Articles in Category: Precious Metals

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Gold prices surged this year due to greater uncertainty in the global macroeconomic environment.

By August, the price briefly regained the $1,500/ounce price point and stood at $1,460/ounce in late November.

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Over the longer term, gold prices and the dollar tend to move in an inverse relationship, as demonstrated by this chart, which shows prices from July 2012 through early November 2019:

Source: MetalMiner data from MetalMiner IndX(™)

However, the relationship does not always hold true.

More recently, we’ve once again seen a break in the relationship, which started late last year (the vertical blue dotted line above) and picked up steam around June.

Source: MetalMiner data from MetalMiner IndX(™)

Both gold and the dollar trended up in value overall, especially from July until September. However, gold prices gained greater momentum and increased by a greater measure than the dollar. Then, both values fell in September and October.

The relationship appeared to switch back to an inverse pattern in November.

Gold prices and the dollar-yuan exchange rate

Source: MetalMiner data from MetalMiner IndX(™)

Because the value of the yuan is set by the central government, the graph above using the CNY/$ exchange rate serves as a proxy to examine the relationship between the currency and gold prices.

Keeping in mind that a higher value on the right axis means a weaker yuan, we should expect to see these two prices moving together.

As the yuan weakens against the dollar, gold prices weaken. As the yuan rises in value, gold prices rise in value.

In real life, the relationship gets impacted by multiple variables. The yuan and the dollar do not have to move in an inverse pattern; the yuan is not a commodity but a currency (the same is true for gold).

However, in recent months, the gold price appeared to more tightly follow the CNY/$ exchange rate in a predictive fashion, rather than holding to its longer-term inverse dollar relationship.

This type of pattern emerged during 2016, as well.

Will quantitative easing by the Fed send gold prices up in Q4?

Monetary policy is known to impact commodity prices.

Quantitative easing is a form of monetary policy; therefore, we can expect any such actions in this direction to impact gold prices.

Quantitative easing can be used when interest rates are already quite low. In effect, it increases liquidity in the system, thus spurring growth.

U.S. Federal Reserve balance sheet since 2008

Source: Board of Governors of the Federal Reserve System

Quantitative easing occurs when the government purchases certain financial assets, which in turn raises the value of the assets but lowers their yield.

Basically, easing targets asset classes that are performing poorly, thus correcting losses for financial institutions. This, in turn, allows financial institutions to lower borrowing rates, creating more liquidity in the system.

The ease of access to funds by businesses and individuals then stimulates economic growth.

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What this means for industrial buying organizations

With the overall macroeconomic environment characterized as unstable, gold prices may generally continue to trend higher in the short term, as gold gets used as a hedge.

However, over a longer period, current monetary policies could weaken prices once more — assuming they take effect as intended.

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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, including our coverage of: ArcelorMittal’s plant closure in South Africa, the oil price outlook, U.S. steel capacity utilization and steel prices, CAMMU’s call for a Section 232 sunset provision, and more.

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Free Partial Sample Report: 2020 MetalMiner Annual Metals Outlook

The Global Precious Monthly Metals Index (MMI) jumped six points this month, rising for a November MMI reading of 113.

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Palladium-Platinum Spread Widens

As noted here many times before, platinum had historically traded at a premium to palladium.

That relationship, however, flipped as of September 2017, and has remained flipped ever since.

The palladium-platinum spread widened this month, even as platinum made gains.

The spread rose to $850/mt this month, up from $763/mt last month.

Looking Ahead

Gold and silver enjoyed a strong run-up during the summer season, but what is ahead for the precious metals?

“Having risen into the summer, gold and silver prices have plateaued in Q3 even as some ETFs have seen strong inflows due to accommodative monetary policies, such as falling Fed rates and safe haven buying in the face of geopolitical uncertainty,” MetalMiner’s Stuart Burns explained. “But jewelry demand is down, central bank buying of gold is lower than the same time last year and a strong dollar set up a number of headwinds that have seen prices unwind as news comes out about a possible winding back of tariffs between the US and China.”

As for platinum, prices did not tick up as much as one might have expected given trends in the automotive industry.

“Likewise, platinum prices have failed to make any headway in Q3 despite a strong showing from other PGMs, such as palladium and rhodium, both of which continue to benefit from the switch to petrol internal combustion engines among European carmakers,” Burns added.

“Gold, silver and palladium prices are expected to ease further in the run up to the year-end while other PGMs will be swayed more by car production and dollar strength. Much will depend on a successful outcome to the encouraging progress on trade talks, which could see investors take a more bullish attitude on risk to industrial metals and weaken demand for safe-haven investment metals.”

