Although physical demand in China and India have picked up, gold prices remain at low levels and are unable to make substantial upside moves.

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We really don’t pay that much attention to gold’s demand because gold is the only commodity where physical annual demand is only a tiny fraction of total supply available. Unlike base metals, where physical demand plays a big role because of their industrial uses, shortages of gold caused by physical demand never happen.

For this reason, the price of gold is almost entirely dependent on the factors that drive traders’ psychology, such as inflation and the dollar. Despite all that, we still see analysts writing lengthy reports analyzing factors with zero predictability, such as jewelry usage and annual gold production.

Gold since 2014

Gold struggling to overcome resistance at $1,160 per ounce. Source: MetalMiner analysis of data.

Since August, gold prices haven’t moved much. They have traded between $1,160 per ounce and $1,080 an ounce. As we pointed out in July,  gold broke a key support level and now prices have some resistance to overcome before they can attempt to advance.

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Gold is considered a safe-heaven asset and certainly equity markets are not in their best shape at the moment. However, it’s hard to imagine gold prices rising while commodities markets, overall, fall and the dollar is strong. The same applies to silver, which is showing the exact same behavior.

SIlver struggling to break above resistance at $15.6/oz

Silver struggling to overcome resistance at $15.6 an ounce. Source: MetalMiner analysis of data.

What This Mean For Metal Buyers

Gold and silver prices remain weak and it’s difficult to see them increasing while commodities keep falling and the dollar remains strong. Buyers should keep an eye on $1,160 per ounce and $15.6 an ounce levels. A break above these levels would signal a change in the direction of the short-term trend.

Switzerland will investigate precious metals price collusion and Horizonte Metals is the first buyer in Glencore‘s mining assets sell-off.

WEKO Wants Precious Probe

Switzerland’s WEKO, a government watchdog group, said on Monday it had opened an investigation into possible manipulation of the precious metals market by several major banks. Its investigation, the result of a preliminary probe, was looking at possible collusion of bid/ask spreads in precious metals markets by UBS, Julius Baer, Deutsche Bank, HSBC, Barclays, Morgan Stanley and Mitsui.

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The move comes a month after press reports that the European Union’s competition regulator was investigating anti-competitive behavior in precious metals spot trading, and follows news of a US probe by the Department of Justice and the Commodity Futures Trading Commission earlier this year.

Horizonte Buys Glencore Nickel Mine

Horizonte Minerals said on Monday it has bought Glencore’s Araguaia nickel project in Brazil for $8 million.

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“This is a game-changing transaction for Horizonte. We have been able to negotiate a unique transaction leveraging the current depressed commodity markets,” Horizonte CEO Jeremy Martin said in a statement.

Today in MetalCrawler, can a shake-up of the Saudi royal family mean a change in oil prices? A major Canadian miner is cutting production estimates, as well.

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Saudi Shake-Up

A shake-up of Saudi Arabia’s oil leadership by King Salman has introduced a new element of unpredictability to its energy policymaking at a moment when Riyadh is grappling with slumping crude prices and its war in neighboring Yemen, Reuters reported.

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State-run oil giant Aramco has been without a permanent chief executive since April, when Khalid al-Falih was made health minister, and the old Supreme Petroleum Council, where energy policy was historically made, was abolished in January.

Goldcorp Cuts Mine Forecast

Goldcorp Inc. on Tuesday cut its 2015 production forecast for its newest mine, the Eleonore gold mine in Quebec, because higher-than-expected “folding” in the underground rock has resulted in lower gold grades. Goldcorp, the world’s biggest gold producer measured by market value, said it now expected Eleonore to produce between 250,000 and 270,000 ounces of gold this year.

Although we don’t let people’s opinions influence our analysis, we like to see what others are saying. Just google gold price news and all you’ll see are talks about the safe-haven aspect of gold, like if it was the one thing that matters. To us, it’s the least important thing right now.

