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Fed decides against interest rate hike

Gold benefits from uncertainty in the US economy

It was no surprise and still, the Gold price increased significantly: The US Federal Reserve decided against an increase in interest rates at its meeting last week. This step is now widely expected for December - based on the Fed Futures Fund Rate the probability of this scenario lies at 60%. Why is the Gold price in this environment then able to climb as high as 1,343.60 $/oz? Firstly, the Fed has lost credibility in the recent past by regularly "announcing but not delivering" interest rate increases. Secondly, the US economy does not develop strongly enough for a rate increase to be the “sure thing”. Gold is benefitting from this uncertainty. A rate hike in December still seems likely – as long as the environment does not alter for the worse - but still, there is currently no reason for a general turnaround in US central bankers’ policy. Supportive impulses for the Gold price are coming increasingly from the uncertain outcome of the US presidential election. In the medium term, the metal should therefore remain in demand. Also investors are already positioning themselves for the steady rise in prices. Both ETFs and futures exchanges are recording respective purchases. Should profit taking set in, it is due to these positions making the Gold price in the short term vulnerable to corrections. In this case we expect first technical support at 1,307 $/oz, the current 100-day moving average price.

Silver still with support

ETF holdings see further increases

Silver closed a strong week with an increase of 4.7% and established itself close to the 20 $/oz mark. In the course of last week, the metal was able to climb as high as 20.06 $/oz - the highest level in 2.5 weeks. Compared to Gold, Silver increased the ratio to 68.65 and ETF holdings rose to a new record high. Reasons are the macroeconomic environment with good economic data from the United States and China, as well as the monetary environment with a still hesitant Federal Reserve, which still has not increased rates. Neither has the ECB announced an extension of its bond purchasing program at its last meeting. This is expected to happen at the next meeting. All of this creates a good environment for further increases in Silver prices. From a technical perspective, relevant levels are the Fibonacci points at 20.13 $/oz as resistance and support at 19.24 $/oz.

Platinum recovering again

Fear of supply shortages drives the price

After seven consecutive weeks with losses, Platinum rose by over 50 $/oz in the course of last week. Just before, we had recorded the strongest sales since November 2015 in a single week and the metal had closed just above 1,000 $/oz (psychological support). With the return of Chinese business after public holidays, the metal then, however, recovered, jumping up to 1,065 $/oz. The Platinum / Palladium ratio dropped to 1.48 – the lowest level since November, 2015. This development was further supported by news out of South Africa as there is so far little hope for a wage agreement to be reached in the near future between the negotiating parties. Word is that supply shortages may be the result due to the increasing risk of strikes. In addition, Anglo Platinum announced a temporary reduction of production capacity by about 70.000 to 100.000 ozs of Platinum due to maintenance of the "Waterval" smelter. The premium for Platinum sponge is still comparatively low.

Palladium on the rise again

Briefly exceeding the 700 $/oz mark

Palladium is on the rise again after receiving good support at 650 $/oz last week. Since the beginning of this week increasing prices could be recorded, which briefly even exceeded the 700 $/oz mark. The metal thus benefitted from the interest rate decision by the Fed on Wednesday. Technically, Palladium defended the 635 $/oz level and has now room to climb higher. Support lies at 651 $/oz. While imports of Silver and Platinum to China have declined, respective volumes of Palladium have risen by 13% over the course of the year. If no agreement can be reached in the wage negotiations in South Africa, Palladium would probably benefit most, since the metal relies strongly on the demand side - especially from the automotive industry. The premium for Palladium sponge is so far unaffected.

Rhodium / Ruthenium / Iridium

Rhodium performing well, Ruthenium unchanged, Iridium for now stable at low turnovers

Rhodium has been able to perform relatively well in recent weeks, but without convincing sustainably. Due to Rhodium’s negative performance in recent months, it is a relief to see the metal simply stabilize rather than go into further tailspin. Turnovers are currently on a stable level and demand, especially by the automotive and chemical industries, is steady. Looking ahead, we may see higher prices in the medium term. Ruthenium remains lethargic, trading unchanged at the same price level. The situation in Iridium has slightly settled. Unfortunately not, however, because supply has increased and the market has cooled down as a result. The opposite seems to be the case: Due to scarce liquidity only smaller transactions are being completed and here often the decision is driven by the need rather than the price. Currently only small amounts can be handled. In response, suppliers, understanding the situation, will sell at respectively high prices only. Also in the medium term, we do not see any improvement yet so that the situation will continue to be problematic for the market. The price will remain on a high level and based on the current situation is likely to increase further.

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  • Rhodium
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  • Iridium
  • Palladium
  • Platinum
  • Ruthenium
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