Articles in Category: Precious Metals

MetalMiner’s precious metals index, tracking a basket of platinum, palladium, gold and silver prices in several geographies across the globe, bounced back in October after several months of declines.

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The Global Precious Monthly Metals Index (MMI) registered a value of 83 for its October 2018 reading, up 2.5% from 81 last month, stanching the bleeding — last month’s level had not been seen since January 2017.

The U.S. platinum bar price had its own bounceback after having dropped last month. Platinum rose to $814 per ounce, up from $777 per ounce in September. However, U.S. palladium bar built up a two-month upward price trend by breaking the $1,000 per ounce level for the first time in eight months, rising to $1,070 per ounce.

This extends palladium’s historic premium to platinum for yet another month.

Palladium Bubble?

John Dizard, writing in the Financial Times, contends that platinum’s once-cheaper cousin is ripe for the bubble it seems to be creating.

“The best investment bubble propositions incorporate the familiar and the incomprehensible,” he writes.

The largest single application for palladium, as MetalMiner readers well know by now, is to help convert toxic gases within catalytic converters. “Therefore, we have something familiar to investors (cars) and something incomprehensible (the physical chemistry of catalytic converters) — perfect conditions for a bubble,” Dizard concludes.

Much of the bubble conditions can be explained by “Dieselgate” — read about it in the full article (paywall) — but speaking of palladium bar prices, as we were just a bit ago, those aren’t what auto buyers should really be tracking: sponge is where it’s at.

“Could it be that the automakers will run into a supply squeeze and be forced to buy palladium bars of the sort represented by Nymex futures? Not exactly,” Dizard writes. “The automakers actually buy a semi-manufactured product called ‘sponge’, which is palladium (or platinum) particles used to coat a ceramic matrix inside the emissions system. There is a separate, over-the-counter market for palladium sponge.”

Ultimately, “if you follow the quotes for palladium sponge, you can see whether the ‘sponge premium’ over the price of bar metal indicates a real shortage of the industrial product,” according to Dizard.

Gold Supply Chain in South America: Treacherous

We recently came across a recent white paper entitled Illegal mining in South America and financial risk – Taking the shine off gold, co-authored by Jesse Spiro and Brian Huerbsch.

Evidently, the promise of huge profits based on higher gold prices – and fueled by rampant corruption — have created a continentwide supply chain problem. According to the authors, the issue plagues Colombia, Peru, Bolivia, Brazil, Ecuador and Venezuela.

The core of the problem is a major risk for gold-buying organizations — the ongoing threat of murky supply chain traceability.

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You’ll be able to read more about it, including our breakdown of what gold-buying companies should do to mitigate risk, later this week on our sister site, Spend Matters.

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MetalMiner’s Global Precious Monthly Metals Index (MMI) — tracking a basket of platinum, palladium, gold and silver prices in several geographies across the globe — continues its trek downward.

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The Global Precious MMI clocked a value of 81 for its September 2018 reading, down 1.2% from 82 last month — and reaching a low not seen since January 2017.

Here’s What Happened

Both U.S. platinum and U.S. gold took sizable hits this month.

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Last month we noted that record-low prices characterized the Global Precious Monthly Metals Index (MMI) monthly reading and posed the question: will there be more price drops to come?

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From the looks of it, the short answer to that is … yes.

Here’s What Happened

Going by the August 2018 reading of MetalMiner’s Global Precious MMI, which tracks a basket of precious metals from across the globe, the subindex suffered a loss of 2.4%, falling to a value of 82.

The last time we saw the Global Precious MMI at that level was February 2017.

Platinum and palladium seemed to drive the loss this month, yet all major forms of precious metals across geographies ended up lower this month.

For example, the U.S. platinum bar price dropped 1.8% to $837 per ounce. Palladium is still transacting at a premium to platinum in the U.S. market, but not in the China or Japan markets (although exchange rates may ultimately be affecting that relationship). The U.S. palladium bar price dropped for August as well, down 2.1% to $928 per ounce.

Yet the U.S. silver price ended up lower than $16 per ounce to begin the month for the first time since January 2017, clocking in at $15.50 on Aug. 1. The gold price dropped as well, with U.S. gold bullion taking a 2.3% hit to end up at $1,223.40 per ounce.

All of these metals appear to be in a long-term downtrend since the tail end of 2017 and first couple months of 2018.

