The month of May was not very kind to the commodities’ sector, as it is beginning to now become clear. The longest bull-run in the asset class since the heady days of 1980 was truncated by a drop of more than 7% in the S&P Goldman Sachs Continuous Commodity Index of 24 raw materials. Silver prices led the decline toward lower levels, however a host of other commodities also experienced large-scale sell-offs as funds exited the hitherto rather “frothy” niche.
The white metal fell by 21% on the month, in brick-like freefall on the charts from its $50+ record high; a level that had also not seen since “Another Brick in the Wall” topped the music charts in that certain year. Yesterday, UBS analysts offered the opinion that silver might revisit price territory that lies under the $30 area as its gains cannot be “sustained by industrial demand.” Behind all of this, at the end of the day (make that; month), lies the better than 2.2% gain that the beleaguered US dollar recorded during the past 31 days. It’s almost that simple of a cause-effect explanation.
The new, abbreviated trading week got off to a bit of a mixed start in the precious metals’ complex. Gold fell $4.00 on the open and was quoted at $1,535.10 the troy ounce. Highs near $1,541 were recorded during the overnight trading hours and the yellow metal continues to offer the possibility of a renewed test of the $1,545 - $1,550 area provided crude oil and the dollar behave as seen in the early part of this morning’s action in New York. Crude oil not only shrugged off Saudi “calls” for $70 - $80 oil based on potentially “losing” some big “customers” (say, Europe?) to the triple-digit values we are currently witnessing, but it roared ahead with a $2.68 per barrel gain and it climbed to $103.27 this morning.
Silver added 38 cents this morning and it opened at $38.45 while also showing a tendency to possibly re-test the $39.00+ resistance area if speculators amass the courage to do so. The stellar performance of the morning however came from the noble metals’ niche. Rhodium stole the “show” with a near-8% rise that brought it to $2,300 on the bid-side, in short order. Platinum gained 1.78% while palladium rocketed nearly 3% higher. The former traded at $1,827.00 per ounce while the latter climbed to $774.00 per troy ounce on account of the largest shortfall in nearly 30 years being noted by Standard Bank Plc.
The bank projected a 1.6 million ounce deficit in the palladium market for the current year. In the background, news that BMW AG sold a record number of cars in Q1 and that Nissan expects 2011 to be its best sales year ever, only added to the bullish tilt in the noble metal. Palladium has thus far lagged gold, silver and platinum in terms of year-to-date performance after having led the pack in terms of same last year (it doubled in value while everyone was hypnotized by silver’s speculation-based climb).
Also helping matters for the performance in the platinum-group metals’ space this morning was the news from Japan that the country’s industrial output managed a post-quake rebound of 1% just weeks after the horrific event which prompted many a doomsday-oriented subscription-based publication to unequivocally declare the “end” of Japan and envision a decades-long recovery, if any at all.