Monday, December 9, 2013

Heraeus Market Report

Positive US data sent gold into a tailspin last week (low at 1,212 $/oz). US monthly production figures were the best in 2 ½ years this November which again brought with them the question of the timing of the reduction in the US bond-buying programme (currently $ 85 bn / month). Technical selling did its bit to enhance the slide as funds and investors sold their metal or went short. Gold in euro terms also fell drastically and only at around 891 €/oz did it find some support; a 3 ½ year low. For the first time since 2004 (in €), it looks like gold is going to finish the year with a loss (at the moment ca. -30%). On Thursday losses were quickly recovered (buy-back of short-positions), though the recovery was limited. The outlook for the recovery of the US employment market and the publishing of the non-farm payroll data for November on Friday pulled out support for the metal. Further developments in the Indian gold market remain of importance in the coming year: it is unlikely that the effective import-duty of up to 10% introduced this year is going to be reduced and a trade body official assumes that this will halve demand to around 550-550 tonnes. Illegal imports have already gone up. For example, buying from Thailand doubled in the third quarter and according to assumptions by the World Gold Council, the metal gets smuggled into India from there. We continue to see no reasons that could give sustainable support to gold. With continuing positive data from the US, some market-participants are speculating that tapering could well start this year. Some clarity is hoped for in the coming FED Strategy Meeting of 17/18 December. We expect the present volatility to continue and the 1,200 $/oz mark to be tested; then followed by supports at 1,180 $/oz and 1,150 $/oz.


The precious metals markets have an energetic week behind them. Silver lost the most in the complex (-2.36%) as it dropped below 19 $/oz during the course of this reporting period to a 5 month low. Though a short-covering rally on Wednesday saw it recover somewhat, Thursday’s good Q3 US-GDP of 3.6% again put pressure on the price of silver. Additionally the metal got little support from the weak US coin sales. Technically silver is still in an intact downtrend. Resistance is at 20 $/oz with support at 18.90 $/oz and again at the years’ low of 18.20 $/oz. This week, among others, the precious metals markets could be influenced by the following: Inflation data from Germany (Wednesday: 08:00 hours), Industrial production Eurozone (Thursday: 11:00 hours) as well as the US Retail Sales (Thursday: 14:30 hours).


Driven by high inflows into the NewPlat ETF, platinum ETF’s, as in previous weeks, know only one direction. Despite this platinum had to book mild losses in this reporting period (-0.68%). The metal dropped from 1,362.50 $/oz to 1,353.25 $/oz. After European automobile sales in October and November had recovered, the US-automobile market also reported positive sales figures. These latter were up 8.7% in November; as high as they were 10 years ago. Presently platinum is showing a tendency for falling prices. We expect a sustainable price-rise if and when South Africa is subjected to continuing strikes (see report from 11.11.2013).


Year-to-date, palladium remains the precious metal with the best performance (+ 5%). Also during this reporting period it was up slightly (+ 2.60%). On the industrial side, the picture appears to be mildly brighter. An indicator for this is demand for palladium sponge, which has improved slightly. Technically support is at the low of November and December at 705.50 $/oz and resistance at the November high of 762.25 $/oz. Outlook for 2014 as per the prognosis of the analysts questioned by Reuters is an average price of 786.70 $/oz, which implies rising prices. One explanation for expectations of rising prices could be Norilsk Nickel’s – world’s largest nickel and palladium producer – suggestion that the market will have a supply-deficit in the face of stronger demand from the automobile market and an unpredictable “above-ground-stock” situation: “Strong demand from the auto sector and an unpredictable supply from above-ground stocks suggest a physical shortage could take place in the palladium market as early as next year, an executive at the Russia's Norilsk Nickel said on Thursday.”