How Gold Scrap Plays a Role in Month's Precious Metal Price Drops

by on

The big story over the last month, of course, has been the gold price crash – after peaking over $1,600 per ounce not that long ago, we’re back to $1,200/oz levels. But that’s not the only story:

Global-Precious-Metals_MMI-Chart-July-2013_FNL

Every single price point in the index dropped. This is the second straight month of the the monthly Global Precious Metals MMI® registering a value lower than our January 2012 baseline of 100 – the price index clocked in at 88 in July, a decrease of 10.2 percent from 98 in June.

Compare with last month’s trends – here’s our free June MMI® Report.

More than half of gold mining industry producers are losing money at current levels, according to recent analysis by MetalMiner’s Stuart Burns. The gold price would have to drop to $1,000 an ounce for jewelry demand to rise and scrap supply to fall sufficiently for there to be a significant enough change in fundamentals to reverse the price, according to Stuart.

“In the meantime, the only plausible alternative is a shift in the Fed’s position on tailing off quantitative easing, which seems unlikely given recent announcements.”

Meanwhile, PGM prices are also in the dumps…

According to ETF Securities’ latest report, “platinum and palladium have been affected more by the recent liquidity squeeze and resultant growth fears in China…we believe the sell-off is overdone. We expect China liquidity conditions will ease and growth fears will dissipate over the course of the year, removing this hindrance to platinum and palladium price performance.”

On our monthly price index, Japanese PGMs were particularly hit hard.

Key Price Index Drivers

today's metal prices - MetalMiner IndXFollowing a 18.4 percent decline, the Japanese silver price finished the month decimated. Japanese palladium bar prices fell 16.6 percent after rising the previous month. After also rising the previous month, Japanese gold bullion prices dropped 15.0 percent. Chinese silver prices dropped by 12.7 percent this month. Chinese palladium bar prices fell 12.5 percent after rising the previous month. Japanese platinum bar prices dropped 12.5 percent. US palladium bar prices fell 12.0 percent.

A 11.7 percent decline for US silver left the price lower. The price of US gold bullion closed the month after dropping 11.0 percent. Chinese gold bullion prices fell 10.5 percent. After falling 8.7 percent, Chinese platinum bar finished up down. A 7.9 percent drop over the past month left US platinum bar flailing. After rising the previous month, Indian silver prices dropped 7.5 percent.

Interestingly, the Indian gold bullion price was the smallest loser, falling only 3.7 percent.

Don’t forget to see June 2013 price trends before July’s report comes out next week.

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.