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Looking back in time, we have seen many periods where the stock market declined and gold prices fell too. For example during the bear market of early 2000’s, gold prices fell from 2000 until 2002; during the recession of 2009, gold prices fell while the market crashed and they didn’t turn up until the stock market did in 2009. Even in the crash of 1987, gold prices didn’t post real gains. Therefore, even if stock markets collapsed from this point, that wouldn’t make us more bullish on gold.

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What we’ve never seen is gold prices rising while commodities markets fall and the dollar is strong. And those are the main things to watch right now. Commodities peaked in 2011 and so did gold. Since then, they have been in a falling market and further declines in US stocks won’t necessarily help them turn upward. Saying at this point that gold will rise because of a stock market decline is like saying that you’ll lose weight if you eat broccoli while not cutting down your daily dose of donuts.

Gold prices since 2014

Gold prices since 2014. Source: MetalMiner analysis of data.

On top of that, the rest of precious metals are falling, with palladium, platinum and silver hitting multi-year lows. Also, as pointed out in July, gold is getting into trouble after breaking a key support level. The price increase that we saw in August looks like a shy rally and nothing suggest that prices have hit bottom. That’s regardless of what the safe-haven theorists say.

It sounds like some benefit is finally coming out of the billions being spent around the world, but particularly in the US, on research and development in batteries.

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From automobiles to mobile devices the trusty lithium-ion battery has been an amazing enabler for new technologies but it’s limitations in terms of longevity, energy density and recharge rates are now a barrier to wider up-take of technologies such as electric cars and to faster roll out of developments in mobile communications.

While strides are, no doubt, being made in a replacement for the lithium-ion battery, it seems developments of the current model are bearing the most fruit. For example, replacing the graphite anode with more complex metal mixtures is proving more immediately practical. Two announcements in as many weeks suggest the next tangible step forward may actually be micro fuel cells.

Apple has filed a patent for a fuel cell it calls MagiSafe that could allow a Mac to run for days or even weeks an article says. The patent includes a number of potential fuel sources, all of which would be mixed with water. Fuel cells work by mixing a fuel, such as hydrogen, with an oxidizing agent, such as water or oxygen.

Apple’s patent lists boro-hydride, sodium silicate, lithium hydride, magnesium hydride, a hydrocarbon and compressed or liquid hydrogen and others as potential fuels. The idea is it would run alongside the existing battery recharging it as it goes along. When the fuel cell finally runs out of fuel it would be replaced (or at least the fuel container would be replaced) as a canister that slides out and a new one slots in.

Apple, of course, files lots of patents so it doesn’t mean a fuel cell-powered Mac is about to hit your local store any day now but the near simultaneous announcement by a British firm called Intelligent Energy in the Telegraph that it has made a working iPhone 6 prototype containing both a rechargeable battery and its own fuel cell technology, creating electricity by combining hydrogen and oxygen and producing only small amounts of water and heat as waste, has more immediate promise.

The firm is reported to be claiming charge life of a week and recharging of the fuel cell would be via a slot, much like the current phone socket or lightning charger connection, on future phone models. The firm is said to be considering the cost of recharges.

For some people, a daily recharge is not a major issue, especially if, like my wife, you never turn the phone on in the first place. But others, not unlike a few of my colleagues at MetalMiner who are constantly using their phones, going a whole week without having to recharge would almost be a price-blind decision.

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Most fuel cells rely on PGMs of one sort or another or a mix thereof to catalyze the reaction but the tiny amounts required for mobile device fuel cells are unlikely to impact PGM demand anytime soon. Longer-term, however, the roll-out across the industry could be rapid if such technologies prove to be reliable and cost effective enough for wider uptake, at which point these and roll out applications for miniature fuel cells could create a step change in PGM demand.

RBC Capital Markets recently released updated forecasts for the gold and silver markets. Conventional wisdom says that safety plays such as precious metals outperform during periods of stock market weakness, but, as we’ve pointed out before, general commodity weakness is dragging down even traditional hedges such as precious metals along with their base metal cousins.

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With the market volatility of the last few days, one might think that silver and gold would see a rebound as investors, at least initially, abandon stocks and put their money into something reliable such as hard currency. Gold and silver are up, but the outlook for the precious cousins is still, at best, mixed.

