Global Markets Shake Up Provokes Volatility in Gold and Silver Bullion

Be careful for what you wish for!  After an extended period of low volatility global markets have been shaken up thanks to an escalation in the Greek saga and China’s announcement of a wave of new measures in an attempt to halt the collapse of the Chinese stock markets. Traders love volatility, until they’re actually faced with it.

The dominant story has been how the Greece ‘No’ vote is going to play out. The situation looks messy to say the least and we look to be in for several weeks of market turbulence as the Europeans and the Greeks try and resolve their differences.  European Creditors don’t seem to realise that the current approach has not worked, and are demanding more spending cuts and tax hikes that will see the economy shrink further. On the flipside, the Greeks turned up to last night’s Eurogroup meeting without any new proposal, and with the attitude that a No referendum vote was somehow a victory for their bailout negotiations.

Against this backdrop of uncertainty and speculation in Europe, Chinese stock markets have been plunging 30% in the past three weeks. Yet there’s been a distinct lack of safe haven buying. Sure a strengthening USD is a headway for commodities, but I believe the real issue is ‘Greek fatigue’. For too long this story has promised so much, for the bullion investor, and for so long there’s been a 11 hour concession. Many still believe some sort of interim compromise will be reached to keep Greece limping along.

Last night’s capitulation in precious metals, which saw Silver and Palladium plunge over 5% at one point, was based on frustration, but shouldn’t have come as any surprise to technical traders. Prices been languishing so perilously close to major support levels, that any minor setback in prices would trigger a bulk of pre-set sell orders just below recent support.  My view is that last night’s capitulation is an opportunity. Bullion prices priced NZD have risen and benefitted from a recent fall in our currency. Now, following this clean out of the nervous bullion investors, an opportunity has arisen to benefit from undervalued metal prices.

Gold Price Volatility encourages Wait and See Approach

Wednesday June 17th 2015.

Hi all, Gold had another wait and see week, treading water around US$1182 per oz. awaiting news on another Greek deadline due this Thursday. Today also marks the beginning of the FOMC’s two day meeting. The US central bank isn’t expected to raise interest rates, however many in the market are now factoring in a likely increase later in the year, with most punters picking September. Speculation has therefore favoured the USD, edging higher, and in turn weighing on commodities and commodity currencies such as the Kiwi. The good news for Gold traders is that the Kiwi has fallen faster and further than Gold and Silver, pushing up Bullion prices in NZ terms.

In uncertain times you can be sure of one thing… volatility!. With talks having stalled ahead of the technical deadline for an agreement on Thursday, the likelihood of a deal being reached is now almost non-existent.  The Euro group finance ministers meeting is still scheduled to decide the “fate” of Greece, but there have been so many of these meetings it is hard to see this one producing anything concrete. It also looks like the market has become complacent, anticipating another last minute deal to be reached, so hence traders aren’t jumping into Gold… yet.

While Gold has had the benefit of safe haven support, the rest of the precious metal complex have struggled. Platinum and Palladium both are being dragged lower by a risk off sentiment swirling around the stock markets. Already this month Palladium has lost 6% to now trade at US$1,080 per ounce and Platinum has dropped approximately 3% to $732.45 per ounce.

I’m not a betting man, but I can’t see the benefits of selling precious metals at current levels, especially this close to major technical support and with such large event risk looming.  Buying Call options appears best strategy ahead of tomorrow’s announcements.

By Adam Van Sambeek, Treasury Manager.

Gold and Silver may Lead to Better Buying

10/06/15

Last week I noted Gold’s test of the resistances just over US$1200, now we’ve seen long held support come under pressure this week. This all stemmed from last Fridays much watched US employment numbers which exceeded estimates, driving up expectations that the Fed would move sooner rather than later to increase interest rates. The resulting speculative jump in US dollar saw Gold fall below long held support around US$1175, which in turn triggered protective Sell stops placed just below this key level, spiking prices to US$1162 lows.  Gold had declined in four of the five sessions last week as US data gradually confirmed the Federal Reserve recent minutes, which said declining first quarter growth was due to temporary factors like the unseasonably harsh winter. The Fed removed all calendar references in its forward guidance and said that recent economic weakness might be “transitory” in nature. This means that bank is now entirely dependent on data so a rate increase could happen at any future meeting.

Meanwhile in Greece, the country delayed last Fridays 300-million-euro repayment to the IMF until the end of June, increasing the risk of a Greek exit from the bloc. Concern over this situation however has failed to propel interest in gold. With investor sentiment for gold so weak, gold prices may well continue lower but I feel this is leading to a better buying opportunity. And given developments in Greece and with the potential for corrections in other asset classes, it may not be too long before the markets start looking for a safe haven again.