What Buyers Should Consider

  • A strong dollar still keeping the platinum price low. Along with supply surplus and the ever-looming threat of a global trade war, the dollar’s strength is a strong indicator of platinum’s fortunes for the rest of 2018. A recent Reuters poll of 29 analysts and traders showed that the platinum price looks to remain historically depressed for the balance of the year, with a slight rebound in 2019. “The diesel scandal remains a drag on demand … Meanwhile, currency weakness provides a lifeline to the South African platinum industry, cutting dollar-denominated costs and reducing the risk of mine closures,” said Carsten Menke, analyst for Julius Baer, as quoted by Reuters.
  • Palladium to remain at a premium? “We expect a rebound in palladium prices [in 2019] amid a growing market share of gasoline vehicles and healthy demand growth in emerging markets. Fundamentals are tight amid a widening deficit,” Intesa Sanpaolo analyst Daniela Corsini told Reuters.
  • Your latest preferred supplier — Sears? In the current economic climate that retailer finds itself in, it’s strange to hear that the company has added several brand lines sold by third-party sellers to “bolster its online marketplace,” according to a press release. Additions include “gold, silver, platinum and palladium bars, rounds and coins, as well as premium bullion products,” the release stated. So if you’re looking outside the box to source your precious metal volumes for industrial applications, take note: “Sears.com and Shop Your Way® are currently offering a $20 CASHBACK in Points when members spend $100 or more on APMEX [the online retailer of the metals] products until August 11.”

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Mining for gold is an expertise of which not too many Indian miners can boast. In fact, it makes up a minuscule portion of overall annual mining activities in the country.

With neighboring China on the prowl for gold mining projects internationally, some recent news has brought some cheer to the gold sector in India.

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For the first time, a state-owned miner will take up gold mining in India. Earlier this month, India’s National Mineral Development Corporation (NMDC) won the rights to it at an e-auction. In the process, it beat several biggies, such as Vedanta and Adani. NMDC will dig up a gold mine located in the southern Indian state of Andhra Pradesh.

NMDC is not a newcomer to gold mining. It is developing a gold mine in Tanzania, while its Australian subsidiary, Legacy Iron Ore, is currently in the process of testing as many as 17 gold tenements in the Western Australian region.

The Chigargunta-Bisanatham mine will be an underground operation. First-phase production is expected to begin two years after the permitting process.

According to a report by the Press Trust of India (PTI), the initial investment is estimated to be about U.S. $4.5 billion. The Indian government stands to earn 38.25% revenue on sale value. It has estimated reserves of 1.83 million tons containing 5.15 grams of gold per ton.

Incidentally, India is on the way to formulating a new gold policy, which will promote domestic gold mining.

Industry experts believe that at least 100 tons of gold can be mined annually in India, from the present level of about 1.5 tons (as compared to China’s 450 tons a year). Geologists believe that India sits on vast deposits of gold, as the terrain from Australia to China is very similar, so they see no reason why India cannot step up its gold mining.

Experts want the Indian government to factor in the complete journey of gold, from mines to market, under the new policy.

Very slowly, after a court-imposed e-auction for mining, gold mining has picked up.

One of the first in this business was Vedanta. In February 2016, Vedanta Resources became the first private company to successfully bid for a gold mine in India, in the central Indian state of Chhattisgarh. The mine has gold reserves of 2.7 tons.

Other Indian private miners, in collaboration with international players, have started to move in. More and more are expected to follow in the footsteps of Vedanta and NMDC.

Gold mining will also save the country foreign exchange, since it imports most of its gold at the moment.

A previous government report identified the unrefined gold resource base in the country at 658 tons of metallic gold. The report also stated that this tonnage is spread over 13 different states.

India needs to get its act together on the gold mining front, especially since China is already well on its way. Since 2013, when gold prices plunged 30% in a year, China has been ramping up overseas gold-mining investments.

There is no doubt that developing gold mines is a long-term, risky process requiring years of planning, research and infrastructure development. Miners also need to conduct analyses on how much gold a ton of ore actually contains.

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But for Indian companies interested in this, several bottlenecks, including environment permissions, remain.

If a miner has to apply for a gold mining license, it has to take over 100 permissions before getting a permit — a process that takes over seven years.

Hopefully, experts say, this will be history once the new policy is adopted.

No one can say the first half of 2018 was not an impactful time for metals markets, including safe-haven assets like gold.

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The World Gold Council’s first-half outlook report details the market forces at work behind the gold price’s recent drop, but also argues an array of factors could see the price rise in the second half of the year.

According to the report, after a 4% rise in Q1, gold came back down by the same amount in June, and argues the price is being driven by a triumvirate of factors: the strengthening U.S. dollar, higher investor threshold for headline risk and soft physical gold demand.

“At the same time, gold’s price momentum and investor positioning in derivatives markets has accelerated its descent,” the report states. “We believe, however, that there may be reasons to be more optimistic during the second half of the year.”

