Precious Metals

gold price

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The Global Precious Monthly Metals Index (MMI) dipped 0.7% for this month’s index value, as gold prices have continued to slide.

March 2021 Global Precious MMI chart

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Gold price dips below $1,700/oz

Amid economic uncertainty and turbulence, many turn to traditional safe-haven assets like gold.

However, the gold price has been on the decline since August.

The gold price reached an August peak of $2,035 per ounce. The price fell below $1,800 around Thanksgiving before recovering to around $1,950 at the start of the year.

Since then, gold has come back down, falling to $1,698 per ounce on Monday.

US dollar regains some strength; treasury yields gain

The US dollar and the gold price are generally inversely correlated.

As such, the US dollar has shown some strength of late.

The dollar index reached 92.30 on Monday and is up 2.64% in the year to date.

In other indicators of strength, the 30-year treasury yield reached 2.31% on Monday, up from 1.66% to start the year. Meanwhile, the 10-year yield reached 1.59% on Monday, up from 0.93% to start the year.

Meanwhile, as we’ve noted previously, other factors potentially weighing on gold include adoption of cryptocurrency by some investors. While Bitcoin’s volatility is significant, the price has surged this year. Bitcoin reached $53,806 to start the week, down from the all-time peak of $57,489 reached late last month. However, Bitcoin is still up 83% on the year.

Automotive precious metals continue to surge

Prices for precious metals used in automotive applications continue to rise — to the chagrin of automotive manufacturers.

Rhodium, for example, used in catalysts that deal with emissions, continues to surge. After reaching $16,000 per ounce in late January, the price reached $25,800 per ounce Monday, or up approximately 61%.

Meanwhile, palladium’s gains have not been as significant, but the price remains elevated. At $2,234 per ounce on Monday, the palladium price is up 47% since its 2020 trough in late March 2020.

In an interview with the Financial Times, Nissan Chief Operating Officer Ashwani Gupta cited the challenge of rising raw material prices, particularly precious metals.

Sibanye-Stillwater reports six-month results

South African miner Sibanye-Stillwater last month reported its results for the six-month period ending Dec. 31, 2020.

The firm’s profit jumped to $1.78 billion, up from $5 million during the same period in 2019.

In its 4E PGM category in South Africa — rhodium, platinum, palladium and gold — production reached 918,679 ounces, down from 980,343 ounces the previous year.

Meanwhile, 2E PGM output in the US — that is, platinum and palladium — totaled 305,327 ounces, down from 309,202 ounces.

“2020 was a defining year for the Group, marking the end of the deleveraging phase that has prevailed over the past three years,” Sibanye-Stillwater CEO Neal Froneman said. “Despite the significant challenges associated with the COVID-19 pandemic, the Group delivered a record financial performance and made notable progress towards delivery on many strategic targets.”

Newmont reports production results

In other production news, top gold miner Newmont Corporation reported fiscal year 2020 net income of $2.14 billion, up from $970 million the previous year.

Furthermore, Newmont’s attributable gold production fell to 5.91 million ounces, down from 6.29 million ounces the previous fiscal year.

Gold production fell due to “Yanacocha and Cerro Negro being placed into care and maintenance in response to the Covid pandemic, lower ore grade mined at Ahafo and the sale of Red Lake and Kalgoorlie, partially offset by a full year of operations from assets acquired in April 2019,” the miner said.

Actual metals prices and trends

The US silver price dipped 1.0% month over month to $26.70 per ounce as of March 1.

The US platinum bar price rose to 10.8% to $1,181 per ounce. Meanwhile, the US palladium bar price rose 3.2% to $2,229 per ounce.

The Chinese gold bullion price fell 6.4% to $56.45 per gram. The US gold bullion price fell 6.1% to $1,736 per ounce.

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The gold price has been on the rise during the pandemic this year. As infections rise, vaccines loom on the horizon and economies gradually recover, what do we expect from the gold price in 2021?

Gold price bulls

The bulls are predicting a resurgence in the price to U.S. $2,300 per troy ounce in 2021.

Goldman Sachs stated last month they had a target of $2,300, as recovery from the the coronavirus-related recession fuels higher inflation next year. Goldman’s economics team sees inflation rising to 3% next year before weakening through year-end. Further fuel could be added from a recovery in demand from India and China.

Punchy, you may think.

The gold price rose strongly in the first half of 2020, in large part due to the fall in both nominal and real yields. An increase in safe-haven investment demand in the wake of the virus-induced economic slump also contributed, Capital Economics wrote recently. The research house explained the the price rise has been strong since the start of 2019, riding an 18-month surge in demand for ETF holdings as a safe-haven investment. That is a process that gathered pace in the face of the pandemic.