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Actual Metal Prices and Trends

The U.S. silver ingot/bar price rose 5.0% month over month to $18.08/ounce as of Nov. 1.

U.S. platinum bars rose 6.3% to $930/ounce. U.S. palladium bars jumped 8.7% to $1,780/ounce.

Chinese gold bullion rose 1.7% to $48.79/gram. U.S. gold bullion increased 2.3% to $1,512.70/ounce.

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India is right in the middle of its annual festival season that carries on until the year’s end — as is customary, all eyes are on the purchase patterns for gold and silver during the festival of Diwali.

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When the country emerged from Diwali time, initial data showed that purchase numbers were down compared to the previous year.

Or, if you are an eternal optimist, the numbers this year were “not as bad” as predicted.

Experts like Surendra Mehta of the India Bullion and Jewellers Association (IBJA) had but a few days ago painted a picture of doom and gloom, forecasting gold buying would fall by 50% compared to Diwali 2018.

But guess what? The IBJA found out that its prediction had not come true.

Ajay Kedia, director of Kedia Advisory, said gold buying fell 25% this year, LiveMint reported.

Consumers had purchased about 30 tons of gold on a single day of Diwali called “Dhanteras,” down by an average 10 tons as compared to the last few years.

According to sales figures provided by other agencies in the business, pre-Diwali Dhanteras sales of gold and silver had dropped by about 40%.

According to the Confederation of All India Traders (CAIT), about 6,000 kg of gold was estimated to have been sold till evening on Dhanteras day, compared with 17,000 kg of gold sold on the same day in 2018.

CAIT’s Gold and Jewelry Committee Chairman Pankaj Arora was quoted by India Today as saying there was a decline of business from 35-40%.

Anantha Padmanaban, chairman of the All India Gem and Jewellery Domestic Council (GJC), told the same reporter they expected sales, in volume terms, to fall 20% compared with last year; however, sales in terms of value would be the same as last year because of higher prices.

Different figures, but all confirm one basic thing: gold and silver purchases were definitely down as compared to previous years, as feared.

The reasons for Indians losing some interest in bullion this year are:

  • Rising international prices
  • Increasing value of the U.S. dollar against the Indian rupee
  • Liquidity crunch in the Indian market
  • Rising unemployment
  • Increase in import duty on gold and other expensive metals

The benchmark gold futures in Mumbai touched a record U.S. $562 per 10 grams (Rs 39,885) in early September and were more than 20% higher than last year. Experts believe these prices could test approximately U.S. $580 over the next year.

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India is the second-biggest market for gold, after China.

Many in the Indian media have started writing off gold as an investment option for Indians, but as someone who has tracked this metal over the years, allow me to say this – they will eventually be proven wrong.

The Indian love affair with gold is not over and won’t be for a long time coming.

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This morning in metals news, global aluminum associations are calling for action on market-distorting activity, China’s semi-finished steel imports skyrocketed in September and Freeport-McMoRan reported its 3Q 2019 results.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Aluminum Associations Demand Reforms

Yesterday, we noted steel associations around the world are asking governments to tackle the challenge of steel excess supply.

Now, aluminum associations are asking for reforms of their own, particularly in an effort to tackle activities that distort markets.

Jean Simard, president and CEO of the Aluminium Association of Canada; Gerd Götz, director general of European Aluminium, and Ryan Olsen, vice president of business information and statistics for the Aluminum Association, released a joint statement asking for action on the matter.

“Given the extent and duration of the harm suffered by the aluminium industry, we are calling for swift, focused and decisive action on market-distorting behavior and excess capacity in both the upstream and downstream sectors,” they said. “On behalf of our respective member companies, we stand ready to support Governments and international organizations with our knowledge, data and commitment to articulate improved trade rules and to restore normal market functions so that all producers throughout the aluminum value chain can compete under conditions of fairness and transparency.”

China’s Semi-Finished Steel Imports Jump in September

China’s imports of semi-finished steel increased in September amid new restrictions earlier this year on scrap imports, Reuters reported.

According to the report, China imported 370,000 tons of semi-finished steel in September, which marked a 418% year-over-year increase.

Freeport’s Copper Sales Fall in 3Q

Miner Freeport McMoRan reported its third-quarter financial results Wednesday, reporting an adjusted net loss of $8 million.

Sales of copper and gold in the third quarter were down on a year-over-year basis “reflecting anticipated lower mill rates and ore grades as PT Freeport Indonesia (PT-FI) transitions mining from the open pit to underground,” according to the firm.

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Third-quarter copper sales reached 795 million pounds, down from 1.0 billion pounds in 3Q 2018. Gold sales totaled 243,000 ounces, down from 837,000 ounces in 3Q 2018.

