Commodity Blog

Commodity Prices – Palladium

Gold and other precious metals retreated today as positive market sentiment decreased demand for safer assets. The Standard & Poor’s 500 Index of stocks jumped as much as 1.2 percent, showing that traders were willing to risk.

Institute for Supply Management reported that US manufacturing Purchasing Managers’ Index rose from 53.4 in March to 54.8 in April. Analysts predict that reports this week will show that US employment grew with faster pace. The report of China Federation of Logistics and Purchasing showed that China’s manufacturing PMI advanced from 53.1 to 53.3.

Demand for safety of precious metals may yet return as problems in Europe continue to have an adverse impact on the global economy. Yesterday’s report about a recession in Spain trimmed optimism among investors. Political struggle in France doesn’t help traders’ sentiment either.

Gold slipped from $1,665.00 to $1,663.30 per ounce as of 20:23 on COMEX today, erasing earlier advance to $1,670.50. Silver declined from $31.05 to $30.93 per ounce and palladium went down from $682.35 to $680.05 per ounce today.

Palladium rose amidst a medium-sized decline in almost all other commodity markets today. The metal gained on expectation that its market will turn to boom later this year as the existing surplus will be replaced with shortage in a cycle.

The Barclays Capital analysts signal improved long-term outlook for palladium. Despite forecasting a better situation in gold for the short-term period, the industrial metal is currently outperforming the precious one. Palladium can boast more than 5 percent gain since April 10 compared to a less than 1 percent drop in gold.

Although palladium is under pressure from the car industry troubles and was affected badly by the excess stockpiles hoarded in Russia, it is going to benefit, and is probably already benefiting, from the shortage expected after the stockpiles are sold out. The production was cut significantly.

Palladium spot price went up from $654.50 to $660.25 for one troy ounce as of 17:09 GMT. Earlier, it has reached $665.96/oz — a new record high level since March 27.

Analysts remained bullish on palladium even though the metal has declined 1.8 percent to $643.75 in London this year on concerns that car sales in China, the world biggest market for vehicles, fell. Still, demand for the metal from carmakers is record high. At the same time, supply from Russia is expected to dwindle.

Demand for cotton in China is expected to increase, bringing prices higher. Zhang Hongxia, the president of Weiqiao Textile Co., predicted that China’s consumption may rise to 9.58 million metric tons in 2012 from 9 million tons in 2011 as the nation’s textile industry is recovering. Chinese imports of the commodity have already advanced 64 percent to 942,400 tons in the first two months of this year. Cotton futures for delivery in September rose 0.2 percent to 21,265 yuan ($3,372) per metric ton on the Zhengzhou Commodity Exchange today.

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.