Commodity Blog

Posts Tagged ‘presious metals’

Gold and silver reached the highest level in a month on the renewed concerns about the sovereign-debt crisis in the European Union.

The European leaders are planning to meet at the summit today to discuss the recapitalization of banks, boosting of the bailout fund and the participation of private bondholders. Traders are still waiting for some decisive answer from the European chiefs and without it the uncertainty eating away confidence and drive investors to safer assets, like precious metals.

The fundamental reports were also negative for traders’ sentiment and positive for gold. The European manufacturing and services industries contracted. The housing market, the manufacturing and the consumer confidence in the US weren’t improving either.

Gold rose from $1650.40 to $1702.10 per ounce yesterday on COMEX remained at this level today as of 3:35 GMT. Silver traded at $33.09 per ounce today, following yesterday’s advance from $31.74 to $33.22 per 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.

Platinum was underperforming compared to gold and silver until recently, rallying less than these precious metals in April. That turned out to be an unexpected advantage as weaker rally led to smaller drop, at least compared to silver. But now the metal looks trendless and it’ll be important to see at the driving forces of its moves to understand its potential performance.

For a start, let’s look at the difference of gold and platinum in relation to markets. Gold is a precious metal, its main value comes from investors, not physical demand, and therefore the yellow metal is driven by speculative demand and market sentiment. Platinum is viewed as generally industrial metal and is driven by industrial demand and other fundamentals. Thus, we can expect platinum-to-gold ratio to decrease over time as fundamentals, particularly outlook for the global recovery, can change drastically and currently not very positive for platinum. On the contrary, the demand for safer assets, including gold, remains in place. It can weaken and strengthen, but current economic environment doesn’t let us believe that speculative demand will go away anytime soon. That’s not necessary bad for platinum as it’s also often helped by the demand for safety, just not as much as gold.

Outlook for supply and demand varies among analysts. GFMS in its Platinum & Palladium Survey 2011, cited by Mineweb, predict that increase of supply will outpace growth of demand. ResourceInvestor said that platinum production growth in 2010 was 0.6 percent, while consumption surged 16 percent, and thought that disparity can even wide this year as production in South Africa may stall because of miners’ strikes and underinvestment.

Another important thing to consider is the usage of the metal in automobile industry. This factor currently is negative for platinum as the slowing US economy, problems in the European Union and, particularly, consequences of the natural disaster in Japan don’t make good for the car production and demand. Oil prices also affect this industry as higher prices decrease usage of cars. The recent spike of prices was negative for the platinum, yet falling oil isn’t necessary good for the metal as the oil drops often on poor macroeconomic fundamentals, which are also bad for platinum.

Now, after reviewing factors influencing platinum, can we predict future performance of the commodity? On the longer run, most economists agree, platinum looks attractive. The global recovery should help the demand from automobile industry, while turbulence of the world economy should support speculative demand. GFMS, even being skeptical for platinum demand in the near future, expect the metal to reach $1,900 by the end of this year. In the short-term, though, outlook remains clouded. Currently, the metal trades in a range between $1,745 and $1,800. If prices would manage to break any of these levels and stay outside the range for some time, we can expect significant move at the direction of a breakout. For now, it’s better to step aside from the metal and wait until the picture clears out and prices will establish a noticeable trend.

Silver posted the biggest drop since 2008 and other precious metals slid after COMEX increased its margin requirements. The minimum amount of cash that must be deposited to trade silver futures was increased from $14,513 to $16,200 per contract. That’s compared to the margin of $4,250 a year ago.

It was the second increase in less than a week as the exchange raised the margin 13 percent at the close of the session on April 29. An increase of margin usually makes traders to liquidate positions. Analysts said that silver is in greater peril than gold as it has rallied faster and has a greater potential for a correction.

July futures for silver delivery slid as much as $3.499 (7.6 percent) to $42.585 per ounce as of 14:07 on COMEX, posting the biggest fall since December 1, 2008. The prices have gained 28 percent in April and 38 percent this year. June contract for gold delivery dropped $16.70 (1.1 percent) to $1,540.40 per ounce.

Oil surged on concerns that political unrest will spread throughout North Africa and Middle East. The conflict in Libya threatens oil supply as the country holds Africa’s biggest reserve. April delivery for crude oil rose $0.09 to $95.51 per barrel on NYMEX by 9:24 after jumping yesterday $5.71 to $95.42, the highest price since October 2008.

The turmoil was also benefiting to precious metal, including gold and silver. The Libyan military and security forces were attacking protesters that demanded freedom and democracy. April futures for gold delivery gained $12.50 (0.9 percent) to $1,401.10 as of 13:51 on COMEX. The price reached the record level of $1,432.50 on December 7. May futures for silver delivery climbed $0.571 (1.8 percent) to $32.856 per ounce after it reached $34.315, the highest price since March 1980.

The unrest in Libya had negative impact on copper. The industrial metal dropped in London as well as in New York. Delivery for copper in three months dropped 0.6 percent to $9,524 per metric ton on LME, while futures on May delivery subtracted 0.7 percent to $4.3320 per pound on COMEX.

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.

Crude oil gained today on forecast the Federal Reserve will expand buying of government debt, weakening the dollar. A weaker dollar increases appeal of commodities. Unemployment claims in the US unexpectedly dropped from 455,000 to 434,000 last week. December delivery for crude oil gained $0.24 to $82.18 per barrel on NYMEX.

A weaker dollar also bolstered precious metals, including gold and silver. The dollar slipped as much as 1.3 percent versus the basket of six major currencies. December futures for gold delivery went up $19.90 (1.5 percent) to $1,342.50 per ounce by 13:59 on COMEX. December futures for silver delivery added $0.471 (2 percent) to $23.875 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.

Analysts say that importers will likely increase purchasing of sugar after prices for the sweetener dropped. Raw sugar has tumbled as much as 37 percent from $0.304, the record in 29 years reached on February 1st, on speculation that global deficit will ease. Global production was hampered by adverse weather conditions in Brazil and India in the previous year. Australia, the third biggest exporter in the world, may increase its sugar production by 10 percent this season in case favorable weather remains. May delivery for raw sugar rose 3.8 percent to $0.1903 per pound yesterday in New York.

Gold fell as buyers regained confidence in world economy, curbing appeal of the precious metal as an alternative haven. Sales of all types of gold coins dropped to 53,930 ounces in the first two months of this year, compared with 267,091 ounces in the same period in 2009. Immediate delivery for bullion dropped 0.5 percent to $1,122.10 per ounce by 8:33 in London.