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


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

Part 2: Red Gold’s Unique Properties and Working with Red Gold Alloys

Following from last week’s post we will share some information on working with red gold alloys, particularly tips around melting, cooling, and fabricating.

Common practice for red alloys after heating/annealing is to allow the metal to come off red before quenching.

Because of the quantities of Copper necessary for the colour of these alloys upon casting a large grain structure can occur. This can result in grain boundary separation/cracking.

Ways around this if applicable are pouring a smaller ingot or annealing the metal prior to working.

Some reds require air cooling after casting whereas others can be quenched once the red glow has dissipated or they can be immediately quenched into hot water.

Once an alloy has been worked down and annealed/heat treated then its structure can balance out to a more user friendly condition. This is the stage our customers would receive the metal.

So at this stage as an alternative to air cooling quenching in hot water can be beneficial as the element of shock is reduced.

Quenching into water that contains a small amount of alcohol i.e. 5% of methylated spirits or Isopropyl alcohol will help with surface oxidation.

All alloys behave differently.

Methodical testing will give definitive results. i.e. Air cooling/quenching but this is not always possible for a Jeweller who has limited product.

Breakdown should be restricted to 50% or twice the original length after elongation although some alloys respond better to higher percentages. Too little work and frequent annealing can have adverse effects.

Our general fabrication annealing temp. is 650˚c or by hand torch/eye a dull red. A controlled atmosphere always produces better results when annealing red alloys.

Here are links to websites where you can learn about soldering based on extensive testing on a range of different solders and alloys:

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.

Part 1: Red Gold’s Unique Properties and Working with Red Gold Alloys

With the increase in popularity of red gold alloys, we thought it would be appropriate to share some information about what makes these alloys unique and how to address challenges that arise from the special properties of red golds.

–        Composition of Red Gold Alloys.
Red gold alloys are characterised by a relatively high copper content. Copper has a higher melting temperature and different structure to gold and silver. This means that red golds can behave quite differently to most precious metal alloys. Lower carat red gold in particular may have a higher overall percentage content of copper, creating challenges when working the metal.

–        Difference between Rose, Pink and Red gold.
Typically, red golds are described as either Rose, Pink or Red. This may vary between suppliers and recipes and is mainly based on the colour. Here are some typical examples for 18 carat red golds:
18K Red gold: 75% gold, 25% copper
18K Rose gold: 75% gold, 22.25% copper, 2.75% silver
18K Pink gold: 75% gold, 20% copper, 5% silver

Next week we will share some information on working with red gold alloys, particularly tips around melting, cooling, and fabricating.


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.