Articles in Category: Precious Metals

Gold prices extended their best start to a year in more than 30 years this month, jumping 5.1% to 82 amid a broad precious metals rally.

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Silver has mostly caught up to its investment metal cousin, too, thanks to its dual use as an industrial and precious metal. Silver miners are seeing their stock prices increase as supply has been constrained by recent mine shutdowns.

Global-Precious-Metals_Chart_May-2016_FNLAs with most of the metals we track, China is the biggest consumer and biggest producer of gold. So, the news that China’s central bank and customs service will allow companies that have “frequent imports and exports” of gold and gold products to apply for a single permit that can be used in as many as 12 shipments was welcome for both producers and consumers. The trial to simplify the rules takes effect June 1 and applies to Beijing, Shanghai, Guangzhou, Qingdao, Nanjing and Shenzhen, the bank said in a statement.

Aside from loosened regulations, the investment metals are sitting in a good, fundamental place. The safe haven status of both gold and silver continues to help their prices as the Federal Reserve again showed no stomach for interest rate increases this month.

As my colleague, Raul de Frutos, recently wrote, this has led to the weakest U.S. dollar in 15 months and sent investors flocking to silver, gold and even the platinum group metals. That’s right, 15-month high for gold, 15-month low for the U.S. dollar index. The correlation, gold-to-dollar, is way more reliable that any physical demand indicator of gold.

It seems as if the Fed’s dovishness is catching on globally, too. Japan was expected to implement a fresh round of stimulus to weaken the yen to combat low inflation. However The Bank of Japan kept interest rates unchanged this month.

Compare Prices With The April 2016 MMI Report

There is little sign that investors will stop flocking to safe havens and with strong consumer demand in automotive, electronics it’s difficult to see an end to this bull run.

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Chinese regulators remain adamant about keeping commodities from becoming speculative casinos there and Glencore is attempting to sell one of its biggest gold mines while prices are still high.

Chinese Regulators Tamp Down Speculation

Chinese regulators appear to have successfully popped a mini-bubble for now in steel and other commodity futures, scaring off speculators who piled in last month to drive steep gains in the prices of raw materials from coal to cotton.

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China has vowed that it won’t allow its commodity futures markets to become a hot-bed for speculators, fearing that price movements not based on fundamentals could skew investment decisions and hamper efforts to rein in overcapacity, Reuters reported.

Glencore Looks to Sell Mine

Mining company Glencore  is considering selling its Vasilkovskoye gold mine in Kazakhstan, sources close to the deal said on Tuesday, confirming an earlier report in the Financial Times. The sources said the assets were worth more than $2 billion. “A sale is one of the options,” one source said, speaking on condition of anonymity.

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The sale of Glencore’s 70% stake in the mine would help the company pare down its near-$26 billion net debt load.

MonthlyMetalBuyingOutlook_May2016_210This month, What appeared to be a rally led by anti-dumping actions involving several different steel products turned into something bigger as China implemented stimulus measures, boosting demand growth not only for steel, but also for the rest of the base metal complex.

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Gold prices jumped this week, extending their best start to a year in more than 30 years, the Financial Times reports.

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Encouraged by a sharp fall in the dollar and a doveish stance by the Federal Reserve, the metal climbed 1% to $1,262.77 an ounce as the dollar fell over 2% against the yen after the Bank of Japan decided not to further ease monetary policy.

Source: Financial Times

Source: Financial Times

Gold had continued a long decline last year from it’s peak in Q3, 2011, but along with all other metals it has rallied some 19% so far this year as investors have plowed back into gold-backed exchange traded funds, encouraged by a relaxation in the Fed’s stance on interest rates and, from that, the prospects for inflation in the medium term. Read more

Silver prices skyrocketed on Monday, hitting an 11-month high.

Silver price hits 11-month high

The silver price hits 11-month high. Source: MetalMiner analysis of @StockCharts.com data.

It is difficult to find a fundamental reason for such a price increase. It seems like silver is simply catching up with gold. Gold surged to a one-year high back in February and, ever since, the yellow metal hasn’t moved much, as if it was waiting for silver to close the gap.

Gold to silver ratio falls

The gold-to-silver price ratio falls. Source: MetalMiner analysis of @StockCharts.com data.

And the gray metal has done so. The gold-to-silver ratio has come down to more normal levels after rising to multiyear highs in February when gold prices surged.

Gold Gets Company

The truth is that gold is not moving up alone anymore, since this is not just about investors looking for safe haven. Commodity markets are showing the first signs of recovery.

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A weaker dollar and rising oil prices in Q1 lured investors into commodity markets this year. Not only gold but the rest of the precious metals, as dollar-denominated commodities are getting a boost over the past few months.

Platinum and Palladium Join the Party

Platinum (in red) and Palladium (in blue) recovering

Platinum (in red) and Palladium (in blue) are also recovering. Source: @StockCharts.com.

