Articles in Category: Precious Metals

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Before we head into the weekend, let’s take a look back at the week that was.

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  • Holidays in India mean an uptick in gold buying — our Sohrab Darabshaw covered India’s holiday gold surge.
  • The fourth round of renegotiation talks focused on the North American Free Trade Agreement (NAFTA) concluded earlier this week. We covered the latest round of talks, which by all accounts have the three negotiating teams at an impasse.
  • As the fallout continues from Kobe Steel’s quality data falsification scandal, our Stuart Burns wrote about what exactly might have gone wrong at Japan’s third-largest steelmaker.
  • The World Steel Association’s Short Range Outlook came out this week, predicting solid, albeit moderated growth for the global steel market.
  • Precious and base metals have been behaving similarly, our Irene Martinez Canorea wrote this week.
  • The U.S. International Trade Commission launched a new Section 337 probe related to automation systems.
  • The value of the U.S. dollar has a significant impact on the fortunes of a number of metals, our Stuart Burns explained.
  • And how about palladium? Burns also touched on the rise of the platinum group metal and its leapfrogging of platinum (for the time being).
  • It’s third-quarter earnings report time. Alcoa and Nucor were among the latest companies to announce their earnings for the latest quarter.

Free Download: The October 2017 MMI Report

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This morning in metals news, Japanese carmakers tested the safety of Kobe Steel products, palladium outshines gold and the global nickel deficit widened in August.

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Kobe Steel Materials Pass Safety Checks

Toyota, Honda and Mazda gave Kobe Steel, Japan’s embattled third-largest steelmaker, a touch of good news Thursday by saying its products are safe, despite the recent data falsification scandal.

According to a report in The New York Times, the products fell short of advertised standards, but met with regulators’ standards (as well as those of the carmakers).

Palladium Continues Charmed Run

The palladium price recently eclipsed that of platinum for the first time since 2001 — and the metal’s rise has people taking notice.

The upward trend for palladium has even caught the eye of the gold industry, according to the Financial Times.

Our Stuart Burns covered palladium’s rise in his post earlier this morning.

Nickel Market Showed 6,700-Ton Deficit in August

The nickel market deficit deficit rose to 6,700 tons in August, according to data released by the International Nickel Study Institute.

Free Download: The October 2017 MMI Report

Global production was 176,800 tons, with demand at 183,500 tons.

The price of several metals has traditionally been looked at paired with that of another metal. For example, gold and silver prices are looked at in isolation and relative to each other, in part because both metals make up a major part of the jewelry trade.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

So, too, are zinc and lead prices, where the correlation is not from market applications but from the fact lead and zinc are often co-mined from the same resource.

Like precious metals gold and silver, less prominent platinum and palladium can be both mined and used in very similar applications. The Platinum Group Metals, or PGMs, are often magmatic in origin and rare in economic concentrations. The majority of the world’s platinum and palladium comes from South Africa, Zimbabwe and Russia, where early low-cost surface mines have long since given way to deep, expensive and complex operations.

As the name suggests, platinum as long been the investor’s favorite PGM and enjoys the widest number of applications.

Recently, however, its quiet PGM peer palladium has caught investors’ interest.

Palladium has traded at a discount to platinum because of platinum’s greater cost of extraction and its wider scope of applications. But one application in which palladium does excel is catalytic converters for petrol engines. The diesel engine’s relative loss of favor over the last 12 to 18 months to the petrol engine has boosted demand for palladium, driving up the price to the point that it exceeded that of platinum this month for the first time in 16 years.

On Monday, palladium exceeded $1,000 per ounce on the London market compared to its platinum’s $950 per ounce.

The reasons are not hard to find.

The platinum market is in surplus, but that of palladium is estimated by Joni Teves, an analyst at UBS quoted in The Telegraph, as experiencing a shortfall in production, which could push the market into a deficit of 830,000 ounces this year, as miners have cut back production.

In fact, John Meyer, analyst at SP Angel, is quoted as saying, “Marginal mine shafts have been closing at a rate of knots. We could see production in both palladium and platinum continue to fall as a result of ongoing rising costs. I don’t think the current rally (in prices) is enough to reverse that.”

Meanwhile, market demand is shifting.

Platinum that is used more in diesel engines has seen falling demand. With car sales growth featuring more in petrol-engine-dominated American and Chinese markets, and less in diesel markets like Europe, the demand bias has been for palladium, rather than platinum.

But even within Europe there is gradual shift from diesel to petrol.

Sales of diesel cars in western Europe fell from 45.1% of the market to 42.7% this year, according to industry research group LMC, with a forecast it will continue to decline to 39% by 2022 as petrol gains favor and hybrid or electric vehicle sales grow.

