Heraeus Weekly Report

Gold Market

Against expectation there were significant impulses last week that sent gold into a downward spin: on Wednesday the metal lost 2.5%. And as has been the case in the past months, it was the debate around the Quantitative Easing Programme in the USA that was the cause. Gold appears to have become a slave to the contradictory statements being made in this connection. Being strongly linked to the Tapering issue has been damaging to gold and even though one would expect a more subdued reaction when things get repetitive, this is clearly not the case. And thus the focus remains on these discussions.

The gold production increase in Q3, as mentioned last week, was again mirrored in the estimate of Thomson Reuters GFMS for the full year 2013. The news agency expects a record result this year (2,920 tonnes vs. 2,861 tonnes in 2012). In view of the lower prices this may not appear plausible; however the various investments made in the past “success-decade” seem to be bearing fruit. As the average “all-in” production costs (ca. 1,200 $/oz) are now just below the present market level (1,230 $/oz), various mines are trying to improve their overall revenue through volume. Even though this may reduce production volume in the coming years, it appears to be more attractive than cutting production or, where possible, closing shafts. Although the costs for this are enormous, one naturally finds some examples.

The correction middle of last week (a 4-months low) led to a strong increase in demand for investment bars at our counters. Private investors appear to have considered prices below 1,250 $/oz as a good buy-opportunity and reacted consequently.

Since gold fell as low as 1,229 $/oz (29.35 €/g) this morning, it is now imperative to defend 1,200 $/oz. We consider it as very likely that this level will get tested. Technical support lies then at 1,180 $/oz and 1,150 $/oz.

Silver Market

As anticipated by us, the negative outlook was confirmed. The metal broke below the 20 $/oz mark during the course of last week and is now trading at a low last seen in early August. Since we fell below the 19.70 $/oz level this morning, the year’s low of 18.20 $/oz is now coming into focus. Given the present good employment figures, the break-below the 

20 $/oz mark as well as the hawkish (end of the bond-buying spree and / or interest-rate hikes) interpretation of the American FOMC Minutes, we also have a rather negative outlook for the metal. Furthermore, the stable investment-demand from small-investors cannot really support the price at the moment. 

Next week, among others, the US Consumer Confidence (Tuesday 16:00 hours), Employment data from Germany (Thursday 09:55 hours) and the European Consumer Confidence data (Thursday 11:00 hours) are awaited with much eagerness.

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 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