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Heraeus Precious Metals Update

Recovery after reaching a five-week low

Gold opened the reporting week at 1,254 $/oz and lost 10 $/oz on that same trading day. Afterwards it broke through the 100-day-average at 1,243 $/oz and on Wednesday it reached a five-week low of 1,241 $/oz. The precious metal stabilized again on the last two trading days, closing the week at 1,257 $/oz. From a technical perspective, there is resistance at 1,294 $/oz in the coming trading week and support at the weekly low of 1,241 $/oz.

Gold has been in a short-term downward trend since the beginning of the month. Overall demand on futures markets has fallen a bit as of lately. Record highs on international precious metals markets have also put some pressure on prices. After oil prices quickly dropped to a nine-month low this week, however, investors became somewhat more risk-averse, as a result of which precious metals - especially Gold - trimmed their losses somewhat.

The second half of the year will likely remain challenging for the Gold and precious metals market, as what has proven to be a turbulent political year is expected to continue. First, there is the G20 summit meeting in Hamburg at the beginning of July, which will feature the first major international appearance by French President Emmanuel Macron, who must now live up to the high expectations that have been placed on him. At the end of September there will be elections for Germany’s Bundestag, the outcome of which is still uncertain. The Brexit negotiations which recently got underway, Donald Trump’s policies, and the strained situation in North Korea will remain long-term issues. Another crucial issue for the price of Gold will be future interest rate decisions by the ECB and the Federal Reserve as well as the impact of such decisions on the US dollar.

Positive outlook for Silver

Silver behaved very similar to Gold this week. It opened the reporting week at 16.70 $/oz, and fell to 16.49 $/oz on the same day. Silver fell to a weekly low on Wednesday, too, with the metal falling to 16.37 $/oz - a level it had last reached in mid-May. It climbed back up to 16.79 $/oz by the end of the week. The Gold:Silver ratio is at its highest level since March 2016, at 75, which represents a good Silver valuation.

Despite the negative sentiment among speculators, physical demand remains strong as a result of the low price level. For this reason, market participants generally see good fundamental data for the second half of the year, which, along with increasing investor interest, may lead to a positive trend for Silver. Industrial demand for Silver is largely dependent on the US economy, as a result of which implementation of the reforms announced by Trump will have a decisive impact. For the coming trading week, we see support at the psychological barrier of 16 $/oz and resistance close to the 200-day-average of 17.37 $/oz.

Platinum continues to fall

Platinum opened the reporting week at 924 $/oz and then fell over the course of the week. Toward the end of the week, the price recovered somewhat, reaching its weekly high of 934 $/oz on Thursday before closing the reporting week at 931 $/oz. As a result, the Platinum trend was also similar to the trend for gold, while sister metal Palladium once again went its own way.

EU automobile sales in May were surprisingly strong, rising by 7.9% in comparison to April. In particular, diesel-heavy countries such as Germany and Spain contributed to this growth. At least in the short term, this should have a positive impact on Platinum demand. In general, the metal faces challenging times with respect to the automobile industry. According to estimates, Platinum will increasingly be replaced by Palladium. In addition, stricter European emission standards could have a negative impact on Platinum demand over the long term due to the alleged displacement of diesel engines in the automobile market. A decisive factor will be the speed with which proposed bans on diesel are implemented in large cities.

Palladium is slowly fighting its way back up

Following sharp price movements at the beginning of the reporting month, the price of Palladium fell again somewhat, mainly as a result of profit-taking. Although the precious metal once again showed signs of an upward trend it lost some value again on Friday. Palladium opened the reporting week at 864 $/oz and closed at 863 $/oz on Friday. Due to the recent volatility in the Palladium market the margins on NYMEX Palladium Futures rose for the second consecutive week – by 22.2% on June 16th and 18.2% on June 23rd.

As already reported, Palladium is profiting from the current expectations that the supply of Palladium will not meet demand for the sixth year in a row. Despite reports that demand in the US and Chinese automobile industries is falling, analysts believe that overall demand for Palladium will continue to rise over the long term. This is because although emission standards in Europe will lead to tighter restrictions in the diesel market, there is no comparable effect in the gas market. Furthermore, demand will rise in particular on the Chinese automobile market, with sales of new vehicles there expected to reach more than 29 million by 2020. This will mainly be driven by increasing urbanization and higher average Chinese incomes.

Price of Rhodium continues to rise; Nervous Ruthenium market; Increased demand for Iridium

Driven by another large surge in demand, the price of Rhodium once again rose sharply during the course of the reporting week. There were purchases in physical form both by users and consumers and on the hedging side, as a price under 1,000 $/oz still seems attractive. However, at the end of the reporting week we were well above the psychological threshold of 1,000 $/oz as a result of the number of purchases, which reduced demand somewhat. For the coming week, it remains to be seen whether there will be additional purchases at this level or whether initial profit-taking will put pressure on the price again. We also failed to break through this level at the end of April. However, given the speculation regarding diesel vehicles demand seems to be somewhat more sound at the moment. Driven by another large surge in demand, the price once again rose sharply during the course of the reporting week. There were purchases in physical form both by users and consumers and on the hedging side, as a price under 1,000 $/oz still seems attractive. However, at the end of the reporting week we were well above the psychological threshold of 1,000 $/oz as a result of the number of purchases, which reduced demand somewhat. For the coming week, it remains to be seen whether there will be additional purchases at this level or whether initial profit-taking will put pressure on the price again. We also failed to break through this level at the end of April. However, given the speculation regarding diesel vehicles demand seems to be somewhat more sound at the moment.

Ruthenium had little to offer last week and there was therefore still absolutely no price-side movement. Demand was at a fairly below-average level, which gives little reason to expect major price movements now that summer is here.

Physical demand from the previous week has continued and the price of Iridium has exhibited the expected reaction. We continue to see stable interest in buying from a wide variety of Iridium users with a limited supply. Although there is certainly no extreme shortage and buyers do not have to fear a panic, the scenario will have an impact on future price trends. We therefore anticipate a similar situation over the next few weeks, with slow price increases if there are no surprise “sources” that provide the market with greater quantities.

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  • Rhodium
  • Gold
  • Silver
  • Iridium
  • Palladium
  • Platinum
  • Ruthenium
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