Heraeus Gold Market Commentary

GOLD

Weaker US economic data fuelled lingering doubts about the timing of an increase in US interest rates. Following the recent pattern, this offered encouragement for the gold price: The metal rose on Thursday up to nearly 1.200 $/oz before profit taking on Friday pressed it back under the level of 1.175 $. This latter move coincided with a weaker dollar also, which is rather unusual. The combined effect pushed the euro gold price to 1.081 €/oz, the lowest level since the end of March. Market participants in the Euro-zone reacted accordingly: While investors remained largely on the sidelines, there was a noticeable increase in buying from industrial users.

For the coming week, once again US interest rate policy will be the key focus of attention for market participants. This week’s FOMC meeting should bring the market some transparency about the Fed’s policy concerning interest rates. Hints about rising interest rates would again put the gold price under pressure and lead to a test of support at 1.160 $/oz quickly. The next significant mark is at 1140 $/oz, where physical buying interest should provide support. Significant chart resistance for gold is at 1200 $/oz and then 1211 $/oz. 

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Gold Market Comments

Heraeus Metals NY

The Yemen news yesterday gave a short lived pop to gold. But yet there is something else going. In Asia gold traded as high as 1206. In London and NY it has traded above 1200 only to retreat. Today’s  fourth  quarter GDP report was  a little higher but the annualized was lower than expected which should have been bullish for gold. Reuter’s Michigan Consumer sentiment was slightly higher than expected causing a net zero effect on market direction. The precious metals complex remains under the gun from the expectations of higher interest rates, futures shorts and ETF liquidations. But in the battle of direction it does not seem that shorts hold all the cards as every good dip has been met by buying. The question is who will tire first, the bulls or the bears before a new direction is made clear when the dust finally settles.

Heraeus Market Report

GOLD
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.

SILVER

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).

PLATINUM

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).

PALLADIUM

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.”

Heraeus Weekly Commentary

Week Ending Nov 17

Those hoping for a recovering last week in gold, after its recent correction, were disappointed. In fact the metal dropped by the middle of the week to 1,265 $/oz; it’s lowest in four weeks. By the end of the week it had recovered somewhat and closed at 1,287 $/oz. The trigger for this move was again the discussions centred around the potential tapering in the USA, which one FED-member feels could be a possibility this year. However, on Wednesday, Janet Yellen, Bernanke’s successor as chairperson of the FED, propagated to the contrary: her statement that the US economy would get monetary-policy support till such time that stable growth and corresponding job-market strength had been achieved was supportive for gold. Nevertheless the largest of the gold ETF’s, SPDR Gold Trust, saw further erosion of stocks which have now fallen to a 4-year low of 865 t.

The World Gold Council (WGC) came out with the demand summary for gold for the third quarter. The jewellery industry, with 487 t, has been responsible for the larger part of this demand. Though total demand in the period July to September, compared to previous year, fell by 21% to 870 t, demand for the first three quarters has gone up, whereby a shift is seen from the West to East. Bar and coin demand has increased by 6% compared to Q3 2012. There was again the discussion that China would overtake India as the largest gold consumer but according to the WGC the difference would possibly be much smaller than anticipated by some (China: 1,000 tonnes / India: 900 tonnes). The supply side shows a year-to-date mine production increase of 70 t whilst recycling fell to its lowest level since 2008 (385 t).

With no significant impulses expected we foresee a sideway movement in a range of

1,280 - 1,295 $/oz for the next few days.

Heraeus, Nov 7 Commentary

Good Afternoon,

If you are watching CNBC this morning you would think the world revolves around the company Twitter. While the media is focused on the equity markets and the Twitter IPO, traders in the commodity market continue to play the range game. Here is a recap of the news this morning:

1.       Bank of England kept the interest rate at 0.50% and kept their bond purchasing program steady

2.       European Central Bank surprised the markets by cutting interest rate to 0.25% from 0.50% and signaled that they will keep interest rates low for as long as necessary   

3.       US weekly initial jobless claims at 336k and continuing claims at 2868k

4.       US GDP grew at 2.8% in the 3^rd quarter faster than most estimates

5.       US personal consumption grew at 1.5%, less than expected

6.       GDP price index increased at 1.9%, more than expected

ECB is focused on not letting the European economies slip back into recession and pump maximum liquidity into the markets. Lack of inflation and stubbornly high unemployment rates are causing concerns. US economy grew at a faster pace in the 3^rd quarter due to increase in inventory levels but there are underlying signs of weakness from business to consumer spending. Economic and political uncertainty in the US have been affecting business and consumers alike. US job markets are showing signs of life but the real unemployment rate and the quality of the jobs being created are both being debated. After all these data, we are right back at where we started… waiting for more “convincing” data to point us to the direction of the US and global economies and further central bank actions. Precious metals continue to trade in a range, gold $1300-$1325, silver $21-$22, platinum $1425-$1475, and palladium $725-$765. Any attempts to break these ranges have so far been met with stiff counter moves. We anticipate gold and silver to trade slightly lower on continuing debate over US FED bond purchase tapering. Platinum and palladium will move depending on next sets of economic data out of China and Europe with South African mine strike news in the background. We believe traders will continue to trade the ranges and jump heavily into a position once data becomes clearer. 

