Metals market report: News about the changes in prices

This mid-week market report focuses on the latest news and changes in prices in the market of the base and precious metals.

Gold treasure hoard discovered inside an antique piano in Shropshire/Sherna Noah:

Discovery of ‘stunning’ cache made by new owners when they tried to tune an instrument, a substantial amount of gold – described as “potential treasure” – has been found hidden in a piano. The discovery of the “stunning” cache of gold items was made by the new owners of the upright piano when they decided to tune the instrument, which they had been given. They “swiftly reported” their discovery, and the items are being kept safe in an unknown location “under lock and key”. The piano in South West Shropshire qualifies as treasure under the terms defined by the Treasure Act (1996). For a hoard, less than 300-years-old to be treasure, it must be substantially made of gold or silver, deliberately concealed by the owner with a view to later recovery, and the owner, or his or her present heirs or successors, must be unknown.

Mid-Week Trivia:

What animal protected the treasuries of Rome?

Mining.com:

Gold for delivery in February, the most active contract on the Comex market in New York, hit a high of $1,217 in early dealings, up 1% from Friday’s close before giving up some of those gains. If the metal manages to close above the psychologically important $1,200 an ounce level it would be the first time since November 22.

Overall bullish positioning is still 80% below July’s record. Gold is up $80 an ounce since hitting post-US election lows mid-December, but remains down just under $130 from an initial but brief surge on election night, as results showed a likely victory for Trump in the presidential race.

After the relentless cutting back of bullish bets, hedge funds or so-called managed money investors in gold futures and options grew their long positions – bets that gold will trade higher in future – by 57% last week. Derivatives traders added to longs and cut back shorts – bets that gold can be bought back cheaper in future – lifting the net position to 5.4 million ounces from one year lows hit at the beginning of 2017 trading.

Kitco metals/Sarah Benali:

The London-based analyst explained in a recent blog post that the future gold and silver prices really depend on what fiscal policies are implemented this year, particularly by President-elect Donald Trump, and what effects they would have on inflation measures. “While expectations of reflation could be justified, the markets appear over exuberant now, and thus over-bearish on precious metals,” she noted. “Hence we believe there is already room for gold and silver prices to start to recover ahead of any fiscal stimulus taking effect.”

World gold council fears for gold’s appeal amid strength of the dollar:

The World Gold Council has expressed concern that the strength of the dollar could limit the global appeal of gold this year. In a recent report, it noted that in addition to currency issues, heightened political and geopolitical risks could impact on gold prices and consequently jewelers. It noted that key elections in the Netherlands, France, and Germany would increase political risk. While the UK economy is still expanding, it said, the pound fell sharply following the referendum decision and continues to weaken every time the markets sense that there is an increased chance of a ‘hard’ Brexit. In the US, there are positive expectations about some of the economic proposals of president-elect Donald Trump and his team, but there are also concerns, the council said, adding: “the US dollar has gained ground since Trump swept to victory last November, but uncertainty is rife.”

Mining.com/Adam Hamilton:

Gold has hit the ground running in this young new year, a stark contrast to its brutal post-election sell off. Rather remarkably, these strong recent gains accrued despite literally zero buying from one of the gold’s most important constituencies. The American stock investors who almost single-handedly fueled gold’s strong bull market last year are still missing in action since the election. That means big gold buying is still coming.

Silver/Jim Rogers:

For silver, whose price is almost always leveraged to the gold price, the price gain should be even more spectacular, doubling to US$30-plus an ounce if 2017 matches 2009. And if the pattern continues as it did until April 2011 then a spike to near $90 is in order in 2018, after a period of consolidation. Over time if you track the ratio of the price of silver to gold, you will find it fluctuates between an extreme of x80 and lows of x40. This ratio shrinks as a bull market accelerates and is just over 70 now.

Thus, silver is the better buy. That said, you will need a strong stomach because silver tends to be very volatile. But if you want to up your game then the way to go is to buy the stocks of silver producers or exploration companies, or a silver ETF like SILJ.

Palladium/Heraeus Forecast:

Palladium has definitely increased in value during the past year and must now defend its high price level in the year ahead. Prices are expected to range from USD 585 to USD 850 per ounce, with an average value of USD 725 per ounce. The significant driver is the increased demand from China and the US for gasoline engine catalysts. The gross demand for palladium reached in 2016 about 250 tons (approx. 8 million ounces). About 220 tons (approx. 7 million ounces) came from the primary production of the mines. The difference is largely made up by recycling catalytic converters, supplying about 60 tons (approx. 1.8 million ounces) of palladium.

Scrap Register:

Palladium, drawing support from optimism about the auto sector, has been the top-performing precious metal so far in 2017, said Citi Research. The metal rose some 11% last week. The 21% increase in 2016 clearly marked a renaissance in the autocatalyst metal as investors now look to be acknowledging the constructive thesis in earnest. “Crucially, while the major industrial metals have surrendered to U.S. dollar pressure through December, palladium has held firm, closing in on the technical level of $750 an ounce and highlighting the level of conviction the market has on its specific (supply-demand) fundamentals,” said analysts at Citi.

