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Heraeus Precious Metals Update

Gold makes gains over the weekend

Up until the final spurt on Friday, it appeared that investors were waiting to see the effects of December’s expected interest rate hike in the US and the uncertain future of US financial politics. The price of gold was largely stagnant at around 1,280 $/oz for the past trading week. Gold reached an interim high of 1,293 $/oz on Tuesday in line with a weak US dollar, and then initially lost in value again. The news on Wednesday that Trump’s 2016 election campaign may have been under Russian influence lent little support to the price, and gold did not increase significantly in value until Friday, ending the trading week at 1,294 $/oz. Main driver was the uncertainty about the progress of Trump’s US tax reform. The US President’s planned tax reform, which aims to lower corporate tax from 35 to 20 percent, has served as a buying incentive. The House of Representatives has already approved the plan and now voting can begin in the Senate—although there is resistance within Trump’s own ranks there. A decision on the plan could be made in the coming trading week. Opponents of the reform say that this transformation will only benefit the wealthy sections of society and corporations.

As we reported previously, global demand for gold is at an 8-year low. ETF stocks also remain considerably below the previous year’s level, although they have been able to make gains in every quarter of 2017 so far. Investors continue to use gold in order to hedge against risks, although geopolitical tensions, such as the North Korean conflict, have receded into the background somewhat in recent weeks, and investors have, overall, focused more on the stock markets.

On the charts, there is tension due to gold’s current battle for the 100-day moving average at 1,280 $/oz. If it is significantly surpassed, this would be seen as a clear signal to buy.

Silver in the wake of gold

Price-wise, the trading week started out rather unspectacularly for silver. Silver broke through the 17 $-mark at the beginning of the week and traded slightly above this range during the week before shooting upward in the wake of gold on Friday evening. Silver closed the trading week at

17.31 $/oz.

On the Comex, the net long position increased to a current level of 81,141 contracts. We expect technical support at 16.88 $/oz. for the coming trading week.

Platinum in the waves of Gold

Over the last week, platinum traded in a range between 930 $/oz and 940 $/oz – until Friday as Platinum correlated with Gold and strongly gained in value. As a result, the ever-widening gap between platinum and its sister metal palladium could be narrowed again a little bit. This morning Platinum is however trading approx. 15 $/oz lower which confirms that this short-term price jump was lacking in substance. Market participants are now waiting in vain for news that might close this gap again in the short term. The price of platinum may begin to rise again in the long term. Current favorable reports from the mining industry may lift the metal’s price in the future. Market participants were focused on platinum mining production last week, as the military coup in Zimbabwe, the world’s third largest producer of platinum metal groups behind South Africa and Russia, could impact the global supply of platinum, which could in turn increase prices. To date, however, this news has not influenced the price of platinum. Some observers are saying that we need to wait and see whether the change of power in Zimbabwe might even have a positive effect on the mining industry compared to the Mugabe era. And it remains to be seen how long any production stoppages might last. The news from South Africa at present is far less speculative: The platinum giants Lonmin and Impala Platinum continue to face financial challenges that might jeopardize mine output over the long term.

Palladium price once again tests the $1,000/oz mark

After rising non-stop over the past several weeks and breaking through the 1,000 $/oz mark, palladium took a little breather last week. But the metal picked up again on Friday and reached a daily high of 1,002 $/oz, after sliding to a weekly low of 978 $/oz on Wednesday. Palladium has already attempted to sustain a price of more than 1,000 $/oz three times this year. But the metal has only managed to reach this price for short periods. The main reason for its slide over the last week is year-end profit-taking by palladium investors. However, analysts agree that given palladium’s robust fundamentals it seems that a long-term breakthrough of the 1,000 $/oz mark is merely a question of time. But a technical reevaluation may once again be necessary if palladium falls below its support line of 950 $/oz. However, we think it is more likely at present that the metal will exceed the 1,000 $/oz mark on a sustained basis. Sponge premiums and financing costs also remain at a high level, which underscores the strong demand. We currently see the initial technical line of resistance at 1,020 $/oz.

(Surprisingly) sharp price increase for rhodium; Price of ruthenium continues its steady climb; Increased demand for iridium

While it appeared at the end of last week that the rhodium market would settle down and stabilize, the market once again had its own ideas: Large-volume purchases, some of them speculative, drove the price sharply higher at the start of the reporting week. Rhodium clawed back $250/oz. over the course of the week. It is now just $125/oz. below the record high it reached at the end of October. The price fluctuations over the past four weeks – first, a price increase of $400/oz., followed by a decline of $350/oz. and then a quick recovery of $250/oz. – are unprecedented even though the reasons for them are, of course, clear. Potential industrial market participants, sellers and buyers alike, are understandably very nervous and have in some cases overreacted. In general, however, the upward movement appears to be supported by the fundamentals, as the auto industry continues to shift from platinum to palladium and rhodium given the much higher number of vehicles being ordered with gas engines over those with diesel engines. We anticipate a well-supported market with strong physical interest over the coming week.

Although the ruthenium market has settled down somewhat over the past week, overall demand remains at a very high level. There is steady interest from major users and we therefore expect prices to continue to rise over the medium term. However, there are some sellers who will use higher prices to dispose of some of their stocks.

The previous week’s iridium trend continued, and demand is correspondingly at a high, but stable, level. Purchases are generally being made by all consumers and users. If this trend continues, we think prices will be somewhat stronger in the medium term following a long period during which there were no major price changes.

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Precious Metals Update Archive

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

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