Articles in Category: Precious Metals

Last month, in our headline for the monthly update article on the Global Precious MMI, we called out the fact that platinum and palladium prices had dropped. Then we asked: “Will it continue?”

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Well folks, if our Magic 8-Ball were to answer, it’d say — signs point to yes.

At least for this month’s index reading.

With losses in U.S. platinum and palladium pricing leading the way, our Global Precious Monthly Metals Index (MMI), tracking a basket of precious metals from across the globe, floated down yet again for April — dropping 1.1% and settling into a two-month downtrend.

(Last month, we had initially reported that before March’s drop, the index had been in a two-month uptrend. Correction: it had in fact been in a four-month uptrend at that point.)

Both stock markets and commodities markets have been in a bit of turmoil lately, with President Trump implementing tariffs on steel, aluminum and potentially 1,300 categories’ worth of additional Chinese imports mid-last month, and China coming back with retaliatory tariffs on a number of non-metal U.S. commodity exports.

It wouldn’t be a stretch to say that knock-on effects are being seen in the precious metals markets.

PGMs Lead the Way

Gold prices in the U.S., China and India were slightly up on the month (with the Japan price holding relatively steady), and even silver prices in China and India increased.

Yet platinum and palladium prices told a different story.

Both platinum and palladium bar prices dropped across all geographies (U.S., Japan, China) — the U.S. platinum bar price sunk 3.5% and the U.S. palladium bar price fell 3.2%.

The longer-term picture for platinum as a crucial component of industrial manufacturing continues to get murkier.

According to a Reuters interview with Bart Biebuyck, executive director of the European Commission’s fuel cell and hydrogen joint undertaking, “the volume of platinum used in fuel cell-powered cars could be cut to ‘micro levels’ within three years and eradicated altogether in a decade’s time, making these environmentally-friendly vehicles much cheaper to buy.”

He said the amount of platinum in the next generation of fuel cell cars had already been cut to levels similar to that used in the catalytic converters of diesel vehicles, which industry estimates put at 3-7 grams, according to Reuters.

With the automotive industry — which accounts for about 40% of platinum demand — looking to cut costs, that 3-to-7-gram range for diesel vehicles may steadily but surely decrease in coming years. That’s because, as we reported last month, the gradual but very real retirement of diesel engines across the European continent continued.

A German court ruled that cities have the right to ban diesel cars from driving the roads in certain areas. Of course, the Volkswagen scandal and its aftermath proved to be a big blow for diesel cars, as well.

If more diesel engines go extinct, with them will go corresponding PGM consumption for catalytic converters.

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This morning in metals news, copper hits an over one-week high, President Trump is pushing for a preliminary deal on the North American Free Trade Agreement (NAFTA) by mid-April and gold could reach $1,400 if a trade war ensues.

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Copper Surges

Strong manufacturing growth in China powered the copper price to its highest level in over a week, Reuters reported.

After a sluggish March for LME copper, it jumped 1% Tuesday to $6,777/mt, according to the report.

NAFTA Deal This Month?

Canada, Mexico and the U.S. have now gone through seven rounds of renegotiation talks focused on NAFTA, the 24-year-old trilateral trade deal.

According to a Bloomberg report, President Trump wants to reach a preliminary deal on NAFTA by mid-April.

Ambitious timelines for a NAFTA conclusion have been heard before, particularly last fall when the U.S. negotiating team expressed a desire to close on a deal before the end of the 2017 calendar year. According to the Bloomberg report, the countries still remain far apart on some issues. So, for now, a deal within the next couple of weeks, while not impossible, might be seen as improbable.

Gold Could Soar if Trade War Kicks Off

The precious metal could jump over $1,400/ounce if a trade war starts, according to Rick Rule, CEO of Sprott U.S Holdings Inc., Bloomberg reported.

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Spot gold traded at $1,337.50 on Tuesday, according to the report.

