC

Source: WPIC

On the demand side, Glaux sees only modest growth across a range of sectors. As this graph from HSBC illustrates, platinum demand is balanced between a number of diverse and broadly uncorrelated sectors. Read more

Neither palladium nor platinum had a good start of the year. Within the first three weeks, palladium prices have fallen 17%, hitting a new five-year low.

Palladium hits 5-year low

Palladium hits a five-year low. Source: @StockCharts.com.

Platinum prices are not performing any better. The precious metal is down 7% so far in January and it’s at the lowest levels in seven years, just above the lows of 2009.

Platinum hits 7-year low

Platinum hits a sevn-year low. Source: @StockCharts.com.

Car Sales Didn’t Help

Auto sales in US hit a new high in 2015, with sales topping 17 million units. In Europe, where diesel powered cars dominate the market, vehicle sales were also strong, growing by 9.3% in 2015 to 13.7 million vehicles. Lower oil prices in 2015 helped the increase in car sales, but it still didn’t move the needle for catalysts such as platinum and palladium.

Free Sample Report: Our January Metal Buying Outlook

Meanwhile, China, with the largest vehicle market in the world at 24.6 million vehicles sold in 2015, saw a 4.7% rise year-on-year in auto sales, marking another all-time high.

Chinese Car Sales Not All That They Seem

Despite China’s vehicle sales hitting a new record in 2015, the world’s biggest car market decelerated in 2015. The annual growth rate in 2014 was almost 10%. Moreover, the Chinese market grew thanks to a strong last quarter, which came from a 50% tax cut for small cars, serving as a stimulus measure rather than a sustainable longer-term demand increase.

Free Download: New! The January 2016 MMI Report

If it wasn’t because of those inflated numbers, China’s auto market would have probably seen its first down year in 2015.

Palladium and Platinum: Victims of China’s Market Slump

The recent stock market selloff in China, which caused global tumult, is what’s really hurting palladium and platinum. A strong dollar is not helping matters, either. Despite analysts calling again for deficits in palladium and platinum markets this year, it’s hard to imagine these two metals rising while China keeps driving everything down.

Greece’s highest court overturned its government’s decision to stop Eldorado Gold‘s mining operation and Johnson-Matthey has lifted its estimate of last year’s platinum market deficit.

Eldorado Gold Wins Greece Gold Mine Appeal

Greece’s top administrative court has annulled the government’s decision last year to revoke Eldorado Gold‘s mining license, according to court documents published on Wednesday. The Canadian mining company had appealed to Greece’s top court to overturn the ban on its plans to develop gold mines in a forested area of northern Greece, in a case widely seen as a test of the new leftist government’s approach to foreign investment.

Free Sample Report: Our January Metal Buying Outlook

Eldorado has put about $700 million into the project since 2012 and planned to invest another $1 billion to develop two mines at Skouries and Olympias sites in Halkidiki. Greece’s government initially revoked its permit in August, saying the tests for a so-called flash-melting method the company planned to use to ensure there would be no environmental damage did not take place on the spot, but rather outside Greece.

Johnson-Matthey Lifts Platinum Estimate

Johnson-Matthey has lifted its estimate of last year’s platinum market deficit after a surge in Japanese bar investment late in the year, though it cut its expectations for the palladium market shortfall.

Speaking at ETF Securities‘ annual investment conference on Wednesday, JM’s general manager for market research Peter Duncan said he expected deficits for both metals to persist this year, although he admitted this may have little impact on prices.

The company lifted its estimate for last year’s platinum market deficit to 702,000 ounces from 652,000 ounces in November, which Duncan cited in the earlier presentation. He credited the change to both an upswing in investment and a 13% drop in recycling.

Platinum hit its weakest point in more than seven years on Wednesday at $812.09 an ounce.

Gold is typically considered a safe haven while markets are volatile, and with the recent equity slide both in China and US, investors are thinking of gold as an alternative, safe haven investment.

Free Download: New! The January 2016 MMI Report

Indeed, since the start of the year gold prices have received a boost, hitting a 2-month high as global stock markets sold-off.

The Gold-Silver Ratio Spreads

The global stock rout didn’t have any bullish effect on silver prices since the precious metal has an industrial metal status, too. That might help explain why gold fared better than silver in January.

Gold (in yellow) versus Silver (grey)

Gold (in yellow) versus Silver (gray). MetalMiner analysis of @StockCharts.com data.

Is Gold’s Rally Sustainable?

We don’t think so. Gold’s rally comes after prices hit a six-year low in December so it seems like a normal reaction after an oversold condition. As we can see in the long-term chart below, gold is still in a textbook falling trend.

Gold bouncing off lows

Gold is simply bouncing off lows. Source: MetalMiner analysis of @StockCharts.com data.