As for Silver, this has dropped below the $16 mark for the first time since May 1 and has struggled to regain and hold this level. Currently we’re sitting just below that at US$15.968 per oz. Technical charts indicate that we’re sitting on an ascending support line, which originated in March of this year. Silver should be viewed as oversold and therefore valuable to a corrective bounce. I’m a buyer of Silver at these levels with a protective Stops at 16.87.

By Adam Van Sambeek, Treasury Manager

Curb Chain: Diamond Cut (Unfinished)

This chain has been soldered and diamond-cut on a lathe. It has not been polished since and if you look closely you can see light drag marks where the diamond tooling tracked on the flat areas. What do you think of this raw, industrial looking chain?

This chain is awaiting polishing / finishing after the diamond cutting stage.

This chain is awaiting polishing / finishing after the diamond cutting stage.

Treasury Update: Is the Timing Right for Platinum?

It may be a shortened week, but already we’ve seen plenty of excitement. Monday saw a surprising spike in Gold prices, making a brief foray above $1,200, but with very little follow through, prices quickly retreated. I couldn’t find any explanation for this sharp jump in price, except that Mondays are notorious for thin volumes, and being the first day of the new month, we tend to see a fresh allocation of managed funds hit the market. Once again, Gold prices settled back into the regular trading range between US$1175 and US$1225.

Meanwhile, Greeks and officials from the ECB and the IMF remain locked in negotiations. Greece looks set to make a first repayment of 300 million euros to the IMF on June 5, but it’s still unclear how it will pay off the rest of its debt. The immediate concerns surrounding the looming debt deadline may have eased, diminishing part of gold’s safe-haven appeal, but it may not all be bad for Gold. If a deal is struck, its highly likely to see a resurgence in the Euro, driving US dollars lower and overall benefiting commodities. Last night’s upbeat German unemployment data and positive Greece talks saw the euro claw back 2.5% against the US dollar, its biggest gain in nearly 3 months.

Looking at other precious metals, Platinum has been the worst performing metal in the sector, sliding 1.4% through May. Palladium didn’t fare much better dipping 0.6%, underperforming Gold, which gained 1.5% and Silver, up nearly 4% on the month. I can’t find sufficient reason for the under-performance by the PGM’s, so I’m buying Platinum, particularly at current levels around US$1100.

By Adam Van Sambeek, Treasury Manager.

Strong Demand for Gold and Precious Metal Continues in Spite of Data Filled Week

After a data filled week, precious metals still remain in relatively tight trading ranges, barely changed from this time last week. While we’ve still experiencing some whippy trading sessions, the ultimate outcomes have done very little to denote direction.  Friday’s much anticipated US non-farms payroll data was viewed as positive on meeting market expectations. Revisions lower from last month’s pervious report perhaps tempered traders relief following a recent string of weaker economic releases. Although one piece of less negative data shouldn’t rise expectations of interest hikes happening anytime in June.

Across in China, news of further stimulus from China’s central bank cutting their one year lending rate by 25 basis points to 5.1% should have a positive flow on effect for commodities. These changes are aimed stimulating their slowing economy to reach its 7% growth targets. Expectations are that this is not the last stimulus, with further easing to follow in the coming months. Lack of commodity demand out of China certainly hasn’t gone unnoticed by the precious metals sector.

Closer to home, we’ve finally found some relief from a high NZD. Since the NZ Reserve Bank hinted it would cut interest rates if demand weakens and inflation remained low, many major banks have come out revising their interest rate forecasts. ANZ Bank is calling for interest rate cuts in both June and July, along with First NZ Capital calling for cuts. This resulted in sharp 2 cent correction in the NZD/USD. Adding fuel to calls for interest cuts, NZ employment data released late last week showed our unemployment rate for the first quarter remained at 5.8% vs expectations of a drop to 5.5%.  Our rock star economy may be having Justin Bieber like fall from fame. This isn’t of course all bad, those holding Gold paid in NZD will be reaping the benefits. So noted in this report, I’ve fancied Gold in NZD terms, therefore the recent demise of NZD has seen Gold values in NZD climb 2%, while USD pricing remain stagnant.

Golds trading patterns appear to be forming a wedge, with declining highs, but with lows remain unbroken, forming progressively resilient support. This doesn’t mean that we can now assume a price floor is in place, it just highlights strong demand for Gold at the US$1150-1170 per oz. area. On the topside, we’ll need a break of US$1205 per oz. before we can feel more convinced about future higher prices.  Otherwise we have a clear trading range in which we can sell into spikes around US$1200-1205 with protective stop losses close to US$1210 -1215 per oz. However, my preference is to buy on dips around US$1175-1180 per oz.

By Adam Van Sambeek, Treasury Manager

Precious Metal Performance is Upbeat Despite a Volatile Week

Silver again out-shined with a 3% gain, Palladium + 2%, while both Gold and Platinum traded 1.5% higher from the same time last week.