Gold price retraces after August peak

However, the gold price has dipped from its August peak. Investors rotated out of safe havens into riskier assets on hopes of a vaccine-induced economic boom next year.

The story here is more conflicting. Yes, vaccines appear to be coming faster than London buses in rush hour.

However, so are infection rates and hospitalizations.

It will be a dark winter, as actual vaccination rates fail to live up to expectations and people continue to die. However, markets generally look forward, not at the present. The expectation remains that, sooner or later, markets will recover as vaccinated immunity spreads through the population.

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silver price

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Silver’s rise has been meteoric since its low in mid-March.

The precious metal’s surge has been particularly notable over the last month.

Both gold and silver have benefited from cheap money, a weak dollar and stronger oil prices. The yield on the benchmark 10-year U.S. Treasury note is presently around 0.57%, while the oil price is holding around $42 per barrel.

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Dollar’s slide drives commodities up

Driving all commodities higher, the U.S. dollar index has slipped nearly 7% in the last three-month period. Measured against six major currencies, the dollar is down nearly 9% from its March highs and is on track for its worst month since 2011, according to a Yahoo Finance report.

Other investment products, like Bitcoin, are also up sharply.

However, gold and silver have been stealing the headlines.

Investors are betting on gold going through $2,100/ounce shortly and silver to top $30/ounce.

Silver lining

Unlike gold, though, the fundamentals for silver have some decent legs.

The LME has operated the LMEprecious suite of exchange-traded contracts since 2017. In a recent update note, the LME reported industrial demand for silver last year topped 16,200 tons. Furthermore, demand is forecasted to increase thanks to its role as a component in antennae for the new 5G mobile network infrastructures being rolled out around the world.

Like gold, silver benefits from the jewelry market, which is expected to pick up as economies gradually recover from lockdowns. In addition, silver has a wide range of industrial applications, which are coming back fast — first in Asia, but now in Europe and the U.S.

Looking ahead at the silver price

Two weeks ago, analysts at Goldman Sachs lifted their 12-month forecast for silver to $30 per ounce by year’s end.

However, that prediction became within reach after just a fortnight.

The bank’s prediction was based largely on the back of an expected continuing weakness in the greenback. The analysts argued a further 5% decline is probable before the year’s end. On top of that, no end is in sight for rock-bottom interest rates.

Silver’s rise has been so dramatic over the last 30 days; a pullback is to be expected.

In fact, silver bulls are said to be looking for short corrections to create more value to add to positions.

Both gold and silver retrenched yesterday. Gold fell below $2,000/ounce, while silver dropped toward $27/ounce.

But whether that will be enough to dampen spirits for a push higher in coming weeks will depend on the course of the dollar, indications on post-pandemic recovery and further action by the Fed regarding longer for lower interest rates.

You’d be brave to bet against it.

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Early this year, the silver market was going through a tough time.

Its reaction to the growing pandemic was in stark contrast to that of gold. The disconnect between the two metals rose to historic proportions, as gold rose on the back of deeply negative real interest rates and expectations, justified or otherwise, of rising inflation as a result of massive fiscal stimulus.

Read more

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This morning in metals news, precious metals prices have taken a hit, Washington state repealed a tax break that had benefited Boeing and the Pilbara Ports Authority released February shipping data.

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Precious metals tumble

Earlier this week, we noted gold prices surged above $1,700/ounce, as investors rushed to the safe haven amid the ongoing coronavirus (COVID-19) outbreak.

However, the gold price closed Thursday at around $1,575/ounce and fell lower still early Friday, down to $1,547/ounce late Friday morning.

After closing Wednesday at around $16.72/ounce, the silver price closed Thursday at $15.80/ounce and traded even lower as of Friday morning, down below $15.00/ounce.

Washington state repeals Boeing tax break

Washington state has opted to repeal an aerospace tax break that benefited U.S. manufacturer Boeing, Reuters reported.

Boeing has for 16 years represented one half of the ongoing Boeing-Airbus tariff battle between the U.S. and E.U.

A decision from the World Trade Organization (WTO) regarding potential E.U. tariffs on U.S. goods is expected later this year. Late last year, the WTO gave the U.S. the green light to impose up to $7.5 billion in tariffs on E.U. goods in response to European subsidies of Airbus.

PPA releases February ports data

Australia’s Pilbara Ports Authority reported total monthly throughput of 49.7 million tons in February, which marked a 9% year-over-year decrease.