Could gold's hedging value by renewed by falling stock values?

Could gold’s hedging value by renewed by falling stock values?

In the report, analyst Stephen Walker lowered his price targets for both gold and silver through 2018. RBC reduced its Q4 2015 forecast for gold from $1,300 an ounce to $1,150/ounce, a 12% reduction. For silver, RBC scaled back its Q4 2015 forecast by 15%, from $18/ounce to $15.25/ounce.

RBC believes that a Federal Reserve interest rate hike in a weak inflationary environment will pressure gold and silver prices. That hike got a little less likely, at least in the near term, in the last few days as the global stock market plunge happened. Cheaper imports from China mean lower prices and deflationary pressure in the US.

All of the precious metals we track on the MetalMiner Indx were up after Friday’s market selloff and gold held firm in a tight range on Monday in London, trading above $1,155 per ounce as China’s markets continued to plummet.

According to data gathered by Commodity Futures Trading Commission, last Tuesday the COMEX gold futures and options net position of managed money turned bullish for the first  time in five weeks. Silver’s net position of managed money also was bullish last week after seven bearish weeks. Treasury bonds, another safe haven, saw their yields fall, as well. The 10-year Treasury yield fell below 2% for the first time in nearly four months and traded 7.8 basis points down on the day at 1.976%, its lowest point since April 28.

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It is too early to tell if gold and silver will see their hedge appeal restored, but the conversation has significantly changed when it comes to interest rate hikes and weary investors may see silver and gold in a different light, depending on how long China’s market rout continues.


A major bank cut its last time with commodity trading and global stocks are still falling due to the situation in China.

Deutsche Bank Leaves the Commodity Business

Deutsche Bank will sever its last link with commodity trading by resigning as a clearing member of the London gold and silver over-the-counter business, two industry sources close to the matter told Reuters on Thursday.

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The move leaves five banks:  Barclays, HSBC, Bank of Nova Scotia, JP Morgan and UBS to settle daily bullion transactions between dealers, amounting to more than $5 trillion worth of metal each year.

Stocks Still Falling

Signs of a sharp slowdown in the world’s second-largest economy, China, have unnerved investors since Beijing surprised markets last week by devaluing its currency. Shares in the US, Asia and Europe have tumbled along with commodity prices as investors worry about waning Chinese demand.

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The US Court of Appeals for the District of Columbia Circuit in April 2014 upheld the bulk of the Security and Exchange Commission’s then-new Conflict Minerals Rule, but ruled a key disclosure requirement violated the First Amendment because it forced a company to “confess blood on its hands.”

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The same federal appeals court ruled against the disclosure requirement a second time Tuesday, saying an investigation requirement is fine, but disclosing that material remains untracked does not require an admission tantamount to guilt, when it comes to receiving raw materials from war-torn areas.

Disclosure of Unknown Origin

The Dodd-Frank Wall Street Reform and Consumer Protection Act required companies to disclose whether any tin, tantalum, tungsten or gold (commonly known as 3TG), in their supply chains is connected to violent militia groups in Africa.

An SEC spokesman said the commission is reviewing Tuesday’s decision.

The three-judge appeals panel split 2-1, effectively siding with business groups in ruling that forcing companies to designate which products “could not be found to be ‘DRC conflict free’” is tantamount to requiring firms to criticize their own products.

Two judges appointed by Republican presidents voted in the majority and a recent appointee of President Barack Obama dissented.

Conflict Minerals Rule Still Intact

The court’s rulings did not overturn the entire Conflict Minerals Rule, it actually upheld requirements such as having companies investigate whether their products include the minerals and a requirement to file public reports on their investigations, a process that began last year.

One situation where a respondent could not confirm that all of its raw materials were DRC conflict free, was party supply retailer Party City, a company that filled out a conflict minerals compliance form and asked their suppliers where, exactly, all of the materials for their mylar balloons and other party supplies came from. Party City reported it received little response from its supply chain.