Some, though, are voicing caution.

Much of the enthusiasm for palladium has been investor-led — it is a small and relatively illiquid market, meaning not a large volume of positon taking is required to dramatically boost prices. Given time — and it would take time — catalysts could be altered to accommodate more platinum to the detriment of palladium demand, if the palladium price stayed at a premium to platinum over time.

In the longer term, electric vehicles are expected to sound the death knell for both metals (at least, with respect to automotive demand). Counter to this is the upcoming move by predominantly petrol engine China to increase its emission standards to the much tighter China 6a standards by 2020. Johnson Matthey says many manufacturers could leapfrog even this standard and aim to future-proof themselves to the yet more stringent China 6b standard expected in the middle of the next decade.

The enhanced PGM loadings such a move would require will maintain palladium demand — certainly well into the next decade — and could be the basis of investors’ longer-term enthusiasm for the metal.

Free Download: The October 2017 MMI Report

Either way, for the time being palladium has come out of the shadows and is having its day in the spotlight. For how long, we will have to see.

Precious metals dynamics have looked similar to base metals during these last couple of months.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

The four precious metals (gold, silver, palladium and platinum) rallied since July, and peaked in September. In September, precious metals saw a price pullback, as did the base metals.

Gold spot prices (see graph below) reflect this movement perfectly.

After the price retracement in September, gold spot prices increased again. The gold rally that started at the beginning of 2017 appears set to continue. More movements to the upside could occur for the rest of the year.

Source: MetalMiner analysis of FastMarkets

Silver prices, however, have traded sideways, showing less of a bullish sentiment than gold. However, silver has shown the same price movements (in different price ranges) from July to October (see chart below).

Does this set the foundation for a new long-term uptrend?

Source: MetalMiner analysis of FastMarkets

As Fouad Egbaria noted: “As of Oct. 1, palladium closed higher than platinum. The last time that happened? Sixteen years ago.” Palladium prices rallied, as did gold prices, while platinum prices traded sideways, similar to silver.

Palladium prices. Source: MetalMiner analysis of FastMarkets

Platinum prices. Source: MetalMiner analysis of FastMarkets

However, both palladium and platinum showed the same price pattern since July. Those price movements may point toward an ongoing bullish market.

As reported by Reuters, the commodities outlook for Q4 looks bullish. MetalMiner also remains bullish on both commodities and base metals, and expects more movements to the upside while the U.S. dollar remains weak.

Free Download: The October 2017 MMI Report

A complete analysis of commodities and base metals for 2018 is published in our free Annual Outlook report. 

If you were in India right now, someone is bound to tell you that it’s that time of the year.

He or she would be referring to the almost-three months of festivals and wedding season, which India sees starting from sometime late August and continues until early September. More specifically, just under a week remains before that “mother of all Indian festivals” — Diwali, the fest of lights.

All this also means an uptick in shopping, but, more specifically, gold shopping.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Indians love their gold, and any excuse is enough to buy some more of the yellow metal. But Dusshera (a major Hindu festival preceding Diwali) and Diwali are special occasions, reserved for buying as much gold as possible. All of this makes India the second-largest gold-consuming market in the world.

This year, there was a slight damper on Indians’ demand for gold.

As part of the new tax reforms, the government included jewelers in the Prevention of Money-Laundering Act (PMLA) in August. This meant a compliance requirement on part of the buyer for any purchase above US $760 (Rs 50,000), including providing their income tax identity.

Incidentally, gold and real estate are the two investment opportunities that were often misused by hoarders of cash or those dealing in the black economy.

For some time, then, there were no “high value” deals as jewelers across the country, their associations and potential customers protested.

So, while September import figures of gold (in the month of Dusshera) were robust, they could have been even higher if the PMLA was not in effect, some associations claimed.

According to a report put out by news agency Reuters, India imported 48 metric tons, equivalent to $2 billion at today’s prices, in September. But since Dusshera fell in September instead of October this year (it follows the lunar calendar), the import figures compared to September 2016 were up, though on a month-on-month basis, it was lower, because of the uptake being down due to the PMLA.

But a decision by the government a few days back has brought back the cheer in the lives of gold consumers in India.

The PMLA has been put on hold for now, which means people can go ahead and buy gold without providing any of the previously required documents. Jewelers are hopeful the gold-buying spree, normally seen during these festive months, will at least revive in October, especially around Diwali. Imports are expected to go up to about 70 metric tons per month.

