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Heraeus Precious Metals Update

Investors flee to safe havens

Gold posted an impressive performance in the last trading week, making great strides toward its two-month high of $1,296/oz. Beginning from an opening price of $1,259/oz., the metal was able to post daily gains. Thus, in light of growing political tensions surrounding North Korea, it has managed to convincingly underscore its reputation as a safe haven. Most of all, it was the promise by US president Trump of retaliation ”with fire and fury like the world has never seen” to threats from North Korea that brought about an increase in the price of gold. The futures markets also showed clear movement on this latest step in escalation. At 148,837 contracts, COMEX net long futures positions reached their highest level in 6 weeks. If the short covering continues, this could further boost the price of gold.

As a result of lower-than-expected US inflation figures on Friday afternoon, we remain bullish and anticipate that gold will approach the psychological threshold of $1,300/oz. We see technical support at $1,274/oz. (76.4% Fibonacci level) for the coming trading week. At the end of August, the ‘Jackson Hole Economic Symposium’ could capture investors’ attention as a turning point due to potential new interest rate signals expected from the FED and ECB.

Silver continues to shine

After opening the trading week at $16.33/oz., the metal shone over the following days with fundamental strength, breaking through the resistance reported the week before. Silver made an impressive recovery with a weekly gain of over 4.5% after poor US labor market data in the previous week had triggered yet another wave of heavy selling pressure. Similar to the trend for gold, the short positions in the silver futures market also fell further, allowing the net long futures on the COMEX to climb to a four-week high. Physical demand for granules remains strong.

Assuming a closing rate of $17.15/oz., we expect technical support at $17/oz. and resistance at $17.17/oz. (61.8% Fibonacci level) for the coming trading week.

Platinum sheltered by gold

The reporting week was dominated by the conflict with North Korea and slightly improved fundamental data for platinum. It opened the week on Monday at $970/oz. and climbed to $987/oz. by the end of the week. We expect technical support at $953/oz. (200-DMA) and resistance at $998/oz. (week-high) for the coming trading week.

Fears of an armed conflict between the US and North Korea drove investors to sell stocks on a large scale. They turned to investments that are widely considered to be safer, like gold, as well as platinum, which is currently a cheaper alternative to gold. Last week, the platinum-to-gold ratio dropped down to its lowest value since March of this year at 0.78. As a result of geopolitical conflicts, platinum is also currently benefiting from an increased correlation to gold. The mood for platinum improved slightly last week due to positive fundamental data both on the supply and on the demand side. The heated discussion surrounding a diesel ban in the European city centers seems to have leveled off, and media reports tell of some minor disruptions in South Africa on the supply side.

Palladium remains at a high level

In the last week, palladium lost some ground compared to platinum, opening $80/oz. below the price of platinum at $890/oz. It had already exceeded $900/oz. at the beginning of the week as a result of the overall upswing. The closing price on Friday was $899/oz. We expect technical support at $871/oz. (50-DMA) and resistance at $910/oz. (month-high) for the coming trading week.

The reporting week was also characterized by steady demand for palladium both from the industrial sector and from investors. Automobile sales in China increased by 5.5% in July to 1.7 million, and 0.6% more cars were sold in the first 7 months compared to the same period last year. The average palladium content in the catalytic converters of Chinese automobiles has also risen due to more stringent emissions standards.

Further rise in rhodium due to physical demand; significant increase in demand for ruthenium; Iridium market situation remains somewhat relaxed

Rhodium’s consolidation which began the previous week, continued. Excellent physical demand from users and consumers, especially from Asia, stimulated a further price increase of $30. We are now approaching the annual high of 2017 and, should this strong industrial demand endure, we will see new annual peak prices in the coming week. In this regard, however, we should not overlook the investors who will, no doubt, keenly observe how the price continues to develop and also be able to play an active role in any further price increases.

Ruthenium has been attracting attention for some time now on account of a considerable rise in demand and did so again during the reporting week. Purchases were made by both the electronics and the chemical industry. But as the metal availability is still good prices have only increased marginally.

Improved liquidity has led to a somewhat relaxed market following the turbulent weeks and months, though there is still a strong buying interest from iridium users. However, over the past 3 to 4 weeks mines had recourse to a somewhat greater supply, and this made itself apparent on the market, also hindering any further upward price movement. We will not be able to tell whether the liquidity situation will endure until after the summer vacation period.

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

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