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Throughput at Port Hedland, the vital iron ore terminal, reached 39.0 million tons (38.7 million of which was iron ore), down 1% from February 2019.

We have covered the precious metals and palladium, in particular, a few times over recent months, not because we have suddenly become PGM investors (although looking at price performance, that would have been a fortunate move) but simply because they are the only metals sector showing any real dynamism.

Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today!

The base metals have at best been lackluster. Aluminum has been range-bound for much of the last nine months, as has most of the base metals complex.

Copper has perked up since about November on the back of expectations of a thaw in U.S.-China trade relations. Nickel got interesting toward the back end of August when the market reacted to news of an Indonesian export ban but has since sunk back.

Only the precious metals have risen and sustained their rises during the period — albeit for differing reasons.

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Several years ago, analysts and mainstream publications once speculated the yuan would eventually replace the U.S. dollar as the world’s reserve currency.

But with most commodities still priced in U.S. dollars, especially oil, the U.S. dollar has remained the world’s reserve currency.

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The U.S. dollar is also a key currency in the precious metals market.

Source: MetalMiner data from MetalMiner IndX(™), Macrotrends.net and Yahoo.com

U.S. and Chinese gold bullion prices, as seen in the chart above, move closely together. Meanwhile, they both tend to move inversely against the dollar.

In other words, as the dollar gains strength, gold prices grow weaker in both countries.

The yuan fluctuates more widely against the dollar, with little apparent impact on gold prices.

Source: MetalMiner data from MetalMiner IndX(™) and Investing.com

Here is a more typical look at the relationship between U.S. values, with gold priced per ounce, which clearly shows the inverse price relationship.

MetalMiner recently caught up with Americas Silver Corporation President and CEO Darren Blasutti regarding underlying gold and silver price trends.

Blasutti explained the transition away from oil supports gold’s bullishness. Once that happens, the rationale for holding U.S. dollars weakens greatly, while currency diversification, including precious metal purchases, will continue to make sense.

Whereas industrial metals have shown more price volatility during certain periods, gold prices have stayed relatively more stable, according to Blasutti, therefore making it more attractive for mining companies.

Source: MetalMiner data from MetalMiner IndX(™)

Gold prices have enjoyed some price support during the past year or so, but still remain lower than in the recent past. Still, prices are trading in a fairly stable sideways band and have done so, more or less, since 2013.

Historical Roots in Silver

Prior to moving into gold mining, as most other major silver companies have done to date, Americas Silver Corporation mined a mixed market basket including silver, zinc and lead.

With prices for silver quite low in the recent past, it’s difficult to justify mining the metal from a cost perspective. As a result of falling silver prices following the acquisition of two key silver projects, Americas Silver Corp. transitioned from predominantly silver mining toward lead and zinc.

Over time, the mining strategy shifted toward higher grades of lead and zinc and lower silver quality. It made more sense to take advantage of higher zinc and lead prices, while silver prices suffered a lengthy slump.

Into the foreseeable future, while silver prices remain lower, the company continues to focus on mining its lower grade silver, leaving the higher grades in the ground because the company remains bullish on long-term silver prices.

“When silver does come back, we can increase ounces quite dramatically on the silver side,” Blasutti said.

The company’s acquisition and startup of the Relief Canyon Mine, located in Pershing County, Nevada, for gold mining will transition the company from a base metals mining company back into a precious metals mining company.

“Part of the impetus to get back to precious metals was to get a commodity that we thought had less volatility,” Blasutti said. “Gold has shown to have less volatility in the last period, much more than the base metals. Base metals traded in a range and gold has traded in a range, but the range hasn’t been severe [for gold].”

Source: MetalMiner data from MetalMiner IndX(™)

So far, even with the trade war at hand, silver prices remain low.

Source: MetalMiner data from MetalMiner IndX(™)

As shown in the chart above, the gold-to-silver price ratio continues to increase toward gold.

But as pointed out by Blasutti, those remaining silver companies stand to win big once prices for the metal turn around. He pointed out the last time prices stood at around this ratio (90.3:1), silver came back.

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What This Means for Industrial Metal Buyers

Given projections for the reduction of oil use in the long-term as stricter emissions standards come into effect, demand for the dollar could decline into the future.

As demand for the dollar weakens, we can expect gold prices to rise. Once gold reaches higher prices, silver may finally follow suit, with the gold-to-silver ratio finally dropping back from current highs that strongly favor gold mine production.

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This afternoon in metals news, the U.S. renewable energy industry has reason to worry about the Republican tax proposal, union members at the Quebrada Blanca copper mine in Chile move closer to a strike, and precious metal prices fall.

