Mid-Week Metals Market Report for Jan. 18

January 18, 2017 09:43 AM

Gold news from around the world, in one place.

Gold Treasure Hoard Discovered Inside Antique Piano in Shropshire/Sherna Noah:  Discovery of 'stunning' cache made by new owners when they tried to tune an instrument, a substantial amount of gold -- described as “potential treasure” -- has been found hidden in a piano. The discovery of the “stunning” cache of gold items was made by the new owners of the upright piano when they decided to tune the instrument, which they had been given. They “swiftly reported” their discovery, and the items are being kept safe in an unknown location “under lock and key”. The piano in South West Shropshire, qualifies as treasure under the terms defined by the Treasure Act (1996).

For a hoard, less than 300-years-old to be treasure, it must be substantially made of gold or silver, deliberately concealed by the owner with a view to later recovery, and the owner, or his or her present heirs or successors, must be unknown.

Mid-Week Trivia:  What animal protected the treasuries of Rome?

Mining.com:  Gold for delivery in February, the most active contract on the Comex market in New York, hit a high of $1,217 in early dealings, up 1% from Friday's close before giving up some of those gains. If the metal manages to close above the psychologically important $1,200 an ounce level it would be the first time since Nov. 22.

Overall bullish positioning is still 80% below July's record. Gold is up $80 an ounce since hitting post-U.S. election lows mid-December, but remains down just under $130 from an initial but brief surge on election night, as results showed a likely victory for Trump in the presidential race.

After relentless cutting back of bullish bets, hedge funds or so-called managed money investors in gold futures and options grew their long positions – bets that gold will trade higher in future – by 57% last week. Derivatives traders added to longs and cut back shorts – bets that gold can be bought back cheaper in future – lifting the net position to 5.4 million ounces from one year-lows hit at the beginning of 2017 trading.

Kitco Metals/Sarah Benali:  The London-based analyst explained in a recent blog post that the future gold and silver price really depend on what fiscal policies are implemented this year, particularly by President-elect Donald Trump, and what effects they would have on inflation measures. “While expectations of reflation could be justified, the markets appear over exuberant now, and thus over-bearish on precious metals,” she noted. “Hence we believe there is already room for gold and silver prices to start to recover ahead of any fiscal stimulus taking effect.”

World Gold Council Fears for Gold’s Appeal Amid Strength of the Dollar:  The World Gold Council has expressed concern that the strength of the dollar could limit the global appeal of gold this year. In a recent report, it noted that in addition to currency issues, heightened political and geopolitical risks could impact on gold prices and consequently jewelers. It noted that key elections in the Netherlands, France and Germany would increase political risk. While the UK economy is still expanding, it said, the pound fell sharply following the referendum decision and continues to weaken every time the markets sense that there is an increased chance of a ‘hard’ Brexit. In the US, there are positive expectations about some of the economic proposals of president-elect Donald Trump and his team, but there are also concerns, the council said, adding: “the U.S. dollar has gained ground since Trump swept to victory last November, but uncertainty is rife.”

Mining.com/Adam Hamilton:  Gold has hit the ground running in this young new year, a stark contrast to its brutal post-election sell off. Rather remarkably, these strong recent gains accrued despite literally zero buying from one of gold’s most-important constituencies. The American stock investors who almost single-handedly fueled gold’s strong bull market last year are still missing in action since the election. That means big gold buying is still coming.

Silver/Jim Rogers:  For silver, whose price is almost always leveraged to the gold price, the price gain should be even more spectacular, doubling to US$30-plus an ounce if 2017 matches 2009. And if the pattern continues as it did until April 2011 then a spike to near $90 is in order in 2018, after a period of consolidation. Over time if you track the ratio of the price of silver to gold, you will find it fluctuates between an extreme of x80 and lows of x40. This ratio shrinks as a bull market accelerates and is just over 70 now.

Thus, silver is the better buy. That said, you will need a strong stomach because silver tends to be very volatile. But if you want to up your game then the way to go is to buy the stocks of silver producers or exploration companies, or a silver ETF like SILJ.

Palladium/Heraeus Forecast:  Palladium has definitely increased in value during the past year and must now defend its high price level in the year ahead. Prices are expected to range from USD 585 to USD 850 per ounce, with an average value of USD 725 per ounce. The significant driver is the increased demand from China and the US for gasoline engine catalysts. The gross demand for palladium reached in 2016 about 250 tons (approx. 8 million ounces). About 220 tons (approx. 7 million ounces) came from primary production of the mines. The difference is largely made up by recycling catalytic converters, supplying about 60 tons (approx. 1.8 million ounces) of palladium.

Scrap Register:  Palladium, drawing support from optimism about the auto sector, has been the top-performing precious metal so far in 2017, said Citi Research. The metal rose some 11% last week. The 21% increase in 2016 clearly marked a renaissance in the auto-catalyst metal as investors now look to be acknowledging the constructive thesis in earnest. “Crucially, while the major industrial metals have surrendered to U.S. dollar pressure through December, palladium has held firm, closing in to the technical level of $750 an ounce and highlighting the level of conviction the market has on its specific (supply-demand) fundamentals,” said analysts at Citi.

A key will be future U.S. and Chinese auto sales. These auto markets are mainly gasoline-powered and thus use palladium for catalytic converters, whereas Europe’s larger diesel-market share requires platinum.

Copper/Mining.com:  At the end of November copper hit an 18-month high on the back of optimism about the possible impact of president-elect Donald Trump's $500 billion-plus infrastructure plan on the metal, widely used in construction, manufacturing transportation and power industries.

The price has since come off the boil, official customs data from China, responsible for some 45% of global consumption of the red metal, released overnight is helping the metal attempt these heights again. Copper futures trading on New York Comex added a couple of pennies trading near its day high. Copper is up 5.7% this week to Copper price jumps as China imports hit all-time high a one-month high. China's refined copper imports surged nearly 30% to 490,000 tonnes in December compared to November, boosting imports for 2016 to a new record of 4.95 million tonnes, up just under 3% compared to the 2015 total.

Copper Markets got hit by bearish political comments and swing a thousand points to the down side off early highs in minutes this week. The Trump comment that the "Dollar" is too strong derails the red metals off its current run away freight train run to 261 from daily high of 271 in the Futures. I keep telling you that this is going to be the normal market action until the summer, so dig in and hedge ANY risk now.

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About the Author

Peter Thomas is a senior vice president at the Zaner Precious Metal Division. As a licensed floor broker he was a filling broker in the silver pit back in the days when silver ran to $55 an ounce. He currently manages a global cash desk which handles Refiners, Recyclers, Mining Operations and Coin & Bullion companies.