gold price

MetalMiner’s index of global precious metals prices dropped yet again this month, falling 3.8% for a January 2017 reading of 76, down from 79 in December.

Key Precious Metal Movers

The U.S. palladium price got a bit too frothy last month, resulting in a December MMI reading of $768 — which was good enough for an 18-month high.

However, for the January MMI reading, that price experienced a pullback, dipping back down under $700 per ounce (although not quite reaching November’s levels).

So a correction in that price point’s journey is evident. The U.S. platinum bar price also had a slight drop-off, as did silver and gold prices across global markets tracked by the MetalMiner IndX.

What’s Happened Since October?

Short answer: a ton.

Trump. Cubs. Brexit. Syria. Refugee crises. Panama Papers. Pokemon Go. (We could keep going…)

But a few of those had a lot to do with what’s happening across precious metals markets right now — especially gold.

Gold in Focus

What’s causing gold prices to fall dramatically? The U.S. dollar.

Gold (in dark) vs the dollar index (in green)

Gold (in dark) vs the dollar index (in green). Source: MetalMiner analysis of @stockcharts.com.

Since mid-August the dollar started a bull run that is still in play. Three main factors are propelling the dollar’s bull run, according to MetalMiner’s Raul de Frutos:

Markets expected the Federal Reserve to raise rates by the end of the year. In December the Fed raised interest rates by a quarter point, as expected, but policymakers signaled a likelihood of three increases in 2017, up from prior expectations for two moves. While interest rates outside the U.S. stay near zero or even in negative territory, it’s no wonder yield-seeking investors are going after the greenback.

The ongoing political tensions in Europe are causing the dollar to appreciate against the euro. The ongoing refugee crisis in Europe, Brexit, terrorist attacks and political instability are some of the events causing investors to lose their appetite for the European currency this year.

Finally, the victory of Donald Trump has added fuel to the dollar’s bull market. The new president-elect has proposed new tax policies that will potentially make multinational companies bring their foreign profits back to U.S., increasing the demand for dollars. In addition, the dollar is perceived as a stronger currency since investors expect growth in US to get a boost.

Essentially, what we wrote last month is still holding true, and it’s hard to see a reversal in the near term.

Exact Precious Metals Prices, Movements:

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Gold prices since 2013

Gold prices since 2013. Source:MetalMiner analysis of @stockcharts.com data.

Gold is the only commodity wherein physical annual demand is only a tiny fraction of total supply available and shortages of gold caused by physical demand never happen.

Therefore, China’s demand growth for metals or the potential boost in U.S. infrastructure spending are factors that aren’t really helping push gold prices higher unlike industrial commodities.

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What’s causing gold prices fall dramatically? The U.S. dollar.

Gold (in dark) vs the dollar index (in green)

Gold (in dark) vs the dollar index (in green). Source: MetalMiner analysis of @stockcharts.com.

Since mid-August the dollar started a bull run that is still in play. Three main factors are propelling the dollar’s bull run:

Markets expected the Federal Reserve to raise rates by the end of the year. In December the Fed raised interest rates by a quarter point, as expected, but policymakers signaled a likelihood of three increases in 2017, up from prior expectations for two moves. While interest rates outside the U.S. stay near zero or even in negative territory, it’s no wonder yield-seeking investors are going after the greenback.

The ongoing political tensions in Europe are causing the dollar to appreciate against the euro. The ongoing refugee crisis in Europe, Brexit, terrorist attacks and political instability are some of the events causing investors to lose their appetite for the European currency this year.

Finally, the victory of Donald Trump has added fuel to the dollar’s bull market. The new president-elect has proposed new tax policies that will potentially make multinational companies bring their foreign profits back to U.S., increasing the demand for dollars. In addition, the dollar is perceived as a stronger currency since investors expect growth in US to get a boost.

What This Means For Metal Buyers

As long as the dollar continues to rise, there is little hope for gold investors to make returns. Gold buyers should wait closely for weakness in the dollar before buying gold. For now, sentiment on the dollar continues to be quite bullish.

Gold rises as a safe haven when investors fear a recession, inflation increases or the U.S. dollar plummets, making the precious metal cheaper for foreign investors.

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Well, none of these things are happening right now. Indeed, quite the opposite is happening. Gold prices fell to their lowest level in nine months. What’s driving gold’s decline?

Gold prices hit a nine-month low

Gold prices hit a nine-month low. Source: MetalMiner analysis of @stockcharts.com data.

The Case For A Bull Stock Market

To be honest, I’ve been pretty skeptical of the U.S. stock market. Markets indexes have traded sideways for almost two years. Still, they have avoided a severe bear market. The day Donald Trump was elected, markets opened sharply lower as fear consumed traders. But stock markets love to do the unexpected and indexes are now back to trading in record territory.