Regarding the first, like other metals, gold exhibits an inverse relationship with the U.S. dollar. The dollar has leveled off somewhat in recent weeks, but in the year to date has posted strong gains. In the year to date (i.e., through July 31), the U.S. Dollar Index has jumped 2.61%, as of Wednesday afternoon.

The dollar dropped in January but steadily increased since then, with the spot index hitting a high of 95.39 as of June 28.

However, the World Gold Council argues the trend of strength might not continue, despite the most recent quarter showing the largest appreciation in the value of the dollar since Q4 2016.

“In addition, in the face of ongoing rhetoric over trade agreements, the market seems to have taken the view that the US will likely benefit from renegotiations,” the report states. “Even if this turns out to be the case, many economists believe that an increase in tariffs will eventually have a negative impact on economic growth. And while this could decelerate gold consumer demand somewhat, its effect may be lessened by a weakening in the US dollar.”

In addition, the rise in trade protectionism around the world “has significantly increased the risk that inflation will accelerate further,” the report argues, also noting the price of gold historically rallies when inflation moves above 3%.

For now, however, inflation levels in the U.S. has leveled off in June, according to PCE Index data released Tuesday. Whether factors like trade conflicts will lead to a surge in inflation remains to be seen in the coming months.

In another optimistic outlook, the report notes that the summer months typically see lower gold demand, while September typically sees demand rise.

“Finally, while the summer period tends to be a quiet period for gold buying and trading – as seen by softer seasonal demand, lower trading volumes and sideways price movement – the gold price has tended to increase in September as consumers prepare for a traditional buying period and investors rebalance their portfolios before the end of the year,” the report states.

Gold has lost a bit of its sheen in recent months, but that could change throughout the remainder of the calendar year if the report’s assumptions hold true. Like many current events in the metals markets, we’ll just have to wait and see what happens vis-a-vis a number of political and economic buckets, from trade barriers to the strength of the dollar to rates of inflation.

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The full report is available on the World Gold Council website here.

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Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner®:

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Here’s What Happened

MetalMiner’s Global Precious Monthly Metals Index (MMI), tracking a basket of precious metals from across the globe, dropped four points (a loss of 4.5%) for the June reading after holding flat for three straight months.

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Incidentally, the July 2018 MMI value hit its lowest point since exactly one year ago, when it last clocked in at 84.

Individual price points within this precious metals basket hit some historic lows as well.

The U.S. silver price hit $16.09 per ounce for the July 1 reading, the lowest since January 2017 (when it took an anomalous dip down to $15.80 for one month before bouncing back up). U.S. gold bullion has languished back down to the mid-$1,200s, a one-year low.

And both platinum and palladium have come off considerably, with the U.S. bar price of the former dipping below $900 per ounce for the first time since February 2016.

What Buyers Should Consider

  • Keep an eye on the U.S. dollar. A stronger dollar of late, which had gotten a bump from recent better-than-expected U.S. manufacturing data at the beginning of the month, pressures platinum prices because “it makes greenback-priced precious metals more expensive for holders of other currencies,” according to Reuters.
  • Gold is also in the crosshairs of a stronger dollar. In fact, that has become “the biggest obstacle” for gold prices in the near and long term, according to a recent JP Morgan price forecast report cited by Kitco.
  • The threat of auto tariffs has also burned platinum pricing. Due to the pricey PGM’s use in diesel engines, “the threat of protectionist policies has fueled bets that slower trade activity will disrupt the global economy, reducing commodity consumption” — including that of platinum in cars, according to the Wall Street Journal (paywall).

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And Now For Some Mid-Summer Metal Fun

While the product contains trace amounts, at best, of gold’s shiny, less expensive cousin — not to mention that it’s fake — Alexa Silver is still pretty hilarious.

Stock markets in New York, London and Shanghai have been sliding for a month now since President Donald Trump unleashed a trade war on the U.S.’s trading partners in an effort to reset terms seen as unfair by Washington.

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Normally, as stock markets slide and tensions rise, you would expect to see the gold price rise; the precious metal is considered a safe-haven asset because it retains or increases value during market turbulence.

Gold is often sought after by investors through economic uncertainty in order to limit their exposure to losses in other assets. Yet, currently gold is at or near a seven-month low, according to Reuters. According to the Singapore Business Times, for the first time in two years, Schroders has cut its global growth forecast for 2018 and 2019, citing rising oil prices and the uncertainty over trade relations that could drag on business decisions to hire and invest (particularly for exporters).

Source: TradingView

So, why isn’t gold playing ball?

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MetalMiner’s Global Precious Monthly Metals Index (MMI), tracking a basket of precious metals from across the globe, held steady for the June reading and remained at an index value of 88 for an unprecedented third straight month.

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The dog days of summer have begun early, much as they did during the summer of 2017.