A key will be future U.S. and Chinese auto sales. These auto markets are mainly gasoline-powered and thus use palladium for catalytic converters, whereas Europe’s larger diesel market share requires platinum.

Copper/Mining.com:

At the end of November copper hit an 18-month high on the back of optimism about the possible impact of president-elect Donald Trump’s $500 billion-plus infrastructure plan on the metal, widely used in construction, manufacturing transportation and power industries.

The price has since come off the boil, official customs data from China, responsible for some 45% of global consumption of the red metal, released overnight is helping the metal attempt these heights again. Copper futures trading on New York Comex added a couple of pennies trading near its day high. Copper is up 5.7% this week to Copper price jumps as China imports hit all-time high a one-month high. China’s refined copper imports surged nearly 30% to 490,000 tons in December compared to November, boosting imports for 2016 to a new record of 4.95 million tons, up just under 3% compared to the 2015 total.

Copper Markets got hit by bearish political comments and swing a thousand points to the downside off early highs in minutes this week. The Trump comment that the “Dollar” is too strong derails the red metals off its current runaway freight train run to 261 from a daily high of 271 in the Futures. I keep telling you that this is going to be the normal market action until the summer, so dig in and hedge ANY risk now.

Pete’s Corner

I’m seeing stories now that the Chinese people are getting tired of gold. Let me correct this, the Chinese people are not tired of gold, the Chinese government wants people to move into the Yuan again and they have been trying very hard to break up what has been a love affair with the metal for centuries. According to the latest data, we have received (which, in my humble opinion, is always questionable at best), The People’s Bank of China has reported a reduction in its gold reserves, which is a first certainly for at least the last 16 years.

So overall it appears to me that the investor’s sentiment is staying the same as the sales of gold in Hong Kong are huge and I foresee our 2017 gold sales to the HK at being a record breaker this year. Which means it’s not the people but rather a reflection of the global war on cash and cash derivatives.

Motley Fool:

The price of gold has risen by over 3% in 2017. This already equates to three-quarters of its total return from 2016, which shows just how strong its performance has been in the first handful of trading sessions in 2017. Looking ahead, the recent growth rate in the price of gold may not continue unabated. However, this year could be viewed as the best year in a generation for the precious metal thanks to the risks which the global economy faces.

Michael Birnbaum:

European leaders grappled with the jolting reality of President-elect Donald Trump’s skepticism of the European Union on Monday, saying they might have to stand without the United States at their side during the Trump presidency.

The possibility of an unprecedented breach in transatlantic relations came after Trump — who embraced anti-E.U. insurgents during his campaign and following his victory — said in weekend remarks that the 28-nation European Union was bound for a breakup and that he was indifferent to its fate. He also said NATO’s current configuration is “obsolete,” even as he professed commitment to Europe’s defense.

FT: May pledges to take UK out of EU single market in clean Brexit. “We are leaving the EU, but we are not leaving Europe,” the prime minister told an audience at London’s Lancaster House. She promised to seek an agreement with the EU that meant “the freest possible trade” while allowing the UK to “control the number of people who come to Britain from Europe”. The pound was on track for its best one-day gain against the dollar since 2008, rallying 2.5% to $1.2340. While some of that rise was due to dollar weakness, the increase since the start of the prime minister’s speech amounted to about 1.4 percentage points.

Will commodities’ revival continue in 2017/Globalheadlines.com:

Positive fundamentals in the case of nickel and zinc, silver, platinum and palladium underpinned by a large deficit in stockpiles and the potential impact of tighter ore yields may provide additional impetus for these metals to move higher. In my mind, as I represent the dealers that use and produce these products I can share with you that demand is strong right now. So, the 500-pound Gorilla in the room whose name is Mr. Trump begs the question. Will our new President-elect be able to ram through both the Senate and House a real infrastructure bill coupled with a repeal of the pages of crippling regulations? If the answer is yes, we will have a wild trading year and big swings throughout 2017. If anything, history has provided us with many examples that creativity is enhanced by volatility.

I like Mrs. Ling Wong’s Blog so I put a little bit of it here:

The London-based analyst explained in a recent blog post that the future gold and silver price really depends on what fiscal policies are implemented this year, particularly by President-elect Donald Trump, and what effects they would have on inflation measures.

“While expectations of inflation could be justified, the markets appear over exuberant at the moment, and thus over-bearish on precious metals,” she noted. “Hence we believe there is already room for gold and silver prices to start to recover ahead of any fiscal stimulus taking effect.”

Wong noted that fiscal stimulus could take effect in developed economies in response to what appears to be a failure by monetary policies to return these economies to pre-financial crisis growth levels.

On this date in 1836: Jim Bowie arrives at the Alamo to assist its Texas defenders.

Trivia Answer:

When honking geese alerted the Romans that the Gauls were about to attack the temple where the Romans stored their treasure, the grateful Roman citizens built a shrine to Moneta, the goddess of warning. The link between rescued treasure and Moneta led many centuries later to the English words “money” and “mint.

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DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation in writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.