If investors were seriously putting money into gold, we would have prices moving significantly higher by now. The key point here is that the stock market selloff is driven by a slump in commodity prices. Gold is also a commodity and falls along with commodity markets.

Free Sample Report: Our January Metal Buying Outlook

Moreover, a strong dollar is also bad news for gold. We expect the dollar to keep strong as interest rates rise domestically and the currencies of commodity-intensive countries keep losing value against the dollar while low commodity prices hurt their economies more significantly.

What This Means For Metal Buyers

We’ve discussed previously that the gold’s safe haven theory doesn’t always work, especially under the market environment we have right now. Gold’s rally is likely to be short-lived. Although stocks don’t look attractive right now, buying gold doesn’t look like a much better idea. Cash will probably give better returns than most assets in this first half.

Just like Oprah giving out cars, our January Metal Price Trends report was generous with the dead cat bounces this month. You get a dead cat bounce, copper! You get one, too, aluminum! You get a dead cat bounce, raw steels! Everyone gets a dead cat bounce!

Free Sample Report: Our January Metal Buying Outlook

Okay, not everyone. Construction, stainless steel, renewables and rare earths all lost ground and automotive was merely steady.

MM-IndX_TRENDS_Chart_January2016_FNL-TOPVALUE100

Still, it’s the most positive movement we’ve seen for many of these metals since early last year. We say they’re dead cat bounces — a cruel-sounding investment term for a temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend (sorry, kitties) — because there is little reason to be optimistic that any of these gains will continue.

Stop Me Before I Bounce Again!

The main driver of commodity, and now stock market losses, has been the slowing Chinese economy and it’s looking worse this year than it did at the end of last. Financial institutions such as RBS are even advising clients to sell everything, save bonds, that’s not tied down.

This is great news for buyers but exactly what metal producers don’t want to hear. What’s worse, for them, is that everything the Chinese government is doing to try to turn their economy around, including a panic button system for its stock markets that actually caused more panic, isn’t working. My colleague Raul De Frutos also pointed out that purposely devaluing the yuan actually hurts metal prices.

How Low Can it Go?

The other big driver of the commodity price rout, the price of oil, shows no signs of turning around, either. Oil hit $30 per barrel this week stoking bankruptcy fears among US energy companies and it even temporarily created some nervousness among OPEC nations who clamored for an emergency meeting.

So don’t expect these price increases to continue as transportation and production costs follow oil’s race to the bottom. My colleague at our sister site Spendmatters, Kaitlyn McAvoy, reported that Goldman Sachs is predicting $20 per barrel for oil this year.  It’s not a very happy new year for metal producers… or cats.

Gather round, folks, dead-cat bounces for all

Free Sample Report: Our January Metal Buying Outlook

And this month’s Global Precious Metals MMI was no exception – after hitting yet another all-time low of 68 last month, the sub-index bounced back up to 70 for our January reading.

Global-Precious-Metals_Chart_January-2016_FNL

As for the dead-cat bounce, the Aluminum MMI had what looked like one, my colleague Raul writes:

“Aluminum has declined more than 30% on the year-to-date. A 3% increase after such a price slump means nothing. Indeed, aluminum producers should be worried that prices are not able to make a decent rally from these low levels. That only means that investors are only interested in selling, not buying.”

The steel markets, too:

“Although steel prices took a break from their year-long fall in December, there are still many factors weighing down prices. It seems too early to bet on a recovery in prices. For corrosion-resistant steel buyers, the effects of the new import duties are certainly something to watch.”

And even the Copper MMI had a tiny one too, (stay tuned for that story, coming next week).

So, alongside the baby-sized Fed interest rate hike came a bit of a bounce for our precious metals price index. Welcome to the party.

The Platinum/Palladium Story

Putting aside gold and silver for now (global prices for which, on balance, fell for silver but rose for gold on the MetalMiner IndX), let’s focus again on the more industrial of the precious – the two PGMs we track.

As far as bigger end-use drivers go, the automotive markets have made most of the headlines lately. In China, car sales rose to the highest level ever, increasing in December by more than 23% from November 2014. That is the second consecutive month in which China’s passenger car sales grew by double digits. Here in the US, data from Ward’s Automotive Group shows 1.63 million vehicles were sold in December last year, making this the strongest month of 2015. In all of 2015, sales totaled 17.38 million, which exceeds the previous record high from 2000.

Producers like Johnson Matthey may have reason to look forward to 2016.

Compare Prices With The December MMI Report

Low gas prices, an improving labor market and low interest rates, “coupled with a solid U.S. economy, could also make 2016 a year of robust vehicle sales,” noted Commerzbank analysts recently. “This should boost platinum and palladium, which are used in auto catalysts; palladium in particular should profit because the U.S. market is gasoline-dominated.”

Get the exact prices by logging in or signing up for MetalMiner membership below!

For full access to this MetalMiner membership content:
Log In |