Commodity Blog

Commodity Prices – Palladium

Most commodities fell as concerns about the debt crisis in the European Union and the slower economic growth of China and the United States made traders wary and unwilling to invest in risky assets. Gold was an exception, running to the upside.

The concerns about the upcoming referendum in Greece can be easily explained. Most Greek citizens are strongly opposed to the austerity measures required by the rescue plans for Greece and very probable negative vote will likely lead to a default of the European country.

There was another report suggesting about a faltering economic growth in the USA. The Purchasing Managers’ Index of the Institute for Supply Management dropped to 50.8 in October from 51.6 in September. Analysts promised an increase to 52.1. The index is dangerously close to the 50.0 level and a drop below this level would mean that the US manufacturing is starting to decline after 27 consecutive months of expansion.

Gold price rose today to $1,726.20 from $1,726.21 today as of 2:35 GMT on COMEX, following yesterday’s advance from $1,716.80 to $1,721.50. Palladium traded today near $638.0 per ounce after yesterday it dropped from $644.0 to $637.0 per ounce. Copper settlement was down from $3.5540 to $3.5130 per pound on yesterday’s trading session.

Metals, together with energy and agricultural commodities, extended its slump today as the debt crisis in Europe eats away confidence of traders.

Goldman Sachs reduced its growth estimates for the world economy and forecast recessions in Germany and France.

Moody’s Investor Serviced cut Italy’s credit rating to A2 with a negative outlook from Aa2, citing:

The main drivers that prompted the rating downgrade are:

(1) The material increase in long-term funding risks for euro area sovereigns with high levels of public debt, such as Italy, as a result of the sustained and non-cyclical erosion of confidence in the wholesale finance environment for euro sovereigns, due to the current sovereign debt crisis.

(2) The increased downside risks to economic growth due to macroeconomic structural weaknesses and a weakening global outlook.

(3) The implementation risks and time needed to achieve the government’s fiscal consolidation targets to reverse the adverse trend observed in the public debt, due to economic and political uncertainties.

The Standard & Poor’s GSCI index declined 1.6 percent.

Gold fell from $1650.40 to $1596.60 per ounce as of 22:51 GMT today on COMEX, following the jump to the daily high of $1675.50. Copper dropped from $3.0955 to $3.0775 per pound. Palladium declined from $586.70 to $569.50 per ounce.

Gold rose today as the decline of prices attracted investors to the precious metal. Gold also gained after Federal Reserve Chairman Ben S. Bernanke spoke about possibility of additional stimulus for the US economy, but failed to detail an actual plan a the next round of quantitative easing.

Bernanke said “the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus”. He also was rather optimistic about the economy in the longer term:

Notwithstanding the severe difficulties we currently face, I do not expect the long-run growth potential of the U.S. economy to be materially affected by the crisis and the recession if — and I stress if — our country takes the necessary steps to secure that outcome.

The statement improved sentiment on markets, but precious metals reacted somewhat strange as gold rallied, while silver fell.

Futures for delivery of gold in December rose $21.10 (1.2 percent) to $1,784.30 by 11:10 on COMEX, yet the yellow metal was still heading for the first weekly loss in eight weeks. Contract for delivery of silver in December dropped $0.003 to $40.79 per ounce. October futures for delivery of platinum advanced $2.50 (0.1 percent) to $1,824.90 per ounce on NYMEX. Contract for delivery of palladium in December gained $0.3 to $753.50 per ounce.

Gold fell, posting the biggest two-day decline in seven weeks, and other precious metal dropped as the European Union pledged to safe Greece from the default if the nation’s government will proceed with the austerity measures. The stronger dollar reduced demand for precious metals as an alternative investment. At the same time, yesterday’s drop of fuel prices diminished appeal of gold and silver as a hedge against inflation.

Adam Klopfenstein, the senior strategist at the broker Lind-Waldock, commented:

Gold is losing the flight-to-quality bid in the near term as the leaders are working toward overcoming the Greek hurdle.

Futures for delivery of gold in August dropped as much as $19.60 (1.3 percent) to $1,500.90 per ounce by 13:45 on COMEX, the lowest price since May 19. The metal tumbled 3.4 percent in the past two days, the biggest drop since May 5. September futures for silver fell $0.366 (1 percent) to $34.65 per ounce. Futures for delivery of platinum in October slipped $17 (1 percent) to $1,680.50 per ounce on NYMEX. September contract for palladium delivery dropped $11.85 (1.6 percent) to $731.50 an ounce.

Crude oil fell today as the Federal Reserve lowered its growth forecast, causing the speculation that demand in the US, the biggest world user, will fall. The central bank kept the interest rates unchanged on today’s meeting and signaled that it’s going to maintain stimulus for prolonged time. Earlier crude gained as the US inventories declined more than expected. August futures for crude oil delivery fell as much as $1.11 (1.2 percent) to $94.30 per barrel on NYMEX, following yesterday’s advance by $1.24 to $95.41.

Gold jumped above $1,550 today as volatility on currency markets made precious metals more appealing as an investment. The euro fell today against the dollar on the speculation that Greece’s Prime Minister will face difficulties in implementing austerity measure even after he won the confidence vote. August futures for delivery of gold gained $7 (0.5 percent) to $1,553.40 per ounce by 13:50 on COMEX. July silver futures advanced $0.36 (1 percent) to $36.739. Futures for platinum delivery rose $5.20 (0.3 percent) to $1,752.40 per ounce on NYMEX. September futures for delivery of palladium went up $3.40 (0.4 percent) to $770.65 per ounce.

