Weekly price bulletins found: 127
After many weeks of speculation, the US Federal Reserve finally made a definite statement about tapering of monetary easing. On Wednesday, chairman Ben Bernanke announced the Fed’s intention to begin winding down its stimulus programme but at the same time to maintain low short-term interest rates. Welcomed by the equity markets, the news had an immediate negative effect on the gold price which fell below $1,200 and took the prices of the major PGMs down with it.
Platinum and palladium made solid gains in mid-week, but with the only real driver being a stronger gold price. Despite the continued talk in the markets of QE tapering, gold made excellent gains following a short covering rally that took the price away from the $1,200 level which had appeared to be the target for investors holding short positions. With little fresh news concerning industrial action in the South African mining sector, platinum and palladium continued to peg their hats on gold’s hook.
The lingering spectre of tapering by the US Federal Reserve is hanging over the gold market, weakening all the precious metals prices; meanwhile any new industrial action at the South African platinum mines appears to be on hold for the moment with workers now unlikely to strike before the Christmas period.
The prospect of tighter monetary policy in the US kept precious metals prices depressed. A breakthrough in talks centred on modifying Iran's nuclear programme in return for a reduction in economic sanctions also weighed on the gold price and affected the PGMs to some extent. Platinum was disturbed by selling in the US prior to the start of the Thanksgiving holiday on Thursday although physical buying in Asia has stepped in to take advantage of price dips.
No new developments on the industrial relations front in South Africa and a bout of nerves among investors in the gold market have combined to depress PGM prices this week. Although the workforce at Northam Platinum is still on strike, the spectre of QE tapering once again spooked the gold market, driving down the gold price and undermining other precious metals prices too.
Despite the release of Johnson Matthey’s Platinum Interim Review, predicting a continuation of deficits in the platinum and palladium markets in 2013, pgm prices continued to react more to monetary policy than supply-demand fundamentals.
After a fairly muted response at the beginning of the week, pgm prices were boosted by South African supply concerns before better-than-expected US economic data towards the end of the week acted to dampen prospects for platinum.
Support for the PGMs came from the spreading potential for industrial action at South African platinum mines as unions served notice of intent to strike at Lonmin and Northam. PGM prices lost some of their vigour as the gold price weakened, investors viewing the mid-week Federal Open Market Committee discussions as positive for the US economy and negative for gold.
US government offices resumed operations this week, leading to the delayed release of economic data which proved to be bearish for the dollar. Consequently, the gold price strengthened, consolidating above the $1,340 level, and pgm prices were well supported too.
Precious metals prices were in stasis until the political stalemate in the USA over the debt ceiling was resolved on Tuesday. After a Chinese ratings agency downgraded the US credit rating on Thursday the dollar went into a tailspin. Gold and the major PGM prices all rose sharply as a result.
The standoff in Washington between Congress and the Administration over the lifting of the US debt ceiling was the focus of attention for investors this week, upstaging the AngloPlats strike. Precious metals prices hardly moved, gold oscillating around $1,300 and platinum around $1,400. Termination of the work stoppage at Anglo on Friday had no discernible price impact on the pgms.
The platinum price failed to respond either to a continuing work stoppage at Anglo Platinum in South Africa, a shutdown of federal government operations in the USA, or a decline in the value of the dollar. With the Chinese market on holiday for Golden Week, platinum had no support in the face of a weak gold price and fell through the $1,400 barrier. Palladium was typically more resilient, perhaps boosted by news of regulatory approval for a palladium ETF in South Africa.
Precious metals began on a weak note after some pro-tapering comments in the USA and growing concerns over a possible US government shutdown if Congress does not approve raising the debt ceiling by the end of the month. An announcement by South Africa’s Association of Mineworkers and Construction Union of its intent to strike at Anglo Platinum for 48 hours from Friday, over job cuts announced last month, gave some support to the PGMs but in the face of the unresolved questions about tapering and default, equities, the dollar and precious metals prices all suffered.
Precious metals markets have been dominated all week by anticipation of and then reaction to Wednesday's statement by the chairman of the US Federal Reserve on monetary policy. Widely believing that he would announce the tapering of America's bond-buying programme, QE3, implying higher interest rates to come, gold was sold down by investors in advance of the statement and platinum headed south alongside it. When, to everyone's surprise, Ben Bernanke said precisely the opposite, that monetary easing would continue, commodities and equities alike were heavily bought, causing a remarkable recovery in prices.
PGM prices were largely governed by a falling gold price. Gold lost $78 over the week in London while platinum dropped a rather less precipitous $55. A slight easing of international tensions over Syria, and speculator anticipation of perhaps a more hawkish monetary stance from the US Federal Reserve, sapped the previous firmness in the gold price. With no particularly supportive factors for the white metals, PGM prices coasted downwards.