Articles in Category: Precious Metals

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.”

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

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Ultimately, all else being equal, we can attribute the subindex’s stasis to the divergence in platinum and palladium price movement.

While the U.S. palladium price bounced back from last month, gaining 1.2%, the U.S. platinum price dropped for the third straight month, according to the MetalMiner IndX. (The U.S. gold price, meanwhile, contributed to the stasis by dropping to its lowest price of 2018, and U.S. silver hardly budged from April to May.)

Palladium remains at a premium to platinum for the seventh month in a row.

Palladium and Platinum Forecast

The U.S. bar prices of both platinum-group metals (PGMs) held above $900 per ounce for the May 1 MMI reading, which is directly in line with analysts’ views on the palladium’s outlook as of a few weeks ago.

In mid-April, Stephanie Aymes, head of technical analysis at Societe General, told Reuters, “Palladium should find support at $900.”

“The short-term ongoing rebound could fetch the 200-day moving average at $973/980, and this will decide on the extension (or not) of the recovery,” she told the news service.

In a more recent Reuters survey that polled 28 analysts and traders, the consensus outlook appears a bit higher for the metal. The average palladium price view for 2018 was $1,039 per ounce, and $1,040 per ounce for 2019.

“We forecast demand growth in palladium to moderate in 2018 after two years of strong growth driven by autocatalyst demand,” Deutsche Bank analyst Nicholas Snowdon was quoted as saying. “While we forecast autocat growth to continue, other elements of industrial demand are likely to decline in response to higher prices.”

“We expect that 2018 could be the year of peak palladium prices in the foreseeable future as market deficits begin to decline,” he continued, as quoted by Reuters.

For platinum, the polled analysts expect the metal’s price to continue its “historically unusual discount” to palladium through 2019. For the balance of this year, platinum is forecast to see an average price of $983 an ounce.

“Platinum continues to face headwinds from the diesel emission scandal,” Julius Baer, analyst at Carsten Menke, is quoted by Reuters as saying. “The share of newly sold diesel cars in Europe’s five biggest markets kept on falling during the first quarter.”

Platinum’s other demand source — the jewelry market — has also taken a hit, especially in China.

Gold Price at Its Lowest for 2018

Global gold demand for Q1 2018 appeared to be the lowest quarterly reading since 2008, according to the World Gold Council. Mainly driven by waning investor interest in gold bars and gold-backed ETFs, the price followed suit.

The U.S. gold price ended up at $1,314.90 per ounce for the May 1 MMI reading, its lowest this calendar year.

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On the supply side, the money that exploration firms are spending to discover new ounces of gold — to the tune of $54.3 billion allocated over the next decade, according to S&P Global Market Intelligence — has not resulted in more new discoveries over the last decade, compared to the previous 18 years.

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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