S&P 500 surges following Trump victory

The S&P 500 surges following the Trump victory. Source: MetalMiner analysis of @stockcharts.com data.

Such action is a hint that equity trading desks and large funds aren’t finished buying stocks yet. The question is: will Donald Trump’s presidency for the next four years be just what the doctor prescribed to keep this aging bull stock market going, even after seven-plus years of gains behind its back? Could the rise in equities even accelerate? Read more

Last night, Republican nominee and developer Donald Trump was elected the 45th President of the United States.

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Gold jumped nearly 5% to $1,337.40 an ounce early Wednesday to its highest in six weeks as investors snapped up safe havens. This was gold’s biggest single-day gain since June 24 when it rose as much as 8% when Britain decided to leave the European Union. It closed up 4.8% that day. However, prices almost immediately began to retreat this morning. It’s back below to $1,281.50/ounce as of this writing (10:45 AM Central), near its closing yesterday of $1,275.80/ounce.

A Trump win, which many believe leads to economic and global uncertainty, may also push the  Federal Reserve to hold off from raising interest rates next month.

Financial markets are beginning to believe the Federal Reserve is finally serious about increasing interest rates.

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At least, that’s the simplest explanation for rising treasury yields and the U.S. dollar index, which measures the greenback vs. a basket of major currencies, hitting the highest level in seven months.

US Dollar Index hits 7-month high

The U.S. dollar Index hits a seven-month high. Source: @stockcharts.com.

While the Fed has repeatedly pronounced its intentions to raise rates, markets took those announcements with a grain of salt, pricing in a lower future rate than what the Fed was promising.

Fed Turns Hawkish

However, since October, the 10-year Treasury yield has risen significantly as markets now see a 67% chance of a rate hike in the December meeting. Higher interest rates make the dollar more attractive to yield-seeking investors. Moreover, the dollar rose as most other major world currencies slid, particularly the British pound, which was depressed by Brexit concerns.

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A rising dollar has a negative impact on metal prices. Metals are priced in dollars and when the value of the dollar rises, it takes more more of them to buy metals. Another reason is that when the value of the dollar rises, foreign buyers have less buying power, typically causing demand for metals to shrink.

Gold plunges as dollar rises

Gold plunges as the dollar rises. Source: MetalMiner analysis of @StockCharts.com data.

This is particularly true in the case of gold and something we mentioned in September. Recently, gold prices fell to a four-month low as the dollar rose.

What This Means For Metal Buyers

The dollar is not the only thing that moves metal prices but it is important. If the Fed raises rates this year that would likely strengthen the dollar, adding pressure to metal prices. On the other hand, if future Fed decisions disappoint, that would weaken the dollar, having a bullish effect on metal prices.

The IMF has downgraded its U.S. growth outlook and Canada’s Goldcorp has been forced to shut down one of its largest mines in Mexico.

IMF Downgrades U.S.

The International Monetary Fund is downgrading its forecast for the U.S. economy this year and warns that political discontent threatens global growth.

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The IMF on Tuesday cut its estimate for U.S. economic growth in 2016 to 1.6% from the 2.2% it had predicted in July. The American economy grew 2.6% in 2015. The fund’s dimmer outlook for the U.S. occurs even as the Federal Reserve is thought to be preparing to raise interest rates in December.

The global economy will expand 3.1% this year, it said — the same as forecast in July.

The IMF described worldwide growth as “subpar,” with a slowdown in the U.S. and other advanced economies being offset by slightly stronger output in developing and emerging nations.

Goldcorp Shuts Down Blockaded Mexican Mine

Goldcorp Inc. said on Monday it was temporarily shutting down its Peñasquito gold mine in Mexico as it was unable to safely continue operations due to a week-long blockade by a trucking contractor, sending its shares down nearly 5%.

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The world’s No. 3 gold miner by market value said it was unable to bring in food, water and fuel for the 750 people on the site, which has been blockaded by a contractor concerned about losing business due to efficiency improvements at the mine.

India will complete the second phase of its mining auctions later this month, after the first round last year received a lukewarm response. Going under the hammer will be gold, diamond and iron ore mines.

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Mines in five provinces — Karnataka, Andhra Pradesh, Madhya Pradesh, Rajasthan and Jharkhand — will be auctioned. This time, there are 14 iron ore mines, 12 blocks of limestone and one block each of gold, diamond and copper. While some analysts have predicted a better response than last time to the iron ore mining auction, the limestone blocks may not see much action because of the cement market slump.

Round One

In the first round of the auction, the states offered 47 mines bearing minerals such as gold, iron ore, bauxite and limestone.