While this subindex fluctuated within a narrow band of only two index-value points between March and August 2017, there was a stretch of two months (May-June) when the Precious MMI sat at 84.

The U.S. gold price increase after June 1 last year had turned some heads. As my colleague (and, at the time, brand new) MetalMiner Editor Fouad Egbaria had reported, “the rise comes in a climate of political uncertainty, with an election in the United Kingdom, former FBI Director James Comey’s testimony before the Senate Intelligence Committee on Thursday and a European Central Bank meeting this week.” (That rise didn’t do much to spur the Precious MMI the following month — it dropped to 83 in July 2017.)

A year later, while we have no shortage of economic and political issues, gold has gone the opposite way, dropping below $1,300 per ounce to start the month for the first time since last December.

Meanwhile, the platinum-palladium price spread widened over the past month. The spread ($58 per ounce last month) widened to $77 per ounce for the U.S. bar prices of those respective metals. Palladium is on a record run of its own: it remains at a premium to platinum for the eighth straight month.

The U.S. silver price rose slightly for the June reading, yet the uptick couldn’t help break the subindex from achieving its first three-month trend of flatlining.

What’s Driving Palladium?

Employing an irresistible pun related to automotive-industry metals is always good for a chuckle. We’d imagine the analysts at Metals Focus would undoubtedly agree.

“Even with the lacklust[er] performance of both the Chinese and US auto markets, automotive palladium demand will almost certainly rise again this year, the result of growth in Europe and elsewhere, as well as tightening emissions legislation driving increases in PGM loadings,” analysts at the research group, following the release of a recent report, are quoted as saying by Reuters.

So, quite literally, cars are driving palladium (prices), at least in part.

Metals Focus analysts keep up the punny work when it comes to platinum as well:

“Global demand appears lacklust[er] and we have yet to see the full effects of the fallout from accelerating losses in the light-duty diesel sector,” they said, as quoted by Reuters. (Italics are ours.)

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This commentary follows the PGM report released by Metals Focus, in which the group foresees a 1-million-ounce deficit due to increased auto demand and falling mine production, while platinum should continue its surplus.

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It was a report in the Hong-Kong-based newspaper, the South China Morning Post that sparked it all off.

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The report claimed that India’s neighbor, China, had started large-scale mining operations in Lhunze county on its side of the “disputed border” with India in the Himalayas.

It said the area was literally a “treasure trove,” having gold, silver and other precious minerals, valued at about U.S. $60 billion according to Chinese state geologists.

On the face of it, at least, the report and the development seems to have caught Indian authorities by surprise.

On its part, China tried to downplay the report, to a degree rubbishing the claims made in the Post report. A report in The Economic Times quoted an editorial in the Global Times tabloid that questioned the news report’s motive, at the same time hoping that India would not be “provoked” by it.

“It is to be hoped that India will not be provoked by this report, lose focus on the big picture of the relationship between Beijing and New Delhi and get off the track of Sino-Indian cooperation,” said the editorial titled “Dodgy report disturbs Sino-Indian ties.”

In fact, the editorial also said to many Chinese people, their first impression was that the report is not credible, given the vague facts in the story.

It’s hardly a secret that the Himalaya region, from India, Tibet and all the way to Afghanistan, has massive reserves of mineral oil, gold and many precious materials. Arunachal Pradesh is said to have vast reserve of mineral oils and even coal reserves. Coal is explored from Namchik-Namphuk mines in Tirap district. In addition, there are huge reserve of dolomite, limestone, graphite, marble, lead, zinc, etc.

Indian newspapers were full of reports talking of a new flashpoint between the two neighboring countries following the South China Morning Post report. India has not yet reacted officially to the news report.

Last year, there was a major standoff between the armies of both countries at the border area of Doklam, which is a triangle area disputed by three countries: India, China and Bhutan. The standoff emerged after China’s People’s Liberation Army (PLA) construction party attempted to build a road near the Doklam area. Bhutan claims Doklam is its area while China claims it as part of its Donglang region.

A few decades ago, India claimed China had illegally occupied Aksai Chin — an area of 38,000 square kilometers, part of India’s Jammu and Kashmir province — and had its eyes on Ladakh because the area was rich in minerals and natural resources.

For over a year now, China has been setting up infrastructure in this mountainous region, including Doklam, leading to India registering its protests over the move to remove the status quo of the disputed border maintained all these years.

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What seems to have gotten China’s goat was the fact that the Post report also claimed that China was rapidly building infrastructure to turn the area into another South China Sea scenario, which the Global Times editorial dubbed an absurd observation. In fact, the editorial also said Lhunze county was not a disputed region at all, as it “fell entirely within China’s sovereignty.”