Just to give readers an idea of Indians’ love of gold, Indian households have the largest private gold holdings in the world, standing at an estimated 24,000 metric tons. That figure reportedly surpasses the combined official gold reserves of the United States, Germany, Italy, France, China and Russia.

This year, even the Indian government wants to take advantage of the festive gold bonanza.

Showing impeccable timing, it has announced the launch of new sovereign gold bond schemes. Never before has such a scheme been announced around festival time.

Free Download: The October 2017 MMI Report

The bonds issue opened Oct. 9 and remain so until Dec. 27, covering the festivals of Diwali and Christmas.

The government has also made important changes to attract high-value investors, raising the annual investment limit per person from 500 grams to 4 kilograms. For trusts and similar entities, the limit was raised to 20 kilograms. This higher limit will make the scheme attractive for high-net-worth individuals who had not participated in earlier schemes, as they found the 500-gram limit to be too low.

Before we head into the weekend, let’s take a look back at the week that was. 

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

  • In case you missed it, our October MMI report is out. Make sure to check out the free PDF download for the rundown on the last month for our 10 MMI sub-indexes: Automotive, Construction, Aluminum, Copper, Renewables, Rare Earths, Raw Steels, Stainless Steels, GOES and Global Precious.
  • Also, our Annual Outlook is out, too. Check it out for a comprehensive look ahead to 2018.
  • Coal India Ltd. is looking to diversify beyond coal, Sohrab Darabshaw wrote earlier this week.
  • Aluminum officials are in “wait-and-see mode” when it comes to the ongoing Section 232 probe vis-a-vis aluminum imports. The investigations into the national security impact of aluminum and steel imports were launched in April and have a January statutory deadline; at that point, Secretary of Commerce Wilbur Ross must present President Donald Trump with a report and recommendations.
  • Glencore bet big on zinc — and won, our Stuart Burns writes.
  • Although oil prices are well below 2014 numbers, supply cuts in some cases have seen the price start to climb. Are more cuts on the way, further constraining global supply and driving up prices? Burns wrote about the subject and what OPEC Secretary General Mohammad Barkindo called a “rebalancing process.”
  • In big news, Kobe Steel is in hot water for a data falsification scandal, one which threatens the firm’s credibility among consumers and manufacturers. The scandal has already had major financial ramifications, as the company’s share price has been in free fall since the news hit.

Free Sample Report: Our Annual Metal Buying Outlook

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Here’s What Happened

  • MetalMiner’s Global Precious MMI, tracking a basket of precious metals from across the globe, cooled off considerably after a sharp rise last month. For October, the sub-index dropped 3.4% to hit 86. That’s nearly back to the August 2017 level.
  • Palladium held steady for a month, but still continues a measurable march upwards. The platinum group metal held above the $900 per ounce level for the second straight month.
  • Platinum did lose a bit of its luster, however, falling back toward the $900 per ounce level and receding from its most recent high of March 2017 (when it landed above $1,000 per ounce). What does that mean? Something quite historic (see the section below)
  • After breaking and holding above the $1,300 per ounce threshold at the beginning of September for the first time since October 2016, the U.S. gold price retraced its steps as well, diving back under that level for the beginning of October.

What’s Going On in the Background?

  • We have quite the record to report. ICYMI, my colleague Fouad Egbaria noted recently that the platinum-palladium relationship reached a milestone: “As of Oct. 1, palladium closed higher than platinum. The last time that happened? Sixteen years ago.”
  • According to a research note from commodities broker SP Angel quoted within a report by Kitco News, “Palladium is benefitting from its inclusion in catalytic converters in gasoline-powered vehicles, which is expecting robust growth from the shift from diesel engines following the 2015 Volkswagen emissions-rigging scandal, and hybrid electric vehicle demand.”

What Metal Buyers Should Look Out For

  • Other analysts have thoughts on platinum/palladium outlook as well. “In the short term, we think platinum is undervalued for a whole host of reasons. Therefore, we think there is scope for platinum to move back to a slight premium in the short to medium term,” Robin Bhar, metals analyst at Societe Generale, was quoted as saying in the Kitco News report. “We don’t see a sustainable premium of palladium over platinum…until about 2020 or 2021.”
  • Overall, however, investors have been seeing nice returns, according to International Banker. The article notes a Reuters poll “of 26 analysts and traders conducted in July, [in which] the average palladium price for 2017 [was] being predicted at $811 per ounce for this year, which is 5 percent above the previous poll conducted in April…[and] the highest annual average price on record, going back three decades.” Well, now we’ve broken $900 per ounce.
  • That makes Standard Chartered rosy as well. “We remain constructive on palladium’s outlook,” according to the bank’s analyst, Suki Cooper. “Not only is the market set to deliver a deficit this year, but it looks set to be undersupplied over the coming years.”