Will the Uptrend in Precious Metals Continue?

That will strongly depend on what the dollar and oil prices do from now on. The recovery in oil prices since February is encouraging, especially since prices are managing to hold their value this week despite bearish news after major oil producers supplying nearly half of global output ended their meeting in Doha, Qatar, over the weekend without reaching an agreement to cap production.

If oil prices continue to climb despite the bearish news, that would be a bullish development, suggesting that underlying supply/demand fundamentals might, indeed, be improving.

Dollar weakens in 2016

The U.S. dollar weakens in 2016. Source: MetalMiner analysis of @StockCharts.com data.

Another key factor to watch is the U.S. dollar, which will likely move in the opposite direction to oil prices. The interest rate stimulus policies that major world banks take through the year will be decisive in the value of the dollar and the rest of wold currencies.

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The U.S. dollar index is approaching new key support levels that if broken, would be another indication that commodity markets are set to continue improving.

Mitchell J. Krebs. Source: Coeur Mining.

Source: Coeur Mining.

Mitchell J. Krebs has been the President and CEO of Coeur Mining, Inc., the world’s ninth-largest silver producer, since 2011. Coeur is also a major player in gold mining and has some 2,005 employees in the U.S., Mexico and Bolivia. Coeur markets its silver and gold concentrates to third-party refiners and smelters in the U.S., China, and Japan. From 2013 to 2015 Krebs oversaw a 22% year-over-year all-in sustaining cost reduction that significantly lowered the Chicago-based company’s bottom line. Those moves are being credited with helping Coeur stock take off since the Q1 2016 surge in silver prices. He recently spoke with MetalMiner’s Jeff Yoders on the phone about the silver market and what is impacting prices on both the supply and demand sides.

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Jeff Yoders: It’s been a good quarter for Coeur, how have the recent price increases impacted the company?

Mitch Krebs: We have seen strong returns. Our business and our financial results are very tightly wound with the prices of silver and gold. In the first quarter, we saw silver go up about 11% and gold up about 17%, that goes right down to our bottom line. We have been really successful at reducing our costs over the last three years, so our revenue line is going up as our cost line is going down, our cash flow has gone up in multiples as a result our stock price climbing 120% on the year-to-date. That leverage in the change in the silver price is significant. Read more

In the first two months of 2016, gold was the market’s MVP but, as we noticed in March, the silver price has started to play catch up.

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The gray metal recently hit a 10-month high after closing above $16 per ounce, while gold has traded flat over the past two months.

Silver hits 10-month high

Silver hits a 10-month high. Source @StockCharts.com.

Silver keeps outshining gold thanks to the same factor we pointed out in March: Oil prices making a comeback have boosted demand for silver’s industrial uses. Gold is not used nearly as much in cars, solar panels and gadgets as silver is.

Oil Holds Near $40 a Barrel

Oil manages to hold above $40-barrel

Oil is managing to hold above $40 a barrel. Source: @StockCharts.com.

Oil prices have, so far, successfully fought off bears when they were attacked earlier this month. Oil has a huge role in the world’s economy. Higher oil prices are giving relief to market participants who were worried by its continuous fall. That helped metal prices rise in Q1. Silver’s price strength is clearly coming from its economically-sensitive role as an industrial metal.

Stock Market Rally Remains Intact

S&P 500 rising non-stop. Will it overcome last year's levels?

The S&P 500 rising non-stop. Will it overcome last year’s levels? Source: @StockCharts.com.

Thanks, in part, to healthier oil prices global markets have been gaining since mid-February and while this rally lasts, money keeps rotating out of safe-haven assets such as gold and bonds. Silver is less impacted than gold in this way, and that also helps silver outperform it.

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Stock markets in the U.S. are acting particularly strong and, so far, they have avoided any price pullback. We will keep a close eye on stock markets and see if they can continue to go up from here as sellers could come into the market soon as prices approach last year’s levels.

Is Silver Set to Continue Gaining Against Gold?

The gold-to-silver ratio falling since March amid global stock market and industrial metals recovery

The gold-to-silver ratio has been falling since March amid a global stock market and industrial metals recovery.  Source: @StockCharts.com.

Not necessarily. But while the factors explained above keep moving in a positive direction, silver will continue to benefit. We’ll see if the rally in the base metals complex and the accompanying one in stock markets extends into Q2.

With eight of our 10 monthly MMI sub-indexes gaining, and even the other two holding their value, April was the most positive month we’ve seen since 2014.

MM-IndX_TRENDS_Chart_April2016_FNL-TOPVALUE100

We felt a bit like Oprah reporting this month’s prices. You get an increase, copper! You get an increase, aluminum! EVERYONE gets a price increase! Except you, of course, rare earths and stainless, but at least you held your value, eh? That’s progress in your markets. Especially for you, stainless.

