Gold

Energy prices got hit the most with oil prices falling below $50/barrel, followed by precious metals. Gold prices hit a 5-year low, falling as much as 8% in July, silver of course, followed because metal price correlation is still an important factor to account for.

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The US House will not vote on the Senate’s six-year transportation bill and China’s economic crisis could cause gold imports to plunge there.

House Won’t Vote on Senate Transportation Bill

House Majority Leader Kevin McCarthy, (R-Calif.), says the House will not vote on the Senate’s six-year highway transportation bill. Funding in the federal government’s Highway Trust Fund will run out on July 31st without any further action.

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The House has already adopted a bill that pays for transportation construction through mid-December. The stumbling block appears to be the provision to reauthorize the Export-Import Bank that’s included in the Senate bill. House members will leave for their August recess on Thursday, and funding for Highway Trust Fund expires Friday. The Senate will be in session next week and could choose to vote on the House bill.

Chinese Gold Imports Hit by Lower Credit Rates

China’s gold imports could fall as much as 40% this year as demand for bullion used to back domestic financing deals decreases, the world’s biggest refiner Valcambi told ThomsonReuters. A lot of the gold China imported in the last three years was used to secure cheaper loans due to a liquidity crunch, but that is now flowing back into the market as lending rates drop there.

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Architecture billings hit an eight-year high this month and several large, Asian sell orders triggered the big gold sell-off on Monday.

ABI Strong in All Sectors

Paced by continued demand for projects such as new education and healthcare facilities, public safety and government buildings, the Architecture Billings Index (ABI) increased in June following fluctuations earlier this year. An economic indicator of construction activity, the ABI reflects an approximate nine-to-twelve month lead time between architecture billings and construction spending.

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The American Institute of Architects (AIA) reported the June ABI score was 55.7, up substantially from a mark of 51.9 in May. This score reflects an increase in design services (any score above 50 indicates an increase in billings).

This is the highest score for the ABI since 2007.

  • Regional averages: Midwest (57.2), South (54.9), West (50.7) Northeast (50.4)
  • Sector index breakdown: institutional (59.1), mixed practice (54.7), commercial / industrial (51.6) multi-family residential (47.0)
  • Design contracts index: 52.5

How Gold Dropped Below $1,100 an Ounce

In early Asian trading hours on Monday, when typically only tens of contracts of gold are traded, investors dumped more than $500 million worth of bullion in New York in four seconds, triggering the market’s biggest rout in years.

The sell-off began when one or more massive sell orders hit the price of gold on the CME Group‘s Comex futures index in New York a tenth of a second after 9:29 a.m. in Shanghai, triggering turnover of almost 5,000 lots of gold. That equates to 13 metric tons of gold, more than typically trades in hours this early in the day. The sales knocked the price almost $20 to $1,100 per ounce during those four seconds.

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Gold miners saw their stock values plummet with the price of the yellow metal on Monday. BHP Billiton is investing $240 million in its Western Australia iron ore tug boat and port business.

Gold Sell-Off Hits Miners Hard

The steep sell-off in shares of gold miners, tracking a plunge in the metal’s price, wiped out more than $8 billion from their combined market value on Monday and pushed a global index of gold stocks to a six-and-a-half-year-year low.

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The Thomson Reuters Global Gold index slumped 8.5% to its lowest since late 2008, the biggest one-day percentage drop in two years, after gold prices sank.

BHP Investing in Infrastructure

BHP Billiton said today it will spend $240 million upgrading its marine iron ore facilities in Western Australia. The funds will be used to purchase six tug boats and build a new tug harbor in Port Hedland’s inner harbor, with construction due to be completed in September 2016.

Free Download: Latest Metal Price Trends in the July MMI Report

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Gold hit a fresh five-year low today and China’s top steel-producing city is getting serious about enforcing pollution standards.

Gold Keeps Falling

Gold stretched its losing skid to six sessions and made a fresh five-year low in early trading Monday. At its low point Monday, an ounce of gold dipped below $1,100 to $1,080 — its lowest level since February 2010 — and was down 4.6% before recouping some of its steep losses.