Our Global Precious Monthly Metals Index (MMI), tracking a basket of precious metals from across the globe, floated back down 3.3% after a two-month uptrend.

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Last month, as my colleague Fouad Egbaria wrote, the platinum-palladium relationship began to reflect its traditional historical dynamic. This month, that trend continues for the two platinum-group metals (PGMs), with U.S. platinum falling 3.6% and U.S. palladium falling 4.2% — below $1,000 per ounce to start the month for the first time since November 2017.

The backdrop of President Trump announcing tariffs on steel and aluminum imports late last week — with more specifics yet to come, continuing an uncertain climate — has forced a broader commodity selloff, which has swept precious metals such as gold into its current, according to Michael Kosares, founder of gold broker USAGOLD, as quoted in a MarketWatch article.

“Once we get through the initial reaction, gold’s appeal as an inflation hedge will likely reassert itself,” he is quoted as saying.

Concerns arose over whether other industrial metals also would get hit as a result of the steel and aluminum tariffs announcement, including precious-metal workhorses platinum and palladium.

“The announcement raised fears there could be retaliation and hit the price of stocks and all industrial metals,” said Phil Flynn, senior market analyst at Price Futures Group, as quoted in the MarketWatch article. There’s also “fear that higher costs for cars could reduce demand” for the metals, according to the article.

So, where will the platinum-palladium trend go from here?

PGM Spotlight

Although both platinum and palladium may see a slightly extended cooldown in the near term, the longer term could see more price increases — especially for the latter metal.

Broader supply-demand market fundamentals look to underpin the two metals’ movements into the next year and beyond. According to Johnson Matthey, as reported by Reuters, platinum looks to be headed for another surplus in 2018. (Last year’s oversupply clocked in at 110,000 ounces.)

“Before accounting for investment, we expect global platinum consumption to rise slightly,” Reuters quoted Johnson Matthey as saying. “However, this will be matched by a modest increase in combined primary and secondary supplies, mainly due to rising recoveries from autocatalyst scrap,” it said. “Assuming that investment demand in 2018 is similar to last year, the market is likely to remain in modest surplus,” the firm added, according to Reuters.

On the palladium front, the market was expected to remain in deficit, Johnson Matthey said.

“Automotive demand, which rose 6 percent last year to 8.424 million ounces, was expected to hit another record high next year, in line with a rise in gasoline vehicle output,” according to the Reuters piece. “Supply, which declined 2 percent last year, was expected to rise slightly, but the market was set to remain in deficit after recording a shortfall of 629,000 ounces last year.”

The gradual but very real retirement of diesel engines across the European continent continued as well. A German court ruled that cities have the right to ban diesel cars from driving the roads in certain areas. If more diesel engines go extinct, with them will go corresponding PGM consumption for catalytic converters.

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The Global Precious MMI (Monthly Metals Index) picked up one point this month, rising to 92 for our February reading. Need buying strategies for steel in 2018? MetalMiner’s Annual Outlook has what you need Within the basket of metals, Chinese gold bullion and U.S. silver ingot/bars picked up in price. Palladium, which has bucked the historical trend by…

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According to a recent report from the U.S. Geological Survey, the U.S. mining industry produced $75.2 billion in minerals in 2017.

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The information was published in the USGS’s annual Mineral Commodities Survey.

Source: U.S. Geological Survey

In the import market, the U.S. was 100% reliant on outside sources for some raw and processed mineral materials, including rare earths, manganese, niobium and vanadium. The report adds that in 2017 the U.S. was 100% reliant on imports for 21 commodities — up from 100% reliance on imports for 11 commodities in 1984.

U.S. metal mine production in 2017 hit an estimated $26.3 billion, up 12% from 2016. Despite higher prices for metals, domestic production was actually lower than the previous year, the report states.

In that vein, for the aluminum sector — which is anxiously awaiting the results of the Trump administration’s Section 232 investigation of aluminum imports — 2017 proved to be another down year in terms of production.