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The standout performer (our “Biggest Winner”) was our Raw Steels MMI®, which posted an impressive 8.5% increase, egged on — at least in the U.S. — by anti-dumping measures that have in large part spurred demand for domestic rebar, cold-rolled and hot-rolled coil and even specialty steel. Specifically, the Korean and U.S. shredded scrap prices tracked by this sub-index bumped up significantly, with Chinese and U.S. finished prices also rising for the month.

Our Global Precious Metals MMI® also posted a healthy 1.2% increase on top of its 10% jump in March for an 11% increase over the last two months. This is no thanks to gold, which acted as a drag on the basket – instead, silver and the platinum group metals drove the increase. Global precious is our biggest winner, leading all of the other sub-indexes at 78.

The Rare Earths MMI® is still lagging behind the rally at a lowly 16, making it our “Biggest Loser” this month, but just reporting a month with no price declines is a moral victory after the losses of 2015. Check out the entire report for a more in-depth at all 10 metal categories tracked in the monthly MMI.

In March and February, gold prices — whether U.S., Indian or Chinese — were the standout performers, with some even nearly doubling in value as investors stocked up on the hard currency as a haven from a falling U.S. dollar and other global economic turmoil.

Compare Prices With The March 2016 MMI Report

But that’s not the case this month. Gold lost value in all the markets we track, a predictable pullback from its runaway performance during most of the first quarter. The precious metal that’s pacing the globe and keeping our sub-index positive is silver, helping the sub-index achieve a 1.2% increase.

Global-Precious-Metals_Chart_April-2016_FNL

Sure, the platinum group metals were predictably positive, too, but silver’s unique position as both an investment and industrial metal allowed it to gain in all the markets we track and its future potential is stronger as safe haven status doesn’t make up such a huge part of its value as with its cousin, gold.

Secondary Mining, Primary Industrial Usage

Silver is mined alongside just about every industrial metal in the world and selling it has been padding the profits of base metal miners during the first quarter. U.S.-based primary silver producer Coeur Mining reported Q1 production of 3.4 million ounces of silver and slightly more than 78,000 ounces of gold. That was in line with expectations, as the company transitions to lower-tonnage, higher-grade, higher-margin underground operations from two ore sources, Guadalupe and Independencia in Mexico.

The electronics uses of silver are pushing miners to bet their future on the metal as its still the world’s best conductor of electrical current and heat. Electronics in automobiles such as Tesla Motorsnew Model 3 “affordable” electric car will require more silver than any automobile on the road today. And electronics are already invading the comfort of our conveyances more than ever before.

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When you add electrical transmission and use in renewables to silver’s demand side equation it’s easy to understand why its global prices could easily keep rising independently of its performance as an investment.

What This Means for Metal Buyers

Continue to expect silver and PGMs to experience strong demand independent of investment potential. Gold could still gain back its losses but its prospects, long-term, are not as strong.

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The price rally we’ve been cautiously documenting continued this week as cold-rolled coil took off and gained separation from its sister steel product, hot-rolled coil.

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CRC is feeling the burn from massive 265% import duties on Chinese imports. You think we got our point across with those tariffs? You listening, China?

Cold-rolled coil is gaining some separation from hot-rolled coil.

Cold-rolled coil is gaining some separation from hot-rolled coil. Source: MetalMiner.

CRC may have been the big winner in industrial metals this week, but it’s not the only winner. Silver is making strides and catching up to gold. Unlike with gold, it’s not investors buoying it, either, it’s good ol’ industrial usage.

Hi-Ho, Silver!

Silver’s in your cell phone, your car and lots of other manufacturing applications. Forget to turn off your plasma television? Just push a button and silver’s there to get that job done for you.

Reuters_silver_971_032316

Silver’s rocky road is finally pointing up. Source: Reuters.

Silver and gold both have strong investor appeal right now and look like they’ll keep rising so long as that sentiment exists.

DUC, DUC Goosing Oil Prices

Okay, sure, higher oil prices helped silver gain some traction this week, too, but that doesn’t make silver any less of a workhorse. Higher oil prices helped all the metals this week. With prices now above the $40 per barrel psychological threshold, U.S. drillers have opened their drilled but uncomplete (DUC) wells and are starting to see profits from these dormant assets.

With DUCs pumping out oil here in the U.S., oil prices likely won’t be able to rise much further, but could still keep their recent gains. As we’ve said before, global oil supply and demand is a complicated game with many levers of power, but U.S. production is a big one.

Chinese Steel Overproduction Continues

Despite the good sentiment from rising prices, the overproduction of steel still looms over suppliers and manufacturers. We visited Steel Markets North America last week, and witnessed a talk by Terance Ko, of Hatch Associates.

Free Sample Report: Our March Metal Buying Outlook

There’s not much hope of China decreasing steel overproduction any time soon. The 100-150 million planned reduction, Ko said, likely won’t make enough of a dent in current overproduction to be felt anytime soon. Maybe tariffs will have to work where economics doesn’t.