Trading hasn’t been without some trepidations, bullion traders once again closing positions into the weekend.  Fridays have now become renowned for this mass exodus of risk. Gold sinking to six week lows, breaking below $1,170 per oz. before clawing back slightly into the close. Even a falling US dollar and generally poor US data didn’t support Friday’s metal prices.  Recognising this trend allows us to identify opportunities and eliminate panic decisions. Monday saw safe-haven buyers back in the market after developments in the Middle East over the weekend and bargain hunters restore last week’s Gold losses. Though the recovery did pick up steam following last night’s US data miss, temporarily reaching key psychological $1,200 level, to currently settle just below at $1,195.

Fundamentals are slowly moving back in the favour of holding precious metals. Physical demand in Asia appears to be picking up again at the currently lower prices. While US data fails to deliver promised growth. Overnight, US trade deficit of $51.4 billion was much larger than the expected $41.2 billion and the worst reading since October 2008. This highlights the dollar’s strong headwind effect on US manufacturing, eroding the country’s global competitiveness.  How long can the US dollar maintain present strength?

Looking ahead, most participants should remain cautious ahead of Friday’s blockbuster US non-farm payroll data, which is forecast at 231,000 in April, after an unusually weak reading of 126,000 in March. Following some soft US numbers and the central bank’s shift to a data-dependent stance of monetary policy, the data could provide clues on when the Federal Reserve will raise interest rates, and therefore the direction of precious metals dominate pricing factor, the US dollar.

By Adam Van Sambeek, Treasury Manager.

Will Gold and Silver Follow Crude Oil’s Suit?

Gold consolidates just below the $1,200 per ounce with no fresh news or direction for traders to latch on to. Renewed dollar strength follows unclear FOMC minutes, which could’ve been interpreted anyway to suit your own view on the FED’s ultimate intentions. This is capping any sustained Gold rally.  Gold failed to hold key 1205 support, after briefly climbing to 1224 just before Easter, returning to its high volume comfort zone of around 1200.  Traditionally, precious metals now enter the seasonally-low period where physical demand historically declines. However, the yellow metal is showing resilience, with higher lows and higher highs, with the next few trading sessions crucial for bulls that we maintain above the 1190 level.  Last night did see this level break, only to claw back losses, closing at $1193, after weaker than expected US retail sales and slump in small business confidence.

Interestingly, the Commodity Futures Trading Commission (CFTC) reported that the Comex speculative traders increased their net-long positions in gold to 100,757 contracts, which marks a five week high, up from 80,019 a week earlier.  A sustained build in price and an adjustment in current bearish sentiment, could rise the likelihood for further long accumulation and short-covering in the coming weeks. However this still poses risks, as this data proves the market remains highly speculative, and therefore vulnerable to price swings. Good news is we’ve already seen Crude oil prices recover 15% over the past month, leading a small commodity revival, as investors seek value in beaten up sectors. Will Gold and Silver follow suit?

By Adam Van Sambeek, Treasury Manager.

Top Tips for Re-Using Precious Scrap Metal

Here are some tips for when you are reusing your clean scrap or customer’s metal. Please comment if you have any tips you wish to share with us.

  1. Be Clean and Tidy: If you know what’s in your scrap it will make it much simpler to troubleshoot any issues that might arise later.
  2. The Periodic Table: You don’t have to have a degree in chemistry, but do try and learn about how metals behave. Remember that if they are close to each other on the table, they may behave similarly.
  3. Precious Metals vs. Non-Precious Metals: Alloys usually contain non-precious metals which will affect their behaviour. High copper content such as reds and pinks can affect the crystal structure making the metals prone to cracking. As can nickel, or even silicon from casting scrap.
  4. Quenching: Quenching in hot water (or metho) can help when dealing with alloys containing non precious metals. This helps by making the cooling rate of the different metals more consistent.
  5. Fluxing/Gases: If your metal is questionable, an additional fluxing step is recommended to remove impurities. Likewise, if you see bubbles/flaring when melting it is worth cooling, then reheating the metal while stirring to try remove the gas. If the metal is still not acceptable after these steps we recommend that you refine and start again with fresh metal.
  6. Oxidising: When melting/pouring, use of a cover flame will help avoid oxidisation. If this is not done it can result in burning off of metal (silver especially) but also in the hardening of the outside layer which can later cause issues especially if worked in to the metal.
  7. Molds: This is purely a safety tip, but please make sure you heat your molds well before use.

OMF Metals Report 11_03_15

By Kevin Morgan

Summary:

*Gold Hits Three Month Low *Silver Slumps, Eyes Major Support *Chinese Copper Imports Lowest Since 2011 *US Now on Daylight Savings Time

Full report: