palladium price

After hitting a new all-time low last month, the monthly Global Precious Metals MMI® bounced back up a bit to catch its breath, and registered a value of 76 in September, an increase of 2.7% from 74 in August.

So What’s At Play? Gold Prices and Fed Hikes?

Yesterday, Reuters reported that spot gold prices lost more ground, after drifting downward the past several days.

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The precious metal was “hurt by a stronger dollar and as investors awaited a key US jobs report to gauge the timing of a Federal Reserve rate hike” – however, the global stock market [expletive]-show that has been rocking investor confidence lately may just be the only thing the Fed needs to go through with the hike.Global-Precious-Metals_Chart_September-2015_FNL

(Besides, ADP‘s private-sector jobs report, released this past Wednesday, betrays severe underperformance – fewer than 200,000 jobs have been added in 6 of the last 8 months, as mentioned here.)

Gold Drivers

The gold price points from each of the 4 global markets we track (the US, China, Japan and India) all rose over the past month, and along with platinum increases in Japan, China and the US, were the main drivers of the wholesale increase in the Global Precious Metals MMI®. That’s likely due to the fact that equities markets have been doing so poorly – no, heinously – from China to the Dow.

So, on the face of it, gold was a factor in the global precious index’s rise…but let’s turn attention to the historical lows of palladium.

“No. 2” PGM More of a Concern

Palladium, platinum’s cheaper and less scarce cousin, hit another bottom. The US price of palladium bars tracked on the MetalMiner IndX℠ clocked in at $600 per ounce (log in or join as a MetalMiner member at the bottom of this article to get full pricing to all the precious metals we track) – the lowest since November 2012.

As my colleague Jeff Yoders wrote recently, although US auto markets appear robust at the moment, there is uncertainty in China and correspondingly lower auto sales there. Chinese auto sales fell by 7.10% in July 2015 compared to July 2014, the largest fall since February 2013.

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Which won’t bode too well for catalytic converter sales, hence for PGM demand – and prices.

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US auto sales remain the bright spot in the drivers of the monthly Automotive MMI®.

The Real Steel Story

Seasonally adjusted annual rate of sales for light vehicles rose to 17.8 million compared with 17.3 million a year earlier and was the highest since July 2005, according to researcher Autodata Corp. August was the fourth consecutive month that adjusted sales remained above the 17 million mark.

Automotive August-2015The Automotive MMI® still registered only a value of 73 in September, a decrease of 3.9% from 76 in August. Weak prices for most of the base metals that make up the index (HDG, copper, aluminum and lead) abound despite strong end user sales in the US. In China, auto sales are falling with the rest of the domestic economy there.

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China Again

Chinese auto sales fell by 7.10% in July 2015 compared to July 2014, the largest fall since February 2013 and such a large economy’s fall is dragging down the prices of automotive metals just as it is dragging down the prices of oil and other commodities.

Major iron ore producers, Rio Tinto PLC, BHP Billiton, Vale SA and Fortescue Metals Group Limited have ramped up production again despite massive iron ore and steel oversupply. believes they intend to continue exploring for iron ore in Australia despite lower growth forecasts from China and weaker iron ore prices, betting on continued strength in iron ore demand over the long term.

What This Means For Metal Buyers

This is normal behavior from major miners such as the Big Three (Rio, BHP and Vale) and almost-there cousin Fortescue. They can make a profit by squeezing volume out of their mines at low prices based on scale, alone, but iron ore investment is coming from non-traditional miners, as well.

India’s Essar Steel is making a $1.9 billion investment in the steelmaking ingredient in Minnesota, of all places. It’s difficult to imagine how such an investment makes long-term sense for Essar without a turnaround in both iron ore and steel prices. Since high-strength automotive steel alloys are one of the best-performing steel products on today’s market, it’s even more difficult to imagine those prices turning around without continued strong auto sales in the US and Europe and a turnaround in China and other emerging markets.

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This Month’s Prices and Trends

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As the base metal and ferrous metal complexes we cover continue to take a bruising, the peripheral hits have struck our precious metals price index as well, with PGMs platinum and palladium leading the charge downward.

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In fact, the monthly Global Precious Metals MMI® registered a value of 74 in August, a decrease of 7.5% from 80 in July – thereby hitting a new all-time low. Every single metal price point for gold, silver, platinum and palladium dropped across all geographies we track, including the US, China, India and Japan.

precious metals price chart august 2015

This index has never seen the 70s before, and it’s not having a really nice day as they used to say in the ’70s (at least not for investors).

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Precious Metal in Focus: Palladium

According to my colleague Raul de Frutos, writing at the end of July, palladium prices fell as much as 14% during that month:

Palladium price since 2013

Palladium price since 2013. Graph: MetalMiner.

Ironically, palladium was the best performer among precious metals until just about a year ago when it started to fall, Raul wrote. So far, year-to-date, palladium has tanked 32% with the most precipitous drop showing over the past two months. So what’s been driving the price meltdown?

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Due to its role in gas-powered car engines, palladium is more exposed to the Chinese and US automotive markets than to European markets. The slowdown of the Chinese automotive market over the past few months may be Public Enemy No. 1 as far as a driver of palladium’s price decline.

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Just a couple days ago, BMW and Toyota Motor Corp. publicly voiced their concerns over China’s car market, saying that the days of double-digit growth are likely over, as reported by Bloomberg. Both companies are concerned about their profits getting dinged, and are therefore cutting back production based on low demand numbers – BMW, for example, said earlier this week that it had cut production in China by 16,000 cars so far this year.

And Platinum?

South African mines, producers of 70% of the world’s supply, have been reporting production levels for platinum above those during the 5-month strike in 2014, as Raul has pointed out in his previous coverage. Combined with the lollygagging of the Chinese auto sector, looks as though platinum prices may not see a huge rebound for some time as well.

Wild Card

Remember, the strength of the US dollar plays a big role in the movement of this index. The dollar-to-euro exchange rate has been listed as the No. 1 driver of all the base metals in our latest, newly revamped monthly buying outlook, and it’s safe to say that’s no exception for gold and silver movement – when the dollar is strong, investors tend to leave gold behind as a safe haven a little more often.

The Global Precious Metals MMI® collects and weights 14 global precious metal price points to provide a unique view into precious metal price trends over a 30-day period. For more information on the Global Precious Metals MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

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There was no joy in automotive metals this month as prices retreated again amid ample supply and not enough worldwide demand.


The monthly Automotive MMI® registered a value of 76 in August, a decrease of 7.3% from 82 in July, another all-time low for the index. Before the last two months, its previous low was 85.

Steel Prices Falling

Base metals remain in a bearish market, one that’s starting to edge on historic proportions. Also, a glut of imported steel in the US market continues to drive down prices domestically while the lack of demand overseas only exacerbates the problem here.

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US steelmakers have been forced to rely on anti-dumping actions again in hopes of creating some semblance of market equilibrium.

Steel is not the only ingredient in the Automotive MMI and its fall has been helped along liberally by steep falls for aluminum, palladium, platinum and copper.

Vehicle Sales Faltering

At least in the US, sales of automobiles are still strong, too. A sales collapse in China is one of the many effects of the stock market crash and slow economic growth there.

“There’s excessive competition and automakers are building excess capacity, and to raise utilization of the plants, they will engage in excessive selling,” Fumihiko Ike, chairman of the Japan Automobile Manufacturers Association, said in reference to the market many are looking at to create global sales increases.

The Chinese market is generally regarded as one that provides higher sales margins to manufacturers and Volkswagen, BMW and other manufacturers are taking on a hit on sales there.

With a continuing metals surplus and only the US end-user market in decent shape, it’s difficult to predict a turnaround for the Automotive MMI. The Thomson Reuters/Jefferies CRB Commodity Index is hitting new lows as well.

Actual Automotive Metals Prices

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It’s safe to say that the Greece and China crises that have hit the global economy are going to be the biggest issues to watch as far as the precious metals markets – and prices – are concerned.

Over the past month, the monthly Global Precious Metals MMI® fell 4.8% from 84 in June, and it may have further to fall before July is out.


* Read what we said in last month’s analysis.

China’s Star is Falling

One may think that the Chinese equity market crash may help investors flock to gold as a safe haven – but not so fast.

A leading precious metals consultancy called Metals Focus, which interestingly, according to this article, has booted GFMS as the primary supplier of statistical data to the World Gold Council, points out that due to China being a gambling culture, “reckons there is more the likelihood that weak equity prices may end up adversely affecting physical gold demand. Losses generated by the impact of the stock market crash may well hit jewellery and gold artefact purchases, while the scale of the fall is such that potential investors nursing big losses may well not have the liquidity to move back into gold.”

Which would likely mean that gold prices won’t see a whole lot of support. As my colleague Raul de Frutos has noted around the office water-cooler recently, “gold’s safe haven thesis” is not really playing out, probably because of a strong dollar.

Saturday Night at the Palladium: Also Down

The palladium prices from all three global markets we track on our IndX (the US, China and Japan) fell by double digits over the past month. Platinum prices also haven’t looked so hot, looking at 6-year lows, mainly driven by weakness across other commodities and industrial metals.

Palladium spot price since 2012

Palladium spot price since 2012. Source: MetalMiner.

So what to watch in palladium and PGM markets in general?

  • Keep an eye on that US dollar – a strong dollar means a weak South African rand, and that means good news for SA producers to boost supply
  • Investment activity – ETF and other inflow/outflows
  • Next China PMI -> What that means for China automotive demand -> What that means for China auto production

Actual Gold, Silver, Platinum, Palladium Prices

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Through half of 2015, US auto sales are on track to hit record levels not seen in 15 years. After climbing more than 4% through July annual sales could approach the previous annual record of 17.4 million if they stay on this pace.

Yet, none of that demand seems to be helping automotive metal prices.

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As robust as the US automotive market is, it can’t entirely make up for sluggish sales elsewhere that are depressing demand for metals such as steel, aluminum and copper and pushing our index further down. Even the exhaust system metals, platinum and palladium, saw a deep dive this month.

Chinese New Car Sales Barely Growing

New car sales grew just 1.2% in China this May. Further complicating matters, is the fact that the nation of 1.37 billion is starting to develop a used car market and it’s looking very much like Chinese consumers like paying less for a used car, rather than paying more for a new one. What a shock?

This is, of course, bad news for raw materials suppliers as the massive Chinese auto market only recently transitioned to automobiles being the main form of transportation. Less-metals intensive bicycles and motorbikes had filled that role until recently.

Chinese steel and aluminum manufacturers had been counting on more robust growth from the domestic new car market and a strong used market could stunt the advances many were planning to reap from new car sales.

Bearish Market Hits Home

The monthly Automotive MMI® registered a value of 82 in July, a decrease of 3.5% from 85 in June.


As we have documented liberally, the strong US dollar has created a bearish environment for all metals and automotive inputs are no exception. The steep fall observed this month in palladium, a metal that had previously held our automotive index up, was an example of just how much the bearish market is affecting even metals with strong demand. Palladium hit a two-year low this month and the bottom, subsequently, fell out of an already listing price index.

Copper, zinc and lead also fell significantly.

What This Means for Automotive Metal Buyers

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The drama surrounding Greece’s debt is compounding the bear market and, while it hasn’t yet caused strong currencies such as the dollar to see significant gains, its potential to do so threatens all commodities.
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The Automotive MMI® collects and weights 7 metal price points used in automotive production to provide a unique view into automotive metal trends over a 30-day period. For more information on the Automotive MMI® constituent metals and their exact price movements, log in or register below!

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Silver prices in Japan, India and the US all rose over the past month, as did gold prices in the same regions. Silver and gold prices in China, however, fell ever so slightly. These inputs, as well as platinum and palladium prices showing mixed movement, resulted in MetalMiner’s monthly Global Precious Metals MMI® registering a value of 84 in June, holding steady at May’s level.

precious metal price index chart

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The real stories that concern us, however, may reside in the PGM markets.

2015 GFMS Platinum & Palladium Survey SAYS:

Thomson Reuters recently released its GFMS Platinum & Palladium Survey 2015, and in it, noted that the platinum market to be in a deep deficit last year “(prior to inventory movements) of 1.02 million ounces, singularly owing to major strike-related production stoppages in South Africa.” The 2014 deficit comes on the heels of surplus in 7 of the last 8 years; the deficit is expected to continue.

Meanwhile, palladium has been a market in deficit since 2007. The GFMS team estimates “the palladium market deficit last year at 1.58 million ounces, representing the most severe market imbalance for more than a decade.”

GFMS Platinum, Palladium Price Forecast

According to the survey, the average platinum price is forecast to fall by 16% year-on-year, averaging $1,170/oz, about 5% higher than May’s closing price on the MetalMiner IndX. Analysts indicate that this suggests a closing of platinum’s discount to gold. The average palladium price forecast is broadly flat year-on-year at $800/oz, not too much higher than current prices.

William Tankard, research director of mining at Thomson Reuters, is quoted as saying, “It appears to us that forward buying programs by the automotive sector are developing increasing levels of flexibility for these consumers to purchase metal when they want to, rather than need to; the sector is becoming increasingly price-sensitive. Without enduring production cuts to be achieved, by permanently closing high-cost mines, the platinum market is expected to return to surplus next year. Of course, it’s a huge challenge as a producer to make that call, incur restructuring costs and permanently close capacity, if you believe the price will recover in the short- to medium-term.”

How Does That Compare to MetalMiner’s Outlook?

It roughly matches what our lead forecasting analyst, Raul de Frutos, has written recently; in short: “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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MetalMiner’s basket of industrial metals used by the auto industry, the monthly Automotive MMI®, registered a value of 85 in June, a decrease of 2.3% from 87 in May.

Automotive_Chart_June-2015_FNLAs the chart shows, this move basically undoes May’s gains and puts the automotive metals index back where it was in April. The loss nearly erased the 2.4% gain last month as palladium and platinum prices either fell or traded sideways and the other metals tracked in the index weren’t really responsible for the recent movement, anyway.

Robust Car/Truck/SUV Sales

While automotive sales remain strong in the US and abroad, those sales are not creating the necessary demand for automotive materials to move the needle this year – even as companies such as Alcoa, Novelis, ArcelorMittal and others invest heavily in automotive aluminum and steel facilities worldwide.

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US car buyers bought new cars and trucks at the fastest pace in nearly a decade in May, US auto sales data released by the automakers showed. General Motors, Fiat Chrysler and Honda reported increases. Toyota, Nissan and Ford saw declines.

Americans bought about 1.63 million new vehicles in May, up 1.6% from about 1.61 million in the same month last year, according to automotive statistics provider Motor Intelligence. Industry forecasts had expected a 1% decline in sales, to 1.59 million, in part because May was one sales-day shorter than it was last year.

May’s seasonally adjusted annualized rate came in at 17.8 million, well past analysts expected 17.3 million.

Steel Inventories Still High

The big drag on the index continues to be the price of steel, which reached another new low this month. Cheap imports and high inventories are to blame in that market, and those high inventories will continue to make the road just as hard to ride for automotive.

Domestic steel producers have filed anti-dumping and countervailing duty petitions against five countries related to corrosion-resistant steel, the type used in automotive applications.

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The petitions charge that unfairly traded imports of corrosion-resistant steel from China, India, Italy, South Korea and Taiwan are causing material injury to the domestic steel industry. The petitions further charge that significant subsidies have been provided to the foreign producers by the governments of those countries.

It will take months to know if this action produces significant relief of the cheap imports and, even then, the anti-dumping and CVD determinations might not be high enough to have an effect. The end-use automotive market and its much of its material supply chain is intrinsically tied to the steel market.

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Bolstered by a weaker dollar, global precious metals rose last month as industrial demand for palladium was finally joined by higher gold bullion and platinum prices.

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The number of Americans applying for first-time unemployment benefits inched up by 3,000 to a seasonally adjusted 265,000 in the week ended May 2, the Labor Department said recently. This was less than the 275,000 economists predicted and within reach of the unrevised 262,000 level for the prior week—the lowest since 2000.

This is the latest sign that an interest rate hike may come from the Federal Reserve as continued improvement in the US labor market might clear the path for rate hikes.

How High Will They Go?

Once the Fed starts the cycle of interest rate increases, the market can focus on how high the rates may rise, which will be less of a weight since the expectation is that rates won’t rise very much. Higher interest rates are bearish for gold because they give investors a reason to move money into investment vehicles that produce a yield. Gold has no yield.

End of the Stock Supercycle

There is also rampant speculation that a combination of downward earnings revisions and the difficulty of the banking system to turn bank reserves into money growth will lead to a large correction in the stock market. Precious metals are also a hedge against falling stocks.

The monthly Global Precious Metals MMI® registered a value of 84 in May, an increase of 1.2% from 83 in April.

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Seems that somebody forgot to tell the automotive metals that the bear market was still going on this month. Strong aluminum and high-strength steel demand, and end-user purchases, have again made auto the standout in a field of mostly down markets.

After flattening in April, the monthly automotive MMI® registered a value of 87 in May, an increase of 2.4% from 85 in April. A big factor was the performance of aluminum coil on the index, as its index broke resistance and soared as well.

Pool 4 Tool’s Automotive SRM Summit

China removed export taxes on aluminum, opening more markets up to the automotive-grade sheet and coil prices that automakers in the West have been experimenting with for a decade now. Prices of palladium, lead and even copper also notched strong LME growth filling strong demand from domestic and foreign automakers.

Consumer Sales Rising

In the US market, April new car sales rose by 5% from a year ago, to more than 1.463 million units as predicted in a J.D. Power and LMC Automotive‘s mid-month auto sales forecast update. April’s totals are anticipated to be the highest since April 2005.

SUVs and smaller “crossover utility vehicles” were the main leaders in the sales surge. While not all US automakers posted strong Q1 results, profits were generally up even if they were up lower than some analysts expected. General Motors‘ results were better than in the same period a year ago, when costs associated with safety recalls limited quarterly profit to $125 million.

Fiat Chrysler Automobiles reported a profit of $101.2 million (€92 million) d​uring the first quarter compared with a loss of $173 million (€190 million) during the same period last year.

What This Means for Automotive Buyers

Consumer demand for automobiles traditionally picks up in the summer months, so this could be the beginning of a big turnaround for our Automotive MMI®. Fundamentals continue to look strong as the index had better supply and demand numbers than other metals even when it was losing price ground. Stay tuned.

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