This morning in metals news: the gold price has surged to an all-time high; China is eyeing changes to its steep capacity swap rules; and Northern Dynasty Minerals has received an environmental impact study for its Pebble copper-gold-molybdenum project in Alaska.
This morning in metals news: the United States International Trade Commission asked for an additional $2.75 million in its budget to help it toward implementation of the United States-Mexico-Canada Agreement (USMCA); the World Gold Council released its H1 2020 report; and U.S. beverage makers are grappling with an aluminum can shortage.
The Global Precious Monthly Metals Index (MMI) gained 1.7% for this month’s reading.
Global Precious MMI: Gold prices remain above $1,700/oz as U.S. states roll back COVID-19 restrictions
The Global Precious Monthly Metals Index (MMI) gained 1.7% this month.
This morning in metals news, Novelis Inc. reported fiscal year 2020 net income fell 3%, ArcelorMittal has opted to suspend dividend payments and Barrick Gold has benefited from the gold price’s rise this year.
Before we head into the weekend, let’s take a look back at the week that was and some of the coverage here on MetalMiner, including: Tesla’s reported interest in cobalt-free batteries; the oil price crash; falling aluminum prices; supply-chain challenges amid the COVID-19 outbreak; Trump’s travel suspension; and global cobalt mine production:
Those enamored with charts and those preferring fundamentals are, for once, aligned.
The gold price hit a 10-year high as markets took fright at the impact of the coronavirus (Covid-19) on supply chains and productivity.
The flight to safe havens took a temporary battering last Friday, as sharp falls on stock markets prompted day trader margin calls and investors liquidated precious metal holdings to meet the costs.
But the horrendous volatility on the stock market is matched only by the horrendous potential damage widespread infection of the virus could potentially cause.
India is almost on the cusp of this year’s festival and wedding season, but the domestic bullion market remains subdued, contrary to historical norms.
The reason? Gold prices in India have rallied 20% this year based on several internal and external factors, Livemint reported.
Over the past week, spot prices touched a high of U.S. $558.45 (Rs 40,000) per 10 grams. The futures market showed a similar trend, though prices later dropped. Gold futures had hit a record high of U.S. $543.44 per 10 grams (Rs 38,666).
The Livemint report said the spread between MCX and international prices narrowed on Tuesday from near $51/ounce to about $42/ounce, sparking some buying interest in the physical market. But even then, the higher domestic price and higher taxes continued to dampen demand.
Bullion experts forward many reasons for the highest-ever spurt in gold prices, including: a hike in import duty, the weaker rupee versus the U.S. dollar, the ongoing U.S.-China trade war, the U.K.’s impending Brexit and buying by global central banks.
India’s gold imports this July fell by 55% from a year ago, down to a three-year low, Yahoo Finance reported.
The gold scene in most of Asia is equally depressing.
News agency Reuters reported steep prices prompted Asian consumers to sell back physical gold for profit this week.
Some amount of buying, even at the current price range, did happen because of gold’s appeal as an instrument to hedge against risk.
In China, the biggest gold consumer in the world, premiums eased slightly to $6-$9 per ounce over the benchmark, down from $9-$10 last week.
The Reuters report quoted Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong, as saying interest was mostly from the investment side.
In India, dealer discounts of up to U.S. $33 an ounce over official domestic price saw some amount of buying activity. Most dealers, however, were not in the mood to place new orders, preferring to wait and let the situation unfold, according to the Economic Times.
Almost everyone is waiting for a price correction, which is a far cry from the positive situation at the start of 2019.
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).
Precious Metals MMI: Norilsk, JPMorgan Chase Bullish on Hybrid Car Demand’s Role in Palladium Prices
It looks as though the winter is just heating up for the Global Precious Monthly Metals Index (MMI).
The sub-index tracking a basket of gold, silver, platinum and palladium prices from four different geographies rose three points to hit 90 for the January reading — a 3.4% increase — driven by a still-hot palladium price.
The U.S. palladium bar price broke the 1,200-per-ounce barrier to start the month, ending at $1,252 per ounce to begin 2019. That represents a three-month uptrend. Meanwhile, the gold price reclaimed its premium over palladium, settling at $1,282 per ounce to begin the month.
U.S. silver also rose, while platinum dropped in the U.S. and Japan.
Palladium Outlook Looking Even Better With Hybrid Vehicle Demand
As we wrote last month, while supply from major producers including Russia and South Africa is not growing, global automotive palladium demand is expected to achieve a new record high in 2018 of around 8.5 million ounces, according to precious metals consultancy Metals Focus as reported by Reuters.
That conspires for the high price bubble of the formerly junior PGM of late. However, that may not last.
“This increases the potential for correction,” Commerzbank is quoted as stating in a recent outlook report. “We expect a price correction [for palladium] to begin in the course of the first quarter of 2019.”
After correcting, the bank expects the price should to “resume its upswing,” forecasting a price of $1,100 per troy ounce by the end of 2019, it is quoted as saying.
Other analysts agree with that general take, but that doesn’t mean that the longer-term demand outlook isn’t still strong.
According to Anton Berlin, head of analysis and market development at Norilsk Nickel PJSC, as quoted by Bloomberg, “combined palladium use in hybrid and plug-in hybrid — or rechargeable — vehicles next year will be nearly triple that of 2016.”
Analysts at JPMorgan Chase & Co. agree. “Hybrids are forecast to grow from just 3 percent of global market share in 2016 to 23 percent of sales by 2025,” stated a late-2018 report by the bank, according to Bloomberg.
Here’s What Happened
- All quiet on the precious-metals front this month, as our Global Precious Metals MMI stood pat from May to June at a reading of 84.
- Since we tend to keep a closer eye on the platinum group metals (PGMs) due to their automotive applications, the U.S. platinum price tracked by the MetalMiner IndX posted only a negligible gain, while the U.S. palladium price suffered only a negligible loss … reflected directly in the wash that was the sub-index’s June performance.
- Interestingly, gold has been getting hot as of late. More on that below.
What’s Going On in the Background?
- Although the Global Precious Metals MMI did not reflect it in the May-to-June time period, the U.S. gold price increase after June 1 has turned some heads. As my colleague and new MetalMiner Editor Fouad Egbaria reported earlier this week, “gold neared its year-to-date high on Tuesday,” according to Reuters. “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,” Egbaria noted.
- Back to platinum. As a reflection of the metal’s dawdling short-term pricing, South African producer Lonmin has been struggling. Reuters reported earlier this week that the company is “pulling every lever to try to restore confidence in its ailing business, including reopening a major shaft and expanding its biggest operation,” according to Lonmin’s CEO. Low prices and skyrocketing costs have reportedly conspired to present the company with a cash problem over the past near-decade.
What Metal Buyers Should Look Out For
- Platinum specifically has had a low-price problem this year — but that’s obviously less of a problem if you’re purchasing metal. While we’re unsure of when prices will swing back up — mainly because output cuts in South Africa and elsewhere have seemingly not helped — it may be hard to discount current windows for smaller spot buys.
Exact Prices of the Key Movers and Shakers
- Again, the dog days of summer have seemingly started early for the precious metals tracked by our sub-index. Gold, silver, platinum and palladium prices only marginally ticking up, down or remaining flat.
- The U.S. palladium price dropped 1.3% to $816 per ounce.
- Meanwhile, U.S. platinum ticked up only $3 to end up at $947 per ounce.
- Our Indian silver price ticked down 0.5%, settling at $619.15 per kilogram.