Tag: precious metal prices

Precious Metals Prices: Dennis Rodman-Style Rebounds Are the Story This Month

Well, perhaps these rebounds are not quite worthy of The Worm — but our Global Precious Metals MMI has hit its highest level since October 2016, climbing 7.9% to 82 for the February reading.

PGMs Lead the Way

Two of the biggest movers on MetalMiner’s precious metal sub-index were U.S. prices of platinum and palladium, rising 10.2% and 10.9%, respectively.

That palladium increase nearly got the price to the 18-month December 2016 high.
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Here’s the deal with palladium in a nutshell, from MoneyWeek:
“Both U.S. and Chinese car sales have been solid of late, with the latter rising at their fastest pace in three years (in 2016) and the former potentially set for another boost thanks to President Trump’s fiscal stimulus. China’s pollution problem is forcing it to tighten car emission standards, adds Chen Lin on Equities.com, which implies a steady rise in demand for palladium over the next few years.
“On the supply side, South Africa, the world’s top supplier, is not expected to increase mined output much. Analysts reckon that dwindling sales from Russia’s stockpiles means they are probably nearly depleted. TD Securities thinks the market deficit could double this year.”

What a Gold Mine!

Our intrepid editor at large, Stuart Burns — you might remember him from world-class macroeconomic coverage as it pertains to industrial metals, or (our) voice of James Bond’s Q — recently explored the wilds of India, and with him, he brought back gold.
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Or, to be more accurate, some gold coverage.
Soon we’ll publish Stuart’s take on the gold import situation in India. Here’s a taste:
“Although India has mines that go back more than 120 years, its annual gold production is miniscule. According to an article in the Hindu Times, that could be about to change. The Kolar gold field was forced to close in 2001 due to mounting losses at operator Bharat Gold. The state-owned company had been mining the Kolar reserves since independence in 1947 but the mines are deep, down to 3 kilometers, and Bharat was operating with outmoded technology and a large unproductive legacy workforce. But Mineral Exploration Corp. estimates show reserves to be worth $1.17 billion in the mines, with another $880.28 million in gold-bearing deposits estimated to be left over in residual dumps from previous mining operations.
India is never likely to rival South Africa, Canada or Australia as a gold miner, but that’s not the point — any contribution will lessen the impact gold imports have on the country’s balance of payments. With domestic reserves estimated at over 100 metric tons, there appears to be scope — with the right state and government backing — for miners to reduce some of those imports and create domestic employment.”

Palladium Price Powers to 18-Month MMI High

MetalMiner’s Global Precious Metals MMI dropped two points this month to 79, from 81 in November; a 2.5% decrease. But that’s less the story than what happened within this precious metals sub-index.

The PGM Story

As we said last month, longer-term structural concerns remain for the platinum-group metals (PGMs), especially platinum and palladium. However, in the short term, one of those two precious metals that are instrumental in automotive catalytic converters kept the Global Precious MMI from falling even further for December.

Global-Precious-Metals_Chart_December-2016_FNL

Indeed, with gold and silver falling across all four geographic markets (see below), our U.S palladium bar price jumped to an 18-month high, rising a whopping 24% month-over-month. Japanese palladium also rose appreciably.

The platinum bar price, however, did the reverse. Our U.S. platinum bar price hit a 10-month low, dropping 7% since Nov. 1.

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Crossing like ships in the night, one heading north, one heading south, what should buyers make of the platinum/palladium divergence?

According to HSBC senior analyst James Steel, talking to Platts, “the platinum-palladium spread has narrowed substantially, from $375/ounce before the U.S. election. This reflects clearly tighter underlying fundamentals for palladium.”

With car sales in the U.S. and China continuing to be robust, and with Johnson Matthey predicting another supply deficit in 2017, palladium could continue its buoyancy for the near future.

The Dollar –> Infrastructure –> Gold

Raul de Frutos gave MetalMiner readers this helpful rundown in late November:

A rising dollar depresses commodity prices, especially precious metals. It does have less of an effect on more economically-sensitive groups like energy and industrial metals. Indeed, industrial metals are on the rise despite a strong dollar. This is because the dollar is rising on expectations of higher rates down the road but, at the same time, metal prices are getting an additional boost because of Trump’s plans to spend big on the nation’s infrastructure. However, gold’s demand won’t be affected by infrastructure spending. As a result, investors are left without reasons to buy gold at this moment.

That still appears to be the case here in early December, as the US gold price on our MetalMiner IndX hit its lowest point in 10 months, falling to $1,173/oz on Dec. 1 — just over an 8% drop from Nov. 1.

(Silver prices followed suit across 4 markets globally, all dropping from November to December.)

Gold Price Predictions: Will Precious Index Fall Further in 2016?

The US gold bullion price as tracked by our MetalMiner IndX has fallen to a record low for this month’s MMI reading — $1,064.50 per ounce — the lowest we’ve seen since the Monthly MMI series began in January 2012.

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Indeed, as we’ve reported on MetalMiner’s digital pages earlier this week, gold officially hit $1,054 per ounce – a five-year low. That price hasn’t been seen since February 2010.

Gold prices —which also fell in China, Japan and India as tracked by the MetalMiner IndX — are the obvious persona non-grata (as far as investors are concerned) in this month’s Global Precious MMI slip, itself a record low at a reading of 68, down 11.7% from 77 in November.

precious metals price index chart december

US Dollar to Blame

The No. 1 driver forcing gold into the Hadean depths of price charts everywhere is the strength of the greenback. As my colleague and metals procurement specialist Raul de Frutos commented earlier this week, “there’s no question” that the dollar is wreaking havoc on gold price — just check out this visual:

[caption id="attachment_75359" align="aligncenter" width="500"]Gold sinks (yellow) as dollar surges (green) simultaneously. Source: MetalMiner analysis of @StockCharts.com data. Gold sinks (yellow) as dollar surges (green) simultaneously. Source: MetalMiner analysis of @StockCharts.com data.[/caption]

Yowza. So what’s next?

Watch the Fed

US dollar vs China yuan“Experts forecast a 78% likelihood the Fed would raise rates in December,” Raul writes. “An interest rate hike could (but not necessarily) boost the dollar even higher as it would add more market conviction that the domestic economy is doing well, or at least better than most major economies, which is good for the dollar.”

“Also, if the Fed raises rates, higher borrowing costs domestically would make the dollar more attractive to yield-seeking investors,” he continued.

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What does that mean for future gold prices? According to Raul, many signs point to a continued gold slump.

Dark Horse of this Month’s Index

[caption id="attachment_75346" align="alignleft" width="228"]Adobe Stock/ Björn Wylezich Adobe Stock/ Björn Wylezich[/caption]

Amidst all the gold hullabaloo, we’d be remiss not to mention palladium prices. The US bar price in particular fell nearly 20% since last month.

The PGM seems to be succumbing to pressure from lower Chinese demand, especially within the country’s auto market, the biggest in the world. Also, the knock-on effect of lower prices and lower demand is being felt by the likes of Johnson Matthey. As my colleague and MetalMiner Editor-at-Large Stuart Burns writes, the VW scandal has played a major role in JM’s woes. In the short term, the company’s stock has taken a beating, and in the longer term, look to production of different types of engines — gas, diesel, hybrid/electric — to drive the direction of palladium prices, and the future of companies such as JM.

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