Primary aluminum production fell for the fifth straight year, according to the USGS report, dropping 12% to reach its lowest level since 1951. Meanwhile, aluminum imports increased by 16% (a shade above the 15.5% increase in steel imports).

Which states led the way in mining production last year? Eleven states produced more than $2 billion in non-fuel mineral commodities. Those states were, in descending order: Nevada, Arizona, Texas, Alaska, California, Minnesota, Florida, Utah, Missouri, Michigan and Wyoming.

On the precious metals front, new gold mines opened in late 2016 and 2017 in Nevada and South Carolina. The South Carolina mine opening — rather, reopening — marked the first gold mine to open east of the Mississippi River since 1999. Gold was discovered at the Haile Gold Mine site, located in Lancaster County about 55 miles south of Charlotte, in 1827, according to the company website. The mine is currently owned by global mining firm OceanaGold.

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Metals used for high-tech applications like electric vehicles, including cobalt and lithium, saw their prices skyrocket in 2017. According to the report, the average lithium price jumped 61% last year, while cobalt prices more than doubled.

The U.S. Department of Commerce. qingwa/Adobe Stock

Before we head into the weekend, let’s take a quick look back at the week that was here on MetalMiner:

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  • This week we wrapped up the latest round of posts for our January Monthly Metals Index (MMI) — check out this week’s posts on the following:
  • Oil and gas exploration is a topic that has both passionate supporters and detractors. President Trump’s recent proposal to open up new areas for drilling, not surprisingly, has both of those, as our Stuart Burns wrote earlier this week.
  • Sticking on the subject of oil, Burns surveyed the factors behind crude oil’s continuing rise in price. Political turmoil is one factor, among others, contributing to the increase.
  • The long wait is over … Secretary of Commerce Wilbur Ross has sent President Trump his Section 232 steel report (the statutory deadline was Jan. 15). Trump now has 90 days to decide what to do. A similar announcement for the Section 232 aluminum probe — which was launched last April, one week after the steel probe — should also be coming soon.

Here’s What Happened

  • Our Global Precious Monthly Metals Index (MMI), tracking a basket of precious metals from across the globe, rose yet another three points to 90 for the January reading, a 3.4% increase.
  • We’re officially in a three-month rising trend for our precious metal sub-index. The last time we saw this buildup was back in Q3 2017, after which the index retreated. If that pattern holds, we could see a drop-off, perhaps as early as February — although seasonality and the global political and economic atmosphere in Q4 both likely had a lot to do with the outcome, which may not be replicated here in Q1 2018.
  • Palladium officially busted through the $1,000 per ounce ceiling in December, and there were no signs of a turnaround for the January reading — the PGM per-ounce held above that level for the second straight month. (More on palladium below.)
  • Meanwhile, it appears as though platinum will need to take advantage of a “Dry January.” The metal came out of the holidays very sluggish, recording only a $2 per ounce increase and beginning the new year in a rather flat state of malaise.
  • “We’ve (still) got a trend, folks!” — this is the fourth straight month in which palladium is priced at a premium to platinum, which has not been the historical norm.
  • And then there’s gold. 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 is back above that benchmark after a few months off.

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What’s Going On in the Background?

  • Can palladium keep rising? That all depends. On the one hand, the supply market is pretty tight, and it has been for a while. In fact, the palladium market has been in deficit for the last six of seven years in which data is available, according to a good Reuters piece published just after the new year. On the other hand, the primary thing driving palladium demand, and therefore prices, is mainly Chinese automotive demand. Caveat: if that slows down or even goes in reverse (car puns are just the best, aren’t they?), palladium could go with it. As we reported earlier this week, a Wall Street Journal story pointed out Chinese consumers are now starting to get into used car sales even more, which could portend the end of unmitigated new car sales growth — much like China’s GDP cooldown over the last few years. To wit, here’s a sweet graphic showing the relationship between palladium and China’s automotive sales:

Source: Thomson Reuters

  • Germans buying up some gold. Regarding that $1,300/ounce threshold we mentioned earlier that gold prices have been hovering above for a couple months straight? That has helped spot gold prices gain about 14% during 2017. Now, at least one nation — going by its recent investment activity — is hoping that upward trend continues. According to another Reuters article, Deutsche Boerse said its Xetra-Gold notes rose in demand to a record 175 tons of gold, a nearly 50% increase over 2016. Safe haven, here we come! (Ja?)

