The price of Gold is in negative territory this morning, as it feels the pressure of a stronger Dollar Index. Silver seems to be in the same camp, down one percent at the time of this report. Gold ETF redemptions continue, showing a reduction in the last fifteen days of almost 800,000 ounces. Nonetheless, the price of Gold is still maintaining its buoyancy, holding above the $1,200 dollar level.
The price of Palladium seems to have turned the corner after rebounding from its most recent low hit on August 16th. A weaker Dollar Index and improved macroeconomic conditions have helped the price increase.
What I find of interest, which can justify the difference between the price of Palladium and the price of Platinum, is found in the Johnson Matthey report. JM estimates that the Palladium market will see another deficit this year, just under 240,000 ounces while Platinum should see a surplus of material. Currently, the price of Palladium is trading approximately $155 dollars over the price of Platinum.
Global demand for gas powered engines, especially in the production of catalytic converters, is helping to keep many investors still interested in this market. It seems to many that diesel-powered engines, which rely on Platinum as a component, will soon be a product of the past.
Global auto sales numbers remain decent, with light vehicle sales rising 4.2% year on the year in June 2018, according to LMC Automotive’s latest statistical data. Passenger car registration in the European Union was up 5.2% in June, totaling 1.6 million new cars on the road. This brings total sales in the first half of 2018 to 8,449,247 units and a 2.9% year-on-year sales increase.
The China Association of Automobile Manufacturers (CAAM) continues to report declining car sales. In the coming months, President Trump’s hard stance with China could continue to weigh on vehicle sales in that part of the world. Auto sales in the states reported down 2.7% in July from year ago.
Settling trade talks with Mexico was a positive step, but we still need an agreement with Canada, and more importantly an agreement with China to help boost industrial metal demand and solidify prices.
All four metals have rebounded ever since the Dollar Index hit its high for the year on August 15th at 96.99. At the time of this report it is trading at 94.82. Our markets need a weaker dollar and stabilizing interest rates to continue to see an increase in prices.
One big hurtle is in the Silver market. There is a huge amount of Silver being held in depositories. Currently, between eligible and registered, there are over 292 million ounces being held. Refiners still seem to be using the exchanges to cash in on their out-turned material.
As I dig through the Internet, there is no shortage of folks claiming that the price of Silver is ready to explode. I couldn’t find one story to the contrary. I guess I’m the only one that sees this much Silver to be a deterrent to higher Silver prices. Who knows how long it will take to turn that much Silver into a viable product before we see a sustained rally in the price of Silver.
Have a wonderful Wednesday.
Disclaimer: This editorial has been prepared by Walter Pehowich of Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.