Why I believe Gold is on a Winning Streak and how this will carry Platinum up with it.

Gold backed up last week’s price gains, climbing back above our previously mentioned US$1180 resistance, reaching a 3 week high of 1195.30 overnight.  Prices are on course to post their longest winning streak since January last year, with investors backing bullion over the past few days because of a slump in the dollar after the Federal Reserve’s cautious stance on the US economy and diminishing likelihood of an early rate increase. The dollar remains the main driving factor of gold price and traders will be looking very closely towards (Fed officials’) comments to gauge when and how rapid the rate hike will be.

As manufacturers we’ve observed that, while bullion sales may have waned, weak prices have spurred an increased in demand of precious metal for manufacturing into jewellery, semi-finished and/or final products. This anecdotal observation has been supported by a recent report from New York-based CPM Group, forecasting an increase of over 4% in 2015 of fabricated Gold products. Marking the second straight annual rise, and feeding my optimism of higher Gold and Silver prices. Demand is still out there, just that we’re observing it in a different form.

In last week’s report I pointed out an opportunity in Platinum, “at US$1116, this is undervalued considering fundamentals” and suggested that buying with “a view that we see a repositioning in the market which will carry Platinum to US$1175-1180 resistance levels.” Today’s platinum price now resides around US$1150, so we’re witnessing this correction unfold. If Gold continues its test of US$1200, then we should see our Platinum target met.

By Adam Van Sambeek

FOMC Report Results in Sudden USD Correction

Apologies for the delay in our weekly report, but with so much riding on the Federal Reserve’s Federal Open Market Committee (FOMC) report released this morning, it’s more beneficial to analyse its impact.

Earlier this month a better than expected US jobs report fuelled speculation that the Fed would reveal a more hawkish stance in this morning’s announcement. In reality many were wrong footed by a subdued assessment of the US economy, leaving the market to rethink the timing of any increase in US interest rates. The FOMC noted that “economic growth has moderated somewhat” over the past month, which is a significant downgrade from the last statement wherein it said that activity rose “at a solid pace”. They also indicated that when interest rates do rise, they will likely rise at a slower rate than previously expected. Compared to expectations, this is a strongly dovish statement, resulting in a scrabble to cover and adjust positions.

The most significant impact from the report was the sudden correction to the USD. The USD index (a basket of currencies against the US dollar) plummeting 5%, before settling 2.2% lower. Precious metals and commodities all benefiting, with Gold climbing back above US$1150 support to close near US$1170 (+1.6%), while Silver gained 2% to settle just shy of US$16 per ounce.

Looking ahead, Gold still has plenty of headwinds, so I’m not getting overly excited unless we break and hold US$1180 resistance. As per last weeks suggestion, I do own Gold Call options, allowing me to benefit from any sustained Gold rally. With Platinum at US$1116, this is undervalued considering fundamentals, so I’m suggesting to hold and buy more with a view that we see a re-positioning in the market which will carry Platinum to 1175-1180 resistance levels. (more on this next week).

By Adam Van Sambeek

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:

“Gold options could be a good option…”

Aside

Inside the Crucible by Adam Van Sambeek

Last Friday’s better than expected US jobs data was the catalyst to finally push gold out of its narrow trading range. Gold prices broke lower, triggering sell stops below $1180 support, as the upbeat data increased the likelihood the Federal Reserve will raise interest rates in the near term. Given that US rate rises and a strong dollar have been on the agenda a long time, I’m surprised by the extent of gold’s reaction, especially as the downward spirals in many currencies could well create risks of their own.

Some market observers looked to China to push gold prices back towards the key psychological level of $1,200, demand has so far been unimpressive, raising concerns that prices have further to fall. I’m imagining that this recent sharp drop in Gold is more technically driven rather than outright negative fundamentals. Although I too wouldn’t rush into Gold here as the charts look damaged, with a possibility we still test $1130. Call me a contrarian, but now seems the ideal time to obtain some low cost exposure to the upside. June Gold Call Options are my preferred method. Limit risk (premium) with unlimited upside potential.

Not all is rosy out there, the US equities have tumbled in the last few days, while the market seems to have ignored news that the ECB has just rolled out a 60-billion euro-per month quantitative easing programme in a bid to prop up its ailing economy. Remember, a lot still depends on the Federal Reserve actually moving interest rates. A major fall in the share market may cause the Fed to hold off, while USD strength could keep inflation so low that the Fed waits even longer before they raise rates.