What Metal Buyers Should Look Out For

  • PGMs. While ETF Securities, an investment and intelligence firm, which we used to cover quite regularly, expects precious metals (including PGMs) to remain pretty stable for the course of 2018 in its Outlook 2018 report, as we noted last month, keep a close eye on All Things China. This is especially important as it pertains to automotive partnerships between U.S. OEMs and China and the resulting innovation, as my colleague Fouad Egbaria reported earlier this week in our Automotive Monthly Metals Index (MMI).
  • ICYMI, our own Irene Martinez Canorea drilled down into the gold markets before the end of 2017 from an analytical perspective, ultimately unlocking the reason why industrial metal buyers (especially those buying copper) should pay attention to gold.

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Gold has defied interest rate rises and record equity markets to rally to its highest level in more than three months, the Financial Times reported this week.

Rising more than 6% since early December to over $1,300/ounce — its highest level, the paper reports, since September 2015.

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Gold is normally considered a safe-haven asset and a store of wealth in times of financial stress and uncertainty. So, why the surge in demand?

Performance of the U.S. Dollar

The U.S. and Europe are both expanding and emerging market growth is set to top 5% this year. One theory is the weakness of the U.S. dollar — as the dollar falls, all commodities priced in the currency become relatively cheaper and therefore more attractive to buyers in other currencies.

The dollar has been the worst performer of the G10 currencies in 2017, falling some 10% over the year. Investors also have expectations of higher inflation in the U.S. due to President Donald Trump’s tax reforms and a rising oil price, which often stokes inflation is seen by some as a risk. But while the dollar is attributed with the majority of the rise in gold, it may not be the whole story.

Read more

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This morning in metals news, Chinese steel futures start the year on the right foot, the automotive sales outlook for 2018 is not quite as bright as it has been in recent years and gold reaches a three-month high.

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Chinese Steel Futures Start ’18 Strong

Chinese steel futures started the year on the right foot, according to a Reuters report.

With that said, the report cites concerns about consumption levels of the metal going forward, particularly as the winter season sees construction activity slow down in China.

Outlook for Auto Sales Less Positive

After a record 2016 and strong 2017 in automotive sales, it wouldn’t be surprising to see the market take a step back in 2018.

According to Bloomberg, higher interest rates could dim the prospects of the automotive market in 2018.

Good as Gold

Gold, meanwhile, hit a three-month high on the heels of a solid December, Reuters reported.

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According to Reuters, the metal rose 4.4% in the last three weeks of 2017, with prices eclipsing the $1,310/ounce mark.

We’re another month closer to the end of the calendar year, and there’s much to recap from the last month in metals.

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After four MMIs ticked upward for our November reading, five did so for our latest report.

Hitting some of the high points:

  • The biggest winners of the month were the Automotive, Construction and Raw Steels MMIs. Automotive picked up four points, while Construction and Raw Steels picked up five points apiece.
  • The Aluminum MMI tracked back down, losing four points after a five-point rise the previous month. As Irene Martinez Canorea wrote, a dropping LME aluminum price had much to do with the sub-index’s drop.
  • The Stainless MMI, meanwhile, fell five points on the month. In this case, a 10% decline in nickel prices contributed to the MMI’s fall. Trading volume for LME nickel is still strong, Martinez Canorea wrote, and the outlook for nickel remains bullish.

You can read about all of the aforementioned — and much more — by downloading the December MMI report below.