Commodity Blog

Commodity Prices – Platinum

Concerns about Europe quickly returned to markets driving commodities down. Surprisingly, among precious metals only silver, the metal tending to profit less from uncertainty and pessimism than other precious metals, was able to gain.

There were bad news from Europe that justified the worries. The costs of Italy’s debt increased. Fitch Ratings warned that the planned 50 percent haircut of Greece’s debt can be considered a default:

An EU invitation to private investors in Greek government debt to exchange their bonds for new debt with a 50% lower notional value would likely result in a post-default rating in the ’B’ category or lower depending on private creditor participation.

The returned fears made most commodities, even precious metals, fall. The Standard & Poor’s GSCI Index of commodities dropped 1.3 percent. Some analysts argue that the decline wasn’t a start of a downward trend, but merely a correction after the strong rally on the previous day.

Gold declined to $1,743.50 from $1,746.60 per ounce on COMEX. Silver spot price advanced from $35.12 to $35.37 per ounce. Settlement of platinum fell to $1,649.60 from $1,657.0 per ounce.

The concerns about the credit crisis in the European Union continue to haunt markets and that helps to support prices for precious metals. Great Britain also has its share of problems that spur investors to buy precious metals as a safe haven.

Both the Central European Bank and the Bank of England left their interest rates unchanged, but expanded their bond purchases programs. The same monetary policy decision had a vastly different effect on currencies of the nations, boosting the euro, but weakening Britain’s sterling. Yet the fact the policy makers of European Union and Britain embarked on quantitative easing undoubtedly means problems in both of these regions and that’s beneficial for safer assets, like gold and silver.

The BoE was rather dovish in its outlook:

The weaker outlook for, and the increased downside risks to, output growth mean that the margin of slack in the economy is likely to be greater and more persistent than previously expected.

The ECB wasn’t optimistic, either:

The underlying pace of monetary expansion continues to be moderate. Ongoing tensions in financial markets and unfavourable effects on financing conditions are likely to dampen the pace of economic growth in the euro area in the second half of this year. The economic outlook remains subject to particularly high uncertainty and intensified downside risks.

Gold advanced from $1614.0 to $1652.0 per ounce on COMEX today as of 18:13 GMT on COMEX, rising for the second day. Spot price for silver jumped from $30.46 to 32.11 per ounce. Platinum settlement climbed from $1478.0 to $1507.0 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.

Platinum, along with all other precious and industrial metals and commodities, took a huge hit today, dropping at a fastest pace since February 2011.

The US stock market dropped more than 2.5 percent today, as the country’s 2-year treasury notes reached the minimum yield level since 2009. The traders look to be afraid of the upcoming economic stagnation in the United States that will wipe the demand for many commodities, including platinum, which is used in the car-building industry to make the catalysts.

It is believed by some market experts that the investors are forced to close their positions in commodities to cover their losses in the stock market, which is experiencing a real disaster as of now. In the long-term, a lot will depend on tomorrow’s US nonfarm payrolls report.

Spot platinum price declined from $1,780.00 to $1,725.50 per troy ounce or more than 3 percent as of 17:24 GMT today, reaching a daily low at $1,715.70 — the metal’s minimum July 12.

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.

Almost all hard commodities are falling today. Big drops can be seen in silver, gold, oil and platinum. Despite a favorable situation in the US stock market, the commodities seem to be bothered by the possibility of the monetary policy tightening.

Commodity speculators are awaiting Federal Reserve statement on the future of the US financial regulation that will be released tomorrow. The market sentiment goes that Ben Bernanke may stop buying treasury notes with Fed’s money, effectively closing down the main fuel source for the speculative growth in the all-favorite silver, gold and oil. Meanwhile, further credit tightening in China is a sure-fire killer for the rally in the industrial metals.

Silver posted the biggest single day absolute loss in years today, following a streak of 9 consecutive days of gain. Nevertheless, April remains a huge winner month for this metal. Gold managed to decline to the minimum level since last Wednesday, confirming its yesterday loss, which followed an all-time record high. Platinum goes down for the first day in the last 5 days, still trading quite low compared to the above-mentioned precious metals.

Spot silver price decreased from $46.85 to $45.30 per troy ounce after reaching as low as $44.42 per troy ounce today. Gold declined from $1,506.86 to $1,503.15 after going to as low as $1,492.90. Platinum is now trading at about $1,803.00 as of 17:31 GMT after opening at $1,825.70 today.

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.

Gold fell today as need for the metal as an alternative currency declined after Europe’s economy signaled that it might retain its strength. Stress tests showed that most European banks are able to withstand a financial crisis. Economists recommend reducing gold holdings and watching euro moves. August futures for gold delivery slid $2.10 (0.2 percent) to $1,185.70 per ounce by 11:44 a.m. on COMEX. The precious metal changed little last week and expected to traded in a range between $1,175 and $1,205.

Platinum fared significantly better. Platinum prices were boosted by concern about possible strike at Impala Platinum Holdings Ltd., the second largest producer of the metal in the world. Discussions to resolve issues with payment have failed and tomorrow more than 18,000 workers may go on strike. October futures for platinum delivery gained $9.10 (0.6 percent) to $1,551.90 per ounce on NYMEX.