Precious metals opened firmer on the heels of the “risk-on” sentiment engendered by the PBOC’s statements but remained confined to fairly well-defined trading ranges after having spent the past two sessions simply drifting without energy. One Marketwatch headline noted “Blue Skies Over Wall Street” this morning. Hmmm…that might certainly depend on one’s definition of “blue.” Pantone number 19-4057 it certainly is not; not if you care about headlines such as these. To be continued…
Gold opened $8 higher at just under $1,730 while silver added 17 cents to trade at $33.75 the ounce. The yellow metal still appears confined to the $1,709-$1,763 trading range and will need fresh headlines to convincingly move it beyond those support and resistance pylons.
Here is a finding that flies squarely in the face of rosy projections that China somehow will be the salvation for the silver market, owing to its putatively “insatiable” demand for everything. Read on. Standard Bank (SA) commodity market analysis issued this morning correctly points out that silver demand is heavily (60%) dependent on industrial offtake (along with investment participation by speculators). Because silver demand has been helped by the fact that China had become a net importer of the metal in the period of from 2008 to 2011, many have jumped onto the bandwagon that believes that which we mentioned above.
However, it turns out that, at the moment, that country is filling the approximately 1,400 tonnes of metal it needs to fill the supply/demand gap it faces by drawing down internal stockpiles rather than importing silver. There has been a sharp decline in SGE silver premiums (from $4 per ounce to about a tenth of that recently) and there is evidence that Chinese imports of the white metal have also declined.
Thus, the SB team concludes that while silver has scope to trade back up near $40 again, it might not do so unless China finishes de-stocking, and that the current quarter might not allow for prices much above the $35 level actually. Speaking of industrial metals and China, do take a look at this hard-hitting analysis of copper and its prospects in the event China manages not to pull off a so-called ‘soft landing’ and it encounters the runway with a bit more ‘force’ than it might be…desirable. In essence, the author concludes, that the prognosis of the copper market is substitutable by the prognosis of the overall situation in China.
Platinum and palladium advanced by modest amounts this morning, also benefiting from the ‘buy everything’ syndrome that was back on the menu in the markets. The former rose by $7 to the $1,632 per ounce mark and the latter added $4 to reach $687 on the bid-side. No changes were noted in rhodium which was still bid at $1,525 the ounce. In the background, copper declined by 0.27% while crude oil climbed by 0.79% and the Dow lost 32 points in the first half-hour of trading, despite the aforementioned “blue skies.”
Hope to see you at our free webinar on gold allocation, upcoming at 12:00 noon EST today.
Jon Nadler is a Senior Metals Analyst at Kitco Metals Inc. North America