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The Global Precious Monthly Metals Index (MMI), which tracks a basket of precious metals and precious metals prices, picked up one point for an MMI reading of 107 this month.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Palladium Surges, Widens Spread with Platinum

Last month, we noted the narrowing of the platinum-palladium spread in platinum’s favor, down to $539 per ounce as of Sept. 1.

This past month, however, that narrowing proved short-lived, as the spread ballooned to $763 per ounce.

The palladium price has been a steady riser this year.

“The price has risen a third this year alone and hit $1,700/ounce this week on the back of a limited supply market facing off rising demand from tighter emission standards in China and a switch from diesel to petrol in Europe, both favoring palladium demand,” MetalMiner’s Stuart Burns explains. “This is despite a generally weak global automotive market, with production down everywhere. Think what it would be like with production at 2017-18 levels — probably over $2,000/ounce. It may still hit that next year.”

China’s massive automotive market has contracted this year.

Through the first eight months of the year, automotive production in China reached 15.93 million units, down 12.1% on a year-over-year basis, according to the China Association of Automobile Manufacturers. Meanwhile, Chinese automotive sales through the first eight months were down 11% compared with the first eight months of 2018.

Meanwhile, U.S. automotive production in August reached 213,000 units, approximately flat compared with August 2018, according to Federal Reserve Bank of St. Louis data.

Gold, Silver and Fed Rates

Meanwhile, in the safe-havens, market watchers should keep an eye on the Federal Reserve.

“Gold and silver are being driven more by safe-haven status and expectations the Fed will reduce rates,” Burns explained. “Lower interest rates are a boost for gold and, to a lesser extent, silver. The investment community is taking an interest in gold this year, with ETF holdings near three-year highs and heavy buying by the Chinese central bank adding almost 100 tons in the last 10 months as it seeks to diversify away for the dollar. For the time being, Fed expectations will be the prime mover for prices.”

In September, the Federal Reserve announced it would lower the range for its benchmark interest rate by 25 basis points, to a range of 1.75-2.0%, marking the Fed’s second cut this year.

However, Fed Chairman Jerome Powell indicated the possibility of another rate cut this month, USA Today reported.

“While not everyone fully shares economic opportunities and the economy faces some risks, overall, it is — as I like to say — in a good place. Our job is to keep it there as long as possible,” Powell said in opening remarks during an event at the Federal Reserve Bank of Kansas City on Oct. 9. “While we believe our strategy and tools have been and remain effective, the U.S. economy, like other advanced economies around the world, is facing some longer-term challenges — from low growth, low inflation, and low interest rates.

“While slow growth is obviously not good, you may be asking, ‘What’s wrong with low inflation and low interest rates?’ Low can be good, but when inflation — and, consequently, interest rates — are too low, the Fed and other central banks have less room to cut rates to support the economy during downturns.”

President Donald Trump has on numerous occasions this year criticized the Fed and Powell for not doing enough to cut interest rates.

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Actual Metal Prices and Trends

The U.S. silver ingot price fell 5.6% month over month to $17.21/ounce as of Oct. 1.

U.S. platinum bars fell 4.4% to $875/ounce, while U.S. palladium bars rose 12.7% to $1,638/ounce.

Chinese gold bullion fell 2.9% to $47.99/gram. U.S. gold bullion dropped 3.2% to $1,478.60/ounce.


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:

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Free Partial Sample Report: 2020 MetalMiner Annual Metals Outlook

Source: World Gold Council

This morning in metals news, the World Gold Council unveiled a set of principles geared toward promotion of responsible mining, Apple’s newest iPhone includes stainless steel and an Indian steel tycoon is critical of the pace of the country’s insolvency proceedings.

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World Gold Council Launches Set of Principles for Responsible Gold Mining

The World Gold Council this week announced the launch of responsible gold mining principles that it says will offer a “new framework that set out clear expectations for consumers, investors and the downstream gold supply chain as to what constitutes responsible gold mining.”

The principles are divided into three categories: governance, social and environment.

“It is our aim that these Principles will become a credible and widely recognised framework through which gold mining companies can provide confidence that their gold has been produced responsibly,” the World Gold Council said. “The Responsible Gold Mining Principles are intended to recognise and consolidate existing standards and instruments under a single framework.”

Newest iPhone Includes Stainless Steel

Apple announced this week that its newest iPhone model, the iPhone 11, will be available in stores Sept. 20.

From a metals perspective, the new phone, which features a a triple-camera system, is made of glass and stainless steel.

“iPhone 11 Pro and iPhone 11 Pro Max have a textured matte glass back and polished stainless steel band, and come in four stunning finishes including a beautiful new midnight green,” Apple said in a release.

Indian Steel Tycoon Critical of Insolvency Proceedings

Indian steel tycoon Sajjan Jindal, head of the JSW Group, panned India’s relatively new bankruptcy and insolvency program on the grounds that it has been slow-moving.

Jindal’s JSW Group put in a $2.7 billion bid for the bankrupt Bhushan Power and Steel in February 2018, but only received approval by an Indian court last week, the Financial Times reported.

Since then, the steel tycoon’s interest in the acquisition has “definitely receded,” he told the Financial Times.

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The country’s Insolvency and Bankruptcy Code, initiated in 2016, aimed to streamline the process by resolving an insolvent business within 270 days; however, as the Financial Times noted, insolvency cases in the country have extended past the mandated 270-day deadline.

The Global Precious Monthly Metals Index (MMI) gained four points this month, rising for a September MMI reading of 106.

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Gold Market Subdued in India

MetalMiner’s Sohrab Darabshaw delved into the Indian gold market ahead of the festival season in the country, which includes Diwali in October.

As Darabshaw explained in late August, the apparent slowdown in demand ahead of the usually busy gold-buying season comes amid surging gold prices. Citing a Yahoo Finance report, Darabshaw noted India’s gold imports in July fell a whopping 55% on a year-over-year basis.

“Almost everyone is waiting for a price correction, which is a far cry from the positive situation at the start of 2019,” Darabshaw wrote.

“Demand grew 9% from January-June this year, sparking hopes that consumption towards the latter half of the year would go up.

“But experts are of the opinion that if things do not improve soon, consumption could slump to a low of over 650 tons (comparable to the 2016 low).”

Gold-buying in India was also sluggish ahead of the holiday season last year.

A Gold Mine in Pakistan

Meanwhile, in Pakistan, MetalMiner’s Stuart Burns weighed in on the struggle between the Pakistani government and Tethyan Copper Co.

“The dispute is over the legality of Tethyan’s claim and rights to exploit the copper and gold reserve at Reko Diq in Pakistan’s remote southwest Balochistan province, close to the Iran border,” Burns wrote.

“Pakistan’s mining rights and practices, not to mention its infrastructure, are not fit for the purpose, as Tethyan’s story underlines all too well.”

The impasse benefits neither party, Burns opined.

“Tethyan has offered to negotiate a settlement, but with the Chinese on the sidelines bidding to extend their Belt and Road involvement in the region, conflicting loyalties and priorities are in play,” he wrote.

“A solution, though, would be very much in Pakistan’s interests.

“The resource is said to be the largest untouched deposit in the world, containing an estimated 2.2 billion metric tons of mineable ore that could yield 200,000 metric tons of copper and 250,000 troy ounces of gold annually for over half a century, Stratfor reports.”

Platinum-Palladium Spread

While palladium remains at a significant premium to platinum, the spread between the two narrowed this past month.

After a spread of $638 per ounce as of last month’s MMI, palladium fell and platinum increased to produce a spread of $539 per ounce.

According to Kitco News, platinum is possibly riding momentum generated by other precious metals — namely gold and silver — of late. The platinum price recently approached its highest level in 16 months, Kitco News reported.

Actual Metal Prices and Trends

U.S. silver ingot/bars rose 12.3% month over month to $18.23/ounce as of Sept. 1. U.S. platinum rose 6.1% to $915 per ounce, while U.S. palladium fell 3.1% to $1,454 per ounce.

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Chinese gold bullion rose 7.8% to $49.33 per gram, while U.S. gold bullion rose 8.0% to $1,527.10 per ounce.

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This morning in metals news, Bank Of America cut its steel price forecast, copper prices dropped and gold lost some of its safe haven luster.

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Gloomy Steel Forecast

Bank of America has cut its steel price forecast and is less than optimistic about steel stocks going forward, Yahoo Finance reported.

According to the report, Bank of America analyst Timna Tanners cut her U.S. HRC price target for the second half of the year from $628 per short ton to $572 per short ton.

Tanners also cut 2019 EPS cuts for U.S. Steel, Nucor, Reliance Steel and Aluminum, Steel Dynamics and Commercial Metals Company, according to Yahoo.

Copper Price Drops

Markets continue to fluctuate on a daily basis based on any sliver of news emerging from the ongoing U.S.-China trade war.

On Friday, despite China’s intention to increase bank lending, LME copper was bid down 0.6% to $5,812 per ton, according to Reuters, after reaching a two-year low earlier this week.

Not so Golden

The gold price posted its largest daily dollar loss in three years, MarketWatch reported, on optimism regarding trade and jobs data impacting its safe haven appeal.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

According to the report, gold on the COMEX for December delivery slipped 2.2% to a two-week low of $1,525.50 per ounce.