Weekly price bulletins found: 96
Another major move down in the price of gold was negative for PGM prices. However, a brief strike at Lonmin and the threat of new strikes at Anglo Platinum provided the metals with some resilience. News that both platinum and palladium were in deficit last year may also have given support.
In a week which saw further record highs in the Dow Jones index and the Nikkei in Japan trading at over 14,000 points for the first time in five years, the pgms were uninspired by the bullish sentiment in equities. News on Wednesday of a strong rise in Chinese exports did give some support but the platinum metals continued to bump against tough resistance at $1,500 for platinum and $700 for palladium. The pgm markets were also waiting to get direction from the outcome of discussions on job cuts and mine closures between Angloplats and the South African government. New proposals were released on Friday morning which comprised a reduction in number of jobs lost from 14,000 to 6,000 and a cut in production capacity by 250,000 oz, compared to 400,000 oz previously, revising baseline production in 2013 upwards by around 100,000 oz as a result.
A stronger week for pgm prices, which reacted more to fundamental influences and less to the gold price, a change from recent weeks. South Africa was back in focus for pgm investors. Anglo Platinum’s talks with the government on its proposed massive job cuts were concluded and although the outcome will not be made known until 6th May many analysts predict a compromise, with at least some redundancies being put in place. In the run-up to wage talks due in July the National Union of Mineworkers said it intends to demand another double-digit wage increase; Lonmin was forced to shut its number two smelter at Marikana because of an unspecified incident, following the recent idling of the number one furnace for planned upgrades; and Impala said it was assessing the viability of some of its shafts in the light of inadequate pgm prices. A degree of recovery in the gold price through a weaker dollar and some physical buying helped the pgm complex initially; although the rise stalled in mid-week it gathered strength later and with investors putting emphasis on platinum and palladium’s position in industrial applications the premium of platinum to gold was maintained.
After the volatility of last week, platinum and palladium made a fairly positive start with increases in line with the price movement of gold. Good physical demand from Asia and buying in Europe has also helped platinum move higher from a low of $1,431. The UK economy recorded a 0.3% increase in GDP for Q1, good news for the UK, resulting in the avoidance of a triple dip recession. The relatively low growth figure was above government estimates which created confidence in the market. Sterling gained some strength against the dollar which encouraged buying in the gold market and supported the increase in platinum and palladium.
PGMs were extremely volatile this week as the price of gold took a significant plunge early on. A combination of factors caused the drop, with 400 tonnes of gold sold on the Comex futures market drastically impacting the pgm complex and many technical sell orders being triggered on the way down. From a low of around $1,320 this week, gold made a slight comeback moving just above $1,400 with platinum faring slightly better at $1,446.
Platinum and palladium made a positive start as a strike at Northam Platinum in South Africa entered its second week. The firmer tone disappeared on Wednesday with a renewed bout of weakness in the gold market, leaving the metals close to the previous week’s lows in early London trading on Friday. Gold was under pressure all week, with the causes being variously ascribed to the strength of the dollar, reports that Cyprus intends to sell EUR 400 million of its gold reserves to finance part of its bailout package, and Federal Open Market Committee minutes suggesting that Quantitative Easing in the US may come to an end sooner than many people thought.
Geopolitical tensions and talk of a pgm producers' cartel should have been supportive factors for pgm this week, but a collapse in the price of gold undermined platinum and palladium prices. Gold has tried but failed to hold above $1,600 in recent weeks and with a volatile Euro and another record close on the Dow Jones Index investors might have become nervous about gold's prospects. Key technical levels supporting gold were broken, and with physical demand for pgm limited at present, the impact on platinum and palladium prices was dramatic.
A calmer week for pgm and gold prices reflected settlement of the Cyprus banking crisis, even though the outcome - draconian penalties on shareholders, bondholders and large depositors at the stricken Cypriot banks - has strained the nerves of financial markets in other economically vulnerable Eurozone countries. Platinum and palladium traded in a relatively tight range and largely in line with movements in the price of gold.
Eurozone fears dominated the week as Cyprus, with its banking system on the brink of collapse, found itself the focus of the world’s economic commentators. The US dollar and gold both established safe-haven status as the euro weakened and investors were back to risk-off. With gold on the increase and breaking through $1600, some gold bulls were eyeing $1625 as the next technical level. Whilst the upside was capped by selling, the yellow metal was still able to establish a significant $60 premium over platinum. Both platinum and palladium saw some liquidation as the pgm complex fell in the middle of the week, but both were able to reverse their fortunes by the end of trading on Friday.
In a relatively quiet week for platinum group metals, much of the market direction for the precious metals complex came out of the US. At the end of the previous week positive US jobs data provided a good foundation for news of a strengthening economy, whilst gains in US equities and buying in the dollar momentarily saw gold on the slide. However, even with a stronger dollar, gold managed to find support from strong physical buying in Asia and a continuing lack of confidence in EU economies. By the weekend the DJIA was able to boast 10 days of consecutive gains and posting record highs, but then baulked at the 11th day on unexpected reports of the lowest level of consumer confidence in the US since December 2011.
After the collapse of prices over the past fortnight, platinum consolidated, underpinned by cautionary news from Southern Africa and some bargain hunting from China. Key support emanated from an unexpected but brief stayaway by miners at Lonmin in South Africa, followed by a threat from the Zimbabwe government not to compensate Impala for the share of its Zimplats operation it is obliged to give up under the country's indigenisation law. Palladium gained from growing investor interest on the basis of its good fundamentals.
This week started with the downgrading of the UK economy and hopes for a positive result in the Italian election; both leading gold higher despite the strong dollar. By Tuesday, the Euro dropped on the back of a closer than anticipated call in Italy, with potential for political instability and civil unrest, and saw equities and commodities move southward and platinum momentarily trade at a discount to gold.
Although platinum and palladium were supported at first this week by further production stoppages in South Africa, the recent surge in dollar strength and equities which has initiated a sell-off in gold eventually weighed on pgm prices, resulting in a rapid decline.
Platinum and palladium prices strengthened in mid-week after some early liquidation. The main impact came from the seizing of land owned by Zimplats in Zimbabwe by the government, which is pressing for the platinum mining companies operating there to build a local refinery instead of shipping matte to South Africa for final processing.
Platinum and palladium markets continued to draw strength from concern about supply from South Africa. The release of Anglo Platinum's annual results, stating a heavy loss for the year, drew renewed attention to its plans for cutting production and more critical comments from government and unions on its redundancy plans.