South Africa vs. Switzerland – Not in World Cup, in Platinum Markets

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MetalMiner’s monthly Global Precious Metals MMI® shot up to 98 in July, an increase of 4.3 percent from 94 in June, mainly on the back of transactional silver and gold prices in the US, Japan and India. However, platinum prices are also being watched, not least due to goings-on in South Africa and Switzerland.

Global-Precious-Metals_Chart_July-2014_FNL

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

There’s been a veritable treasure trove (see what I did there?) of goings-on in the platinum and silver markets this past month, and it’s translating into some interesting outlooks up ahead.

MetalMiner Editor-at-large Stuart Burns has analyzed both the effect of South African mining strikes on the platinum price, and the now-infamous silver fix. Here we give you a rundown:

On the Silver Fix

A new benchmark to set silver prices is certainly required and the London Bullion Market Association (LBMA) along with the wider silver market community is keen to see a system to allow daily prices to take shape…The preferred option of the silver users apparently is for an electronic auction-based system. Although the LME would use its existing infrastructure in it’s LME Select electronic platform, it still feels this would be the most challenging to have running by August 15.

The importance of getting this right cannot be overplayed, not just for the trade but for investors. A price that enjoys everyone’s unquestioning acceptance and trust is imperative to ensure continued liquidity and support.

On South African Strikes and Platinum

The market’s reaction has been limited, probably suggesting the settlement had been priced in by investors in recent weeks. The most significant movement has been a liquidation of long positions, but this has been going on for the last couple of weeks as the market anticipated the end was near.

It will take some time to achieve full production again and, in the meantime, the mining companies have lost some 24 billion rand of revenue ($2.25 billion) not to mention dragged the South African economy into recession in the first quarter, so all parties will be keen to get production going again. According to Standard Bank, the upside for platinum is limited, with the metal likely to trade in a range from $1,400-1,500/oz much as it has done for the last month. Palladium, the bank feels, is harder to gauge but advises it “has value” at below $800, suggesting this is a floor with some upside potential.

Platinum Market Outlook

According to our friends at ETF Securities, an interesting report recently released by CPM Group posits that “platinum is likely to have a supply shortfall in 2014 near 820,000 ounces” – the largest in history. CPM expects the total supply of platinum to decline nearly 10% to 6.5 million ounces in 2014 on the back of the South African strikes, according to ETFS.

Unless, of course, there are loads of platinum available in Switzerland’s vaults…

Key Price Drivers

Japanese silver prices rose 11.6 percent to $6.74 per 10 grams. US silver finished the month at $20.96 per ounce after gaining 11.5 percent. After rising 9.5 percent, Indian gold bullion finished the month at $465.32 per 10 grams. The price of Indian silver climbed 9.3 percent to $737.78 per kilogram. At $1,327 per ounce, US gold bullion finished the month up 6.5 percent. Japanese gold bullion reached $42.71 per gram after a 6.1 percent increase for the month. It was a strong month for Chinese gold bullion. The metal posted a 4.5 percent increase, finishing at $42.60 per gram. Following a 3.6 percent change in price, Chinese silver closed the month at $694.66 per kilogram. The price of US platinum bar jumped 3.5 percent last month to $1,482 per ounce.

Japanese platinum bar saw its price rise 2.3 percent to $47.88 per gram. Japanese palladium bar rose 1.1 percent to $27.24 per gram. After a 1.1 percent increase, US palladium bar finished the month at $840.00 per ounce. Finishing the month at $50.77 per gram, Chinese platinum bar recorded a 1.0 percent increase.

Chinese palladium bar prices fell 0.5 percent to $30.30 per gram after rising the previous month.

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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