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This morning in metals, the U.S. dollar index is up, while gold and silver prices are on a downward trend and oil prices dip slightly from Monday’s high. In addition, there’s a very intriguing potential source of renewable energy on the horizon.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

A drop in U.S. oil inventories has helped oil prices stay more or less steady, Reuters reports. The biggest factor supporting oil prices has been Turkey’s threat to cut off oil exports from Kurdistan, and this past Monday, the price of oil came close to $60/barrel for the first time since June 2015.

U.S. Dollar Index Rises, Precious Metals Fall

Gold and silver prices fell to four-week lows as the U.S. dollar index climbed to a five-week high, fueled by the expectation that the Feds will hike up interest rates again, Reuters reports.

As Stuart Burns wrote earlier this morning, “Trump’s United Nations speech threatening annihilation on North Korea failed to support the gold price, as investors took a cue from central bank announcements that the Fed intends to start unwinding its multi-trillion dollar balance sheet in October.”

A New Renewable Energy Source?

Could 70% of U.S. energy come from plain old H2O? According to new research, energy from water evaporation could provide a staggering 325 gigawatts of power. Read more

Investors sometimes have short attention spans.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Just a month ago, worried by the escalating tension between the U.S. and North Korea, the gold price was rising, hitting its highest level in over a year at $1,358 an ounce as the dollar weakened and tensions ratcheted up.

However, Trump’s United Nations speech threatening annihilation on North Korea failed to support the gold price, as investors took a cue from central bank announcements that the Fed intends to start unwinding its multi-trillion dollar balance sheet in October.

The Financial Times reports the prospects of higher interest rates make gold less attractive, since the metal provides no yield.

After peaking in early September, gold remains up 13% on the year. Silver prices are up 6% in the year-to-date. The Fed seems set on a rate hike by December, followed by probably two more next year.

Yet, the gold price is merely the most visible of many undercurrents caused by the Fed’s gradual withdrawal of liquidity as it unwinds its eight-year stimulus program.

Little attention has been given of the impact this gradual draining of liquidity will have on emerging markets.

Already, a few alarm bells are beginning to sound.

Read more

Here’s What Happened

  • MetalMiner’s Global Precious MMI, tracking a basket of precious metals from across the globe, tore itself away from a one-month downward trend to rise 4.7% for a reading of 89. That value was up from 85 at the beginning of August.
  • Palladium continues its steady yet undeniable march upward. The platinum-group metal (PGM) crushed it with yet another recent high, ending up above the $900 per ounce level as of Sept. 1. As of this writing, palladium is holding on to that increase, still hovering near that level.
  • Platinum is no slouch either, creeping upward even closer to its recent high of March 2017, when it landed above $1,000 per ounce.
  • The U.S. gold price broke — and held above — the $1,300 per ounce threshold at the beginning of the month for the first time since October 2016.

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What’s Going On in the Background?

  • Unless you’ve been living in a cave, you would’ve been hard-pressed to miss the hurricane and tropical storm news of the past couple weeks. No sooner did Hurricane Harvey slam into the Texas Gulf Coast region, Hurricane Irma made her way up into the center of Florida soon after.
  • Aside from natural disasters, other price drivers, such as political uncertainty surrounding North Korea and the U.S. Congress’ tussle over how to deal with the debt ceiling — and potential government shutdown — certainly have taken their toll on investor sentiment.

What Metal Buyers Should Look Out For

  • How will the recent storm disasters affect precious metals prices? It could hit gold and silver refiners especially hard, as South Florida is home to one of the biggest precious refiners in the country and is also a hub for “assaying, refining, logistics and financing operations,” according to this article citing, ultimately, reporting done by the Miami Herald. If you’re in the market for those two metals, keeping an eye on the short-to-medium term aftermath of Hurricane Irma looks to be crucial.
  • As for the PGMs, platinum prices may turn around to the downside soon, if the recent outlook of the World Platinum Investment Council (WPIC) is to be believed. The WPIC foresees a stalling of supply out of South Africa for the balance of 2017, while demand will equally stall, according to the council. In terms of palladium’s future, analysts at Commerzbank told DigitalLook “the metal used by the auto industry in emissions-controlling catalytic converters was benefiting from strong Chinese car sales data but that sales there are likely to weaken.”
  • Of course, vehicle replacement in Texas and Florida post-hurricanes could do their part to support platinum and palladium prices. Be sure to check out how MetalMiner’s Automotive MMI fared.

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