Global Precious MMI: Topsy-turvy month for precious metals amid coronavirus, South Africa lockdown

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The Global Precious Monthly Metals Index (MMI) fell 7.0% this month.

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Precious metals join base metals in price free fall

In times of economic crisis, investors often flock to that trusty safe-haven asset: gold.

But amid the coronavirus pandemic, even gold prices have taken some losses.

“Gold, in particular, has been the victim of its own success, rising strongly this quarter on the back of growing investor anxiety about the wider economy,” MetalMiner’s Stuart Burns wrote March 17.

“Longer-held positions were showing a healthy profit. So, when investors faced demands for margin calls on falling equities, the first place they turned to was to take profits on precious metals and cover the margin calls.”

The gold price reached approximately $1,680/ounce on March 9 before falling to $1,575 later the same week. Since then, however, the gold price has recovered, reaching just under $1,650 as of the market’s closing Wednesday, April 8.

Likewise, platinum and palladium also took losses.

“Not only were profits being taken, but both metals are seen as heavily dependent on industrial demand (platinum in autocatalysts and silver in electronics),” Burns wrote. “With industrial activity certain to be hit by the impact of virus-related shutdowns and supply chain disruption, the short-term prospects for both metals appears bleak.”

As noted previous, auto industry shutdowns amid the pandemic will put pressure on palladium and platinum prices (both used in catalytic converters). As such, it remains to be seen how long shutdowns announced by companies like General Motors, Ford and Fiat Chrysler will continue and, consequently, the scope of those shutdowns’ impact on the global palladium supply-demand balance (and, in turn, the price).

Golden disconnect

Sticking with gold, Burns also delved into the disconnect between physical gold and market prices.

“The Financial Times reported the price of gold futures traded on COMEX and expiring this month widened to a $70-per-ounce premium above the London physical gold market Tuesday,” Burns wrote March 31. “The spread marked the highest on record, prompted by fears the physical 100-ounce gold bars traded on the exchange would not be available as retail demand surged.”

Burns continued, noting banks are long on 400-ounce bars but not the smaller bars favored by everyday retail customers.

“London’s gold vaults are reportedly full of gold bars, but they are of the 400-ounce variety traded by large banks such as HSBC and JPMorgan, not the smaller bars retail customers buy, which tend to be 1 kilogram (35 ounces) or lighter,” Burns explained.

“That is creating a disconnect between physical gold prices and market prices as retailers pay and charge premiums for gold and silver they buy back from investors or they resell.

“There is little sign the situation is going to ease up any time soon.”

South Africa’s 21-day lockdown supports platinum, palladium

Later in March, the South African government announced a 21-day lockdown of its mining sector, an effort aimed at curbing the spread of COVID-19.

South Africa is one of the world’s leading producers of platinum and palladium.

On the heels of the announcement, platinum and palladium prices both surged, by 11% and 15%, respectively, Kitco News reported.

Norilsk Nickel announces COVID-19 measures

Russia’s Norilsk Nickel, the world’s top producer of palladium — plus nickel, platinum and copper — in March announced measures it is taking to curb the spread of the COVID-19 pandemic.

“All Nornickel’s operations are carried out as business as usual,” the company said in a release March 25. “The health and safety of our personnel remains our absolute priority. In order to protect the well-being of our employees and to ensure the continuity of operations amidst the coronavirus pandemic, Nornickel has established an emergency response team (ERT) chaired by the First Vice-President, Corporate Security, Sergey Barbashev and comprised of the Company’s senior management. The ERT’s main task is to ensure the business continuity of the Company’s production, procurement, sales and marketing operations and protection of employees’ health and safety. ERTs have been also set up at Nornickel’s local production sites.”

Among the COVID-19 measures announced by the company included: transition of headquarter employees to remote work; employees returning from countries with coronavirus cases are asked to self-quarantine for 14 days; and a ban on international business travel has been introduced, in addition to a reduction of business-related travel within Russia.

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Actual metals prices and trends

The U.S. silver ingot/bars prices fell 16.3% month over month to $13.93/ounce as of April 1.

U.S. platinum bars fell 16.3% to $723/ounce. U.S. palladium bars fell 8.5% to $2,278/ounce.

Chinese gold bullion fell 1.6% to $50.46/gram. U.S. gold bullion dropped 0.5%, down to $1,577.10/ounce.

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