Thanks,     

David M. Lee

Heraeus Metals New York LLC

Gold Market Commentary

Good Morning,

The precious complex is under heavy pressure this morning despite a weaker greenback and tension at the world’s #1 platinum producer that just added another layer of complexity. At midnight the U.S. government entered into partial shutdown as the plug was pulled non-essential services due to the congressional stalemate over a continuing resolution to fund the largest employer in the country and the Affordable Care Act. In South Africa, the National Union of Mineworkers (NUM) is heading to court to contest Anglo American Platinum’s planned restructuring that includes eliminating 3,300 jobs. The Association of Mineworkers and Construction Union (AMCU) has been on the picket line since last Friday and will continue the strike action as recent negations have failed to resolve the situation. On the U.S. economic front, data on construction spending and manufacturing  are on tap for today as well as September U.S. auto sales figures. Ford sales were up 5.8% last month compared to estimates of 5.0%. Gold closed Monday’s session at $1327 but has since fallen below the $1300 mark and is down nearly 2.5% to $1295. Platinum is down more than 2% to $1387 after closing the previous session at $1408. Have a great day!

Tom Hungerford

Sales and Marketing Representative

Heraeus Metals New York LLC

Heraeus Market Commentary

Good Morning,

We could be in for a rather uneventful day in the precious metals complex as market participants await the conclusion of the FOMC meeting tomorrow. At this point, it seems the consensus isn’t if the Fed will begin tapering the $85 billion-a-month asset purchase program but by how much. A $10 billion reduction in the program may have already been priced into the market so any deviation could make Wednesday afternoon very interesting. Until then it’s a wait and see atmosphere as the metals hover at or slightly below yesterday’s closing levels. Gold closed the previous session at $1317.80 and touched as low as $1307 in overnight trading. The yellow metal now trades $1312.60.  Silver ended Monday’s session at $22.009 and now trades nearly .75% lower at $21.850 after reaching as high as $22.14 overnight. Platinum trades about .5% lower at $1434 while palladium trades relatively flat to yesterday’s close and continues to hold above the $700 mark at $705. In economic news, The Labor Department released its consumer price index which rose .1% last month compared to a .2% increase in July. Have a great day!

Tom Hungerford

Heraeus Metals New York LLC

Heraeus Market Commentary

Good Morning,

After yesterday’s blood-letting in the precious complex, it’s looking like a quiet Thursday ahead of tomorrow’s highly anticipated U.S. government jobs data. ADP private sector jobs numbers, released earlier this morning, showed 176,000 added to private payrolls and weekly jobless claims numbers fell by 9,000 last week. However, there was little reaction to the data and the metals continue to hover near yesterday’s closing levels with a little pressure building to the downside. That is, except for and palladium which continue to get no love from positive U.S. auto sales figures released throughout Wednesday’s session. Palladium has fallen another 1.5% to $687.90 after closing yesterday at $698.25. Gold is a bit lower from Wednesdays close with prospects of a full blown war in the middle east dissipating as the Obama administration continues to emphasize the limited nature of any strike against Syrian targets. The yellow metal closed the previous session at $1390 and now trades roughly $10 lower to start the day. Platinum failed to hold the $1500 level yesterday but the potential for a spill-over of labor tensions in the South African gold sector, into the platinum sector, should cushion the white metals retreat. Have a great day!

Tom Hungerford

Heraeus Metals New York LLC

Heraeus Market Report

Good Morning,

A whole lot of nothing…That’s what the general consensus seems to be regarding yesterday’s release of FOMC minutes from the most recent meeting of the Fed minds. There’s no question that tapering will eventually happen but the “sooner or later” part of the equation has yet to be solved. All calculus, trigonometry and algebra aside, the simple sum of whether the job market is healthy and inflation reaches an optimum level will continue to be the proverbial trip wire for the beginning of the end of Quantitative Easing. After the dust settled, 10-year bond yields had surged to 2.9% and the DJIA had lost over 100 points by the end of the session. Gold closed the day at $1370.6 and now trades at the day’s high of $1374.8. The rest of the complex is in the green to start the day as will with silver up nearly 1% while platinum trades at $1523, having reached as high as $1529, and palladium hovering just below $750 an ounce. In domestic economic happenings, the weekly U.S. jobless claims increased 13,000 to 336,000 and while that is not necessarily a good sign, some critics would argue that because the more accurate four-week average stands at 330,500 and overall jobless claims remain near the lowest levels seen in more than 5 years, that employment may be poised for a comeback. We’ll see about that on September 6^th. U.S. manufacturing pushed further into expansion territory this month as data from Markit showed the index moved to 53.9 from 53.7 last month. Jackson Hole gets underway today and central bankers from around the globe will converge on the site to hear what Janet Yellen, the likely successor to Chairman Bernanke, has to say about the current state of affairs. Have a great day!

Tom Hungerford

Heraeus Metals New York LLC

Heraeus Market Commentary

Good Morning,

Today is shaping up to be one of those “calm before the storm” trading sessions as market participants gear up for not only month end but also the heavily anticipated Fed speak tomorrow as well as a slew of other economic data culminating in Friday’s NFP release. The Federal Reserve’s two-day bonanza kicks off today as Chairman Bernanke and his cohorts will attempt to get on the same page with this whole quantitative easing fiasco. Until then, we’re left to digest the S&P Case/Shiller Index that showed home prices had the biggest y-o-y gain since 2006 as prices rose 12.2% for the month of May. It is tough to decipher what that seemingly positive number means when one sees an article on Bloomberg titled “The American Dream Erased as Home Ownership at 18-year Low”…but I digress. Consumer confidence numbers are the other flavor of the day and will be released at 10:00 am EST. 2Q GDP and ADP employment figures will accompany tomorrows conclusion of the FOMC meeting. Have a great day!

Tom Hungerford

Heraeus Metals New York LLC