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Renewables Market Pushes Against BEAT Tax

While the Republicans’ latest attempt at an overhaul of the U.S. tax system is receiving the usual praise and criticism, the renewable energy sector is concerned – and understandably so. As Dino Grandoni explains in the Washington Post, the bill may inadvertently end investment in wind and solar energy.

Currently, many companies have large multinational corporations finance wind or solar energy projects, and in return, give the latter the renewable energy credit that the government provides. But these credits may be cancelled out as part of the base erosion anti-abuse (BEAT) tax, which is meant to discourage multinationals from moving profits abroad.

According to the American Wind Energy Association’s Peter L. Kelley, the BEAT tax – if it is not amended to exempt renewables credits – could put an end to more than half of the country’s wind projects.

Strike Brewing at Quebrada Blanca Mine

A quarter of the workforce at the Quebrada Blanca copper mine in Chile moved closer to a strike, as the 106-member union rejected Canadian miner Teck Resources’ contract offer on Wednesday, Reuters reports. Ninety-six percent of the union voted to reject the offer and strike, said the president of the union. Read more

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This morning in metals, the U.S. dollar index is up, while gold and silver prices are on a downward trend and oil prices dip slightly from Monday’s high. In addition, there’s a very intriguing potential source of renewable energy on the horizon.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

A drop in U.S. oil inventories has helped oil prices stay more or less steady, Reuters reports. The biggest factor supporting oil prices has been Turkey’s threat to cut off oil exports from Kurdistan, and this past Monday, the price of oil came close to $60/barrel for the first time since June 2015.

U.S. Dollar Index Rises, Precious Metals Fall

Gold and silver prices fell to four-week lows as the U.S. dollar index climbed to a five-week high, fueled by the expectation that the Feds will hike up interest rates again, Reuters reports.

As Stuart Burns wrote earlier this morning, “Trump’s United Nations speech threatening annihilation on North Korea failed to support the gold price, as investors took a cue from central bank announcements that the Fed intends to start unwinding its multi-trillion dollar balance sheet in October.”

A New Renewable Energy Source?

Could 70% of U.S. energy come from plain old H2O? According to new research, energy from water evaporation could provide a staggering 325 gigawatts of power. Read more

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This morning in metals news, a recent report predicts the precious metal catalysts market will reach $19.4 billion by 2022, Reliance Steel and Aluminum Co. posted strong second-quarter numbers and   China’s Ministry of Commerce says it is willing to work with the U.S. on global aluminum market issues.

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Precious Metal Catalysts Market to Grow to $19.4B

Precious metal catalysts will prove to be especially precious on the market in the near future, according to a report from Research and Markets.

The report indicates the market will grow from $14.37 billion this year to $19.41 billion by 2022, at a compound annual growth rate (CAGR) of 6.19%.

Why is this metal sector set to become even more precious? Advances in automobile technology and pharmaceutical applications will see a rise in demand for this subset of metals, according to the research report.

“The newly developed emission standards demand additional improvements in catalyst technologies to successfully remove toxic substances from car exhausts, which will, in turn, drive the precious metal catalysts market growth through the automobile sector,” the report states.

A Good Q2 for Reliance

Reliance Steel and Aluminum Co. — the largest metals service center operator in North America,  headquartered in Los Angeles — posted strong numbers for this year’s second quarter.

According to a report on the Nasdaq website, the company reported a bottom line of $103.1 million, ($1.40 per share), compared with $99.5 million, or $1.36 per share, for Q2 of 2016.

The company’s revenue total also rose in Q2 by 12.7% to $2.48 billion, up from $2.20 billion last year.

China Signals Willingness to Work on Aluminum Market Issues

Ever since announcing Section 232 investigations of steel and aluminum, the Trump administration and the U.S. Department of Commerce have made it clear that Chinese excess capacity is the primary focus (notwithstanding the fact that Chinese steel and aluminum represent relatively small portions of U.S. imports).

On the heels of the U.S. International Trade Commission’s (USITC) Section 332 report on competitive factors affecting U.S. aluminum, China’s Ministry of Commerce suggested a global approach to tackling problems within the aluminum market, Reuters reported.

According to the Reuters report, Ministry of Commerce spokesman Gao Feng did not agree with the assessment that the USITC report accused China of “sponsoring” its aluminum industry.

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The results of the aluminum investigation will likely not be coming for some time, as the steel report is expected to come first. However, June came and went without a steel 232 announcement. Plus, if President Donald Trump’s comments earlier this week are any indication, steel trade policy doesn’t seem to be a top priority at the moment, particularly as the health care debate continues to heat up.

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