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About 8:30 a.m. ET, an ounce of gold was down $18.80, or 1.7%, to $1113.10. Last week, gold tumbled more than 2%.

Our Lead Forecasting Analyst, Raul De Frutos predicted the yellow metal had further to fall last week.

Tangshen to Crack Down on Pollution

China’s top steel producing city of Tangshan will punish steel companies if they fail to meet tough new pollution standards over the next three months, according to new industry guidelines. This could force closures and help ease a severe capacity glut. China is using tougher environmental rules to help tackle a severe glut of steel capacity that has depressed prices.

Free Download: Latest Metal Price Trends in the July MMI Report

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Gold and silver are heading into a risky zone. Both precious metals have fallen for the past four years but it looks like more declines might be around the corner.

Gold since 2014

LBMA gold since 2014. Graph: MetalMiner.

Gold tried to rally this year but the rally wasn’t sustainable. Gold is now back to $1,150 an ounce and seems ready to hit another multi-year low. Despite all the global economic uncertainty, “gold’s safe heaven thesis” is not really playing out.

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A strong dollar and bearishness across commodities are what’s really driving gold prices down.

Silver since 2014

Silver since 2014. Graph: Metalminer.

Not surprisingly, silver is following the same pattern as the same price drivers are applying. Indeed, silver is already hitting a multi-year low. Interestingly, the same thing happened last year when silver fell and then gold followed.

What This Means For Metal Buyers

The outlook remains bearish not only for base metals but also for precious metals. Gold and silver at approaching key support levels and if not able to hold, we could see prices sinking. The buying strategy to take on gold and silver is pretty clear: don’t buy weakness.

Free Download: Latest Metal Price Trends in the July MMI Report

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PriceWaterhouseCoopers‘ Mine 2015 Report was good news for India, but cast a troubling picture of the overall global mining industry.

Free Download: Latest Metal Price Trends in the June MMI Report

Dry-fuel miner Coal India Ltd. (CIL) moved up from the 8th to the 6th slot on the list of the largest mining companies in the world in terms of market capital.

A second state-owned company, which was also the country’s top iron ore miner, National Mineral Development Corporation (NMDC), also improved its ranking by coming in 21st, up three spots over the previous year.

What is Mine 2015?

Mine 2015 analyzed the financial performance of the world’s top 40 mining companies by market capitalization. The report said market values continue to fall, overall, in spite of improvements reported in the financial results of all top 40 companies.

Depending on which way you read it, in 2014, a collective $156 billion was eroded (about 16%) of the top 40 companies’ combined market value, but then again, that was only half of the 2013 slide. The collective market capitalization came in at $791 billion in 2014, which was the range miners held a decade ago.

The report said the world’s largest miners had reduced spending but stepped up production. The industry was also helped by lower input costs and currency devaluation. PwC did note, however, that weak commodity prices due to low demand hammered down revenues.

The Iron Ore Drag

The report said the downturn was largely driven by iron ore miners, particularly diversified companies with large exposure to shifts in commodity prices.

Last year, iron ore was the hardest hit, with prices dropping by half because of a supply glut and a negative short-term demand outlook, the report said.

On the coal front, coal miners in the BRICS countries (Brazil, Russia, India, China, South Africa) saw their values increase 19% over the period, regaining almost half of the value they lost in 2013.

In Asia, more industry consolidation was expected between key resource players from India and China in order to stem production overcapacity, the report said.

Chinese Production Still Surging

The coal companies of China made significant gains in the ranking of the top 40 mining companies, with three appearing in the this year’s top twenty.

China Shenhua Energy Co. Ltd (Shenhua) topped the list, becoming the third most valuable mining company (based on market capitalization) after BHP Billiton and Rio Tinto Group. Shenhua moved up from fifth in 2013’s rankings.

Another company, China Coal Energy Co. climbed to 14th rank from 23rd in 2013, with a 30% increase in valuation, while Inner Mongolia Yitai Coal Co. jumped to 18th from 25th. Yanzhou Coal Mining Co. came in at 26th – up from 34th in 2013. Yanzhou also recorded a more than 30% increase in value over 2014.

