Palladium Price Weakness Drags Down Precious Metals Worldwide

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Without major central bank actions, precious metals will continue to fall in Q2 and possibly longer.

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The decline that began in February has taken hold for metals such as palladium, gold and platinum and it looks to be a long-term trend that won’t end, based on market forces alone, for some time.

Global-Precious-Metals_Chart_April-2015_FNL

Palladium price weakness pushed the monthly Global Precious Metals MMI® to a value of 83 in April, a decrease of 3.5% from 86 in March.

Palladium Weakness

With most of our metals still in bearish territory, even if they’re posting small gains on the monthly MMI, global precious was a bright spot through January, when it was still being bolstered by strong industrial and investor demand for palladium. That demand began dropping last month and, without palladium to prop it up, our index fell even further this month without much hope for recovery.

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As my colleague Raul de Frutos pointed out recently, palladium has broken a key support level and this indicates that selling pressure is increasing as the metal declines. It’s now recording lower high points on the CME’s spot index and that’s a clear sign that there is diminishing buying pressure during upward bounces.

Palladium-backed exchange-traded funds also saw their biggest weekly outflows (more than 50,000 ounces) since August last week. A strong dollar and low oil prices look like barriers that automotive demand, alone, can’t overcome for palladium. The mining cost of platinum and palladium has gone down with the ruble in top producer Russia and supply should be abundant enough to meet demand as production is being buttressed by the favorable exchange rate there and in number two producer South Africa.

Meanwhile, in Goldville…

Gold is still falling in most of the world in the face of that strong dollar, as well. While many long-term forecasts predict that Chinese and Indian demand will eventually propel the world’s favorite investment metal upward, the continuing strength of the dollar as a reserve currency is hurting it even more than base metals with more industrial uses.

The Federal Reserve remains conservative when it comes to when it will raise interest rates for and it’s not likely that other central banks will make a major move to rein in the strength of their currencies before the Fed. Chairwoman Janet Yellen also warned of continuing slow growth domestically and internationally this month, an argument that would seem to support keeping the rates low for the foreseeable future.

My colleague, Stuart Burns, wrote this month that other strong economies such as the UK are not likely to join in raising central bank rates for at least a further 12 months even if the Fed raises its rates tomorrow. That will exacerbate the dollar’s strength, particularly against economic regions such as the European Union, which is still dependent on a quantitative easing program.

Banks such as JP Morgan Chase have lowered their forecasts for gold and silver this year based on the big drop in the value of the investment metals in February and March. Without central bank action it’s hard to see these metals finding any footing this year.

Actual Platinum, Palladium, Gold and Silver Prices

At $26.60 per gram, Chinese palladium bar was down 10.3% for the month. The price of US palladium bar closed the month at $733.00 per ounce after dropping 9.2%. A 8.7% decline for Japanese palladium bar left the price at JPY 2,847 ($23.72) per gram. After falling 4.7%, Chinese platinum bar finished the month at $39.50 per gram. Japanese platinum bar prices fell 4.3% to $36.03 per gram. A 4.1% drop over the past month left Chinese gold bullion at $38.22 per gram. The price of US platinum bar drifted 2.6% lower to $1,141 per ounce. At $1,183 per ounce, US gold bullion was down 2.2% for the month. The value of Chinese silver weakened by 2.1% this month, settling at $567.47 per kilogram. Indian gold bullion fell 2.1% to $426.06 per 10 grams. Last month, Japanese gold bullion prices dropped by 1.5% to $37.98 per gram.

The price of Japanese silver rose 1.7% to $5.41 per 10 grams after falling the previous month. After dropping the previous month, the price of US silver prices rose 0.6% to $16.63 per ounce.

At a price of $607.86 per kilogram, Indian silver did not budge the entire 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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