They were able to auction seven mines in that phase, earning the government billions of dollars over the next 50 years. However, 17 blocks were not sold due to an insufficient number of initial bids on account of factors such as quantity and grade of ore and low quality of the mineralization studies, among other reasons.

The first round also came under scrutiny when the comptroller and auditor general of India (CAG), a body that audits all government expenditures, passed certain adverse observations. It said in a report tabled in the Indian Parliament that competition may have been restricted in the auction of 11 coal blocks on account of multiple bids by corporate groups made through joint ventures or subsidiaries.

What Does This Mean For India’s Steel Exports?

The iron ore auction comes at a time when the Indian government is contemplating a relaxation of export duties on iron ore. This has led to protests from the domestic steel industry.

In a representation to the steel ministry, the Indian Steel Association asked the government to continue with a 30% export duty on all grades of ore, to preserve natural resources for domestic use.

The government already cut the export duty on low-grade fines to 10% earlier this year but continued with a 30% levy on lumps.

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India’s ore production is lagging its growth of steel production. Production, according to steel ministry data, fell at a compound annual growth rate (CAGR) of 6.5% in the past five years.

Our Global Precious Metals MMI took a slight step backward this September, coming in at a value of 85 — a 4.5% drop from the previous month’s 89.

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However, the latter half of the summer has been kind to the gold, silver, platinum and palladium prices we track, with the past three months representing the highest MMI values of the entire calendar year.

Global-Precious-Metals_Chart_September-2016_FNL

All four precious categories tracked by the MetalMiner IndX softened over the month of August for our September 1 reading, contributing to the overall 4-point decline.

Main Index Drivers: Platinum and Palladium Prices

In a forthcoming MetalMiner analysis, my colleague Stuart Burns will share his findings from interviewing Trevor Raymond, director of research at the World Platinum Investment Council. The main takeaway? That the platinum market is like a “ticking time bomb.”

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Essentially, the global platinum market has been in deficit for five years running, with mine strikes and shortfalls leading the way into a supply-side headache for the industry. Demand, meanwhile, appears robust, according to WPIC’s data and quarterly reports, led by developments on the heels of Volkswagen‘s diesel scandal, China and India’s jewelry desires, and a potentially interesting knock-on effect from rising oil prices.

However, the investment community will likely be the prime driver of PGM price movements in the future; but whether it’s a chicken-and-egg situation — rising prices spurring investment activity, or vice versa — remains to be seen.

Secondary Driver: Gold Prices

According to a recent release by Sprott Asset Management, “August marked the fourth successive month that gold prices rose in contrast to the dollar — something that has not occurred since metal peaked five years ago amidst the global financial crisis.

Demand is now at a four-year high with metal displaying one of its best yearly performances since the 1970s. Due to the rise of negative interest rates and a more volatile market, gold is looking like a safe bet for many investors,” right alongside platinum, it would seem; with a secondary positive aspect of the latter being its industrial element.

“As a result of sluggish global economic growth, central banks are pushing interest rates into negative territory, which is positive for gold,” according to Senior Portfolio Manager Paul Wong, along with the Sprott Asset Management precious metals team. “We are likely in the early stages of the current gold bull market, driven by a global push to a negative interest rate policy, currency volatility and a high level of cross-asset class correlation.”

My colleague and our in-house metals procurement specialist and analyst, Raul de Frutos, agrees — see his most recent report on the gold market.

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Tired of being an also ran?

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Having status symbols no better than the guy next door? Ever pulled up in your yacht only to find, 10 minutes later, a guy with a yacht twice the size pulls into the same bay right next to you? Yeah, tiresome isn’t it?

Who Needs a Ferrari When You Can Have a Gold iPhone 7?

Well, while everyone else is queueing outside an Apple store from midnight before the next morning release of a new smartphone, we have something so much better for you. This is the new iPhone 7 from Goldgenie, finished in 24-karat Gold, Rose Gold or Platinum, and if that is not enough for you they do a super luxury version edged and decorated with Swarovski Crystals and even high-quality diamonds. Here’s the best bit, this exclusive, oh-so-cool, piece of one-upsmanship (if there is such a word) luxurious collection will be available with prices starting at just $3,150 (£2,400).

goldgenie_gold_iphone7_550

Why buy a bigger yacht when you can have a 24-karat gold iPhone 7? Source: goldgenie.

However if you really want to push that boat out and outdo the sheikh next to you, go for the $14,300 (£11,000 ) Diamond Rockstar. A bargain, right? It is also rumored that the luxury brand may even be replicating the $3 million (£2.3m) iPhone 6s Diamond Ecstasy encrusted with over 800 diamonds. Read more

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Gold Prices Take Off

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Source: Financial Times

Source: Financial Times

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