That was one of many cases that highlighted the difficulty of actually vetting and confirming supply chain compliance for the wide range of businesses that the Conflict Minerals Rule covers.

What Does This Mean For Conflict Minerals Compliance?

In a statement after the initial ruling against the SEC last April, the regulator indicated that companies are not required to identify products as “DRC conflict free,” having “not been found to be ‘DRC conflict free’” or “DRC conflict undeterminable.” The SEC also indicated that, pending further action, an independent private sector audit (“IPSA”) will not be required unless a company voluntarily elects to describe its own product as “DRC conflict free” in its Conflict Minerals Report. That statement is likely to remain in effect pending the outcome of further litigation. It also looks unlikely that the private sector audits will be required this year and, barring a legal settlement, likely most of next year.

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The SEC can petition the entire DC Circuit Appeals Court to hear the case en banc, a request that the court can decide whether or not to grant. The SEC can also appeal to the US Supreme Court no matter what the outcome is at the circuit court level. The business groups that challenged the Conflict Minerals Rule can ask the court to stay the entire law, as they did after the April decision, but it’s not likely that the court would grant such a request as a stay was not allowed after the initial decision.

Most larger companies — in a variety of industries — intend to continue implementing their 3TG traceability and responsible sourcing initiatives no matter what the outcome of the case concerning the DRC measure.

A major gold bull reduced its investment in the largest gold ETF just in time, and a specialty steel maker locked workers out over healthcare contributions this week.

Paulson Partially Dodges Gold Bullet

Hedge fund Paulson & Co. cut its stake in the world’s biggest gold-backed exchange-traded fund in the second quarter of 2015, after holding it unchanged for six straight quarters, just before prices took a tumble, a filing showed on Friday.

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The move came just before spot gold prices tumbled 6.6% in July, their weakest monthly performance in more than two years after a steep selloff in Shanghai and New York, and on expectations for the Federal Reserve to raise rates as early as September.

Paulson & Co., led by longtime gold bull John Paulson, cut its stake in SPDR Gold Trust by 1 million shares to 9.2 million shares worth $1.04 billion in the quarter ending June 30, according to the 13F-HR filing.

The sharp reduction came as SPDR holdings fell by 3.5% in the quarter

ATI Locks Out Workers Over Healthcare Premium Contributions

400 Workers protested outside of Allegheny Technologies, Inc.‘s plant in Beaver County, Pa. The workers were picketing a lock out of 2,200 United Steelworkers of America-represented employees at plants in six states today.

The disagreement between ATI and the union centers on employee health benefits. ATI had proposed monthly premium contributions starting at $125 a month and increasing to $215 by the end of a proposed four-year contract. That would be coupled with higher deductibles and out-of-pocket maximums.

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Negotiations hit a wall last week when the Pittsburgh-based specialty steel manufacturer proposed a “last, best and final offer” to the union and threatened the lockout if workers did not accept the proposal by Monday.

The union balked at concessions sought by ATI.


Gold demand fell to a six-year low last quarter and US steel shipments jumped in June, although the 2015 numbers are still down year-over-year.

Gold Demand Plummets

Gold demand hit a six-year low in the second quarter, a World Gold Council report showed on Thursday, as sluggish prices and the prospect of better returns in equities curbed interest. Demand fell 12% to 914.9 metric tons, with declines in China and India accounting for nearly half of the drop, the WGC said.

US Steel Shipments Up in July

The American Iron and Steel Institute (AISI) reported that for the month of June 2015, US steel mills shipped 7,758,087 net tons, an 8.1% increase from the 7,175,211 net tons shipped in the previous month, May 2015, and a 6.4% decrease from the 8,291,823 net tons shipped in June 2014.  Shipments year-to-date in 2015 are 43,980,293 net tons, a 9.8% decrease vs. 2014 shipments of 48,777,146 net tons for six months.

A comparison of June shipments to the previous month of May shows the following changes:  hot-dipped galvanized sheets and strip were up 14%, hot-rolled sheet was up 12% and cold-rolled sheets, up 9%.