Crude oil rose today for the second day as Saudi Arabia reduced its production. The Banque Saudi Fransi reported that the biggest oil producer in the Organization of Petroleum Exporting Countries cut output by 300,000 barrels per day. May contract for crude oil delivery gained $1 to $108.11 per barrel on NYMEX.

Precious metals, including gold and silver, jumped on the speculation that the high prices for raw materials and the low interest rates will increase inflation pressure, boosting demand for the metals as an inflation hedge. June futures for gold delivery advanced as much as $16.80 (1.2 percent) to $1,472.40 as of 13:42 on COMEX. May futures for silver delivery went up $1.427 (3.5 percent) to $41.664 per ounce. June futures for palladium delivery added $8.95 (1.2 percent) to $774.25 per ounce on NYMEX. July futures for platinum delivery rose $18.40 (1 percent) to $1,795.60 per ounce.

Crude oil jumped the most since September 2009 on concerns that tensions in Egypt will spread unrest to the major oil-producing countries. Protesters are going on demonstrations in Egypt, demanding an end to the 30-year rule of President Hosni Mubarak. Suez Canal, one of major path for transporting oil, is situated in Egypt and civil unrest in the country may disrupt supplies coming this way. March delivery for crude oil rose $3.70 to $89.34 per barrel on NYMEX. Prices gained 0.3 percent this week and 21 percent last year.

Gold and other precious metal also profited from Egyptian tensions. The unrest in Egypt turned market sentiment to risk aversion and increased demand for the precious metals as a safe haven. April futures for gold delivery gained $21.90 (1.7 percent) to $1,341.70 per ounce by 13:45 on COMEX. March futures for silver delivery advanced $0.888 (3.3 percent) to $27.919 per ounce. April futures for platinum delivery jumped $1.50 to $1,805 per ounce on NYMEX. March futures for palladium delivery went up $3.50 (0.4 percent) to $817 per ounce.

Crude oil and precious metals, including gold, silver and palladium, gained after a report showed that US employers added fewer jobs than expected and unemployment rate in the US unexpectedly rose, decreasing appeal of the dollar and boosting demand for commodities. Nonfarm payrolls in the US grew by 39,000 jobs in November, compared to the expected value of 143,000 and the growth in October by 172,000. Unemployment rate rose to 9.8 percent, while it was expected to remain unchanged at 9.6 percent.

Poor employment data sparked a new wave of criticism of quantitative easing and fueled concerns about US economy. The Dollar Index, which tracking greenback versus six currencies of major US trading partners, fell as much as 1.1 percent. A decline of the dollar increased attractiveness of commodities. The Thomson Reuters/Jefferies CRB Index of 19 commodities rose 1.3 percent to 316.16, the highest level since November 10th.

January delivery for crude oil jumped $1.19 to $89.19 per barrel on NYMEX. February futures for gold delivery rose $16.90 (1.2 percent) to $1,406.20 as of 14:15 on COMEX. March futures for silver delivery went up $0.699 (2.4 percent) to $29.271 per ounce. March futures for palladium delivery climbed $6.40 (0.8 percent) to $770.10 per ounce on NYMEX.

Wheat slid today for the sixth straight session after favorable weather improved forecasts for winter varieties of the crop in the U.S. The southern U.S. Great Plains have got as much as six times the normal precipitation the last week, causing expectations of an increased yield. July futures for wheat delivery slid $0.015 (0.3 percent) to $4.6625 per bushel as of 10:29 on the Chicago Board of Trade.

Platinum and palladium dropped today as concerns about impact of Germany’s ban of some bearish assets on the European economy caused speculation that demand for metals may fall. The Germany prohibited naked short sales for 10 banks and insurers and naked credit-default swaps on government bonds of the Euro-zone, causing volatility and panic on markets. Fundamentals look good for the metals, though, and long-term outlook remains favorable despite some short-term pessimism. Immediate delivery for platinum fell $74 (4.4 percent) to $1,599.50 per ounce by 15:31 in London. Palladium dropped $41.30 (8.3 percent) to $457.70 per ounce.

Palladium and platinum declined today on a speculation that investors will prefer gold as an alternative investment. Analysts say that traders will be shifting from the platinum-group metals toward gold. Immediate delivery for palladium fell $33.60 (6.5 percent) to $484.40 per ounce in London. Platinum dropped $44.40 (2.7 percent) to $1,624.60 per ounce.

Corn and wheat gained today on a speculation that crops in the U.S. and some other parts of the world will be damaged by an adverse weather. Low temperatures may harm crops in the U.S., while dryness may impede a growth of the crops in some parts of China, Australia, Canada and Russia. July futures for corn delivery gained $0.04 (1.1 percent) to $3.73 per bushel on the Chicago Board of Trade. July wheat futures added $0.0125 (0.2 percent) to $5.12 per bushel on CBoT.

Soybeans dropped today on a concern that a demand for the commodity may be reduced as the global economic recovery can be slowed by the persisting fiscal problems in Greece. As Greece’s budget deficit crisis threatens to spread across whole Europe markets are suffering. July futures for soybean delivery fell $0.09 (0.9 percent) to $9.78 per bushel on CBoT.