US Miners Can’t Keep Pace

On the other hand, not many US coal-mining companies charted in Mine 2015. Consol Energy found itself at number 28. No other companies charted despite noted concern from US manufacturing execs about local resource supply.

Of the 40 companies, 15 miners saw their share values appreciate, while 25 witnessed a decline.

The average return on capital employed was largely below the minimum hurdle investment rate of 15 to 20% set by the companies themselves. Only 6 of the 40 passed the 15% benchmark: CIL (coal), OAO Norilsk Nickel (nickel), NMDC (iron ore), Randgold (gold), Shandong Gold (gold), and Newcrest (gold), according to the report.

Copper Still Stagnating

On the copper front, Mine 2015 noted that global copper production had gone up by only 2.8% last year, which was way below the 8.1% of 2013. PwC noted that the world’s largest copper producer, Chile, had faced problems increasing its production due to falling grades.

PwC’s general outlook for the global metals and mining market though remains dreary due to the continuance of a slower rate of economic growth, particularly in emerging markets, especially due to the cooling off of China’s growth rate.

In 2014, iron ore, coal and copper prices had fallen by 50%, 26% and 11%, respectively, according to the report.

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The US dollar index has declined 6% since its peak in mid-March.

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This decline gave a boost to commodities and, of course, precious metals were not left behind. However, their upside moves look anything but impressive. Despite the weaker dollar, it seems as if precious metals are having a hard time moving away from their lows.

Gold prices rose a shy 6% since mid-May. The yellow metal is still near record lows. A bit more encouraging is the move silver is making, up 12% since mid-May. The grey metal, however, is still near record lows as well. The metal is trading at $17.71/oz and we’ll see if it can break medium-term resistance at $18.5/oz.

A bit more encouraging is the move silver is making, up 12% since mid-May. The gray metal, however, is still near record lows as well. The metal is trading at $17.71/oz and we’ll see if it can break medium-term resistance at $18.5/oz.

Platinum is up 7%. A very small movement compared to its huge decline since summer last year. The metal has a long way up to reach last year’s levels.

Palladium rose 8% after making a 1-year low in March. Palladium is clearly the best performer among precious metals but since summer of last year is also being dragged down with the rest of precious metals.

What This Means For Metal Buyers

Recent weakness in the dollar is giving a boost to precious metals. However, these price movements have been quite shy so far. It still makes sense to be long-term bullish on the dollar and bearish on precious metals.

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It is one of those delicious ironies of life that India, the world’s largest consumer of gold, has very little to show when it comes to actually mining the yellow metal.

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That’s poor form because India sits on very large resources of gold, revealed by several geological studies in the past. One such study pegged India’s primary gold resources at about 491 metric tons. Despite its 6,000-year mining history, the country mines just around a pitiful 25 mt of gold annually.

Imports Flourishing

India is one of the biggest importers of gold, despite a punitive 10% import tax. In the financial year ended March 31, gold imports had touched 900 mt, up 36% from a year ago.

Perhaps keeping all this in mind, and the fact that gold mining could mean earning some big bucks, Western Australia recently expressed interest in developing gold mines in India, as part of the bilateral cooperation in minerals and energy sectors between the two nations.

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Today in MetalCrawler; the Chinese economy continues to disappoint, gold breaks a key support level and nobody agrees about when copper prices might recover.

Chinese Economy May Be Stimulus-Proof

In many ways China doesn’t really look like an economy growing at even 7%, with exports plunging in March, power generation dropping 3.7%, the biggest fall since 2008, and a host of other indicators pointing to sluggish growth.

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Reuters Clyde Russell writes that increased economic stimulus spending by Beijing may not be able to do much to help the Chinese economy this year.

Gold Falls

Gold slid below $1,200 an ounce on Thursday as the dollar pared losses after upbeat US factory data and demand for physical metal stayed weak, though uncertainty over the timing of a Federal Reserve rate increase underpinned prices.

The dollar index, strength in which tends to weigh on gold, recovered from lows against a basket of currencies after a survey showed factory activity in the mid-Atlantic region accelerated in April.

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