Precious and Industrial Metals Start Off The Week With A Shine

This week starts off with a holiday in the US, which means market trading will see lower volumes. To many investors surprise, with US traders celebrating the Columbus Day holiday there is a bevy of Federal Reserve speakers. This could have a big effect on gold but the reaction may be delayed until Tuesday.  Beginning at 1200gmt markets will listen to FOMC member Lockhart, followed a few hours later by Reserve Board member Evans and late in the evening markets will hear from Committee member Brainard. Late Thursday, San Francisco Fed President John Williams had a pre-scheduled speech after which he said to reporters that the September jobs report had no effect on the notion that the U.S. labor market is in fact improving.

Through all this commentary from the Fed members, traders will keep an eye on all those sectors that have reached the oversold territory.

Regardless of what Fed members have said up to this point, gold continues to rally. Gold soared on Monday to trade at 1157.30 adding $13 in the early session.

International stock markets also rose to 7-week highs in aggregate following Thursday’s release of minutes from the US Federal Reserve’s September policy meeting, which showed only 1 member out of 10 voting to raise interest rates from 0% as previously hinted and expected.

Trading some 0.9% higher from last Friday afternoon’s benchmark, today’s auction took only 1 round to find its market clearing price, with the bid volume worth $89.8 million – barely half the July-September average.

Gold trading had earlier risen a little following yesterday’s return from the National Day ‘Golden Week’ holidays and continued to rally on Friday. Silver volumes were higher again, touching fresh multi-month highs. Silver’s benchmark price in London – also discovered by electronic auction on behalf of trade body the London Bullion Market Association – the end of the week found its highest level since mid-June at $15.99 per ounce. Silver is trading at 15.81 continuing its rally is the Asian session.

Copper had an amazing week ending at 2.4220 up by 77 points on Friday alone and was able to hold on to gains Monday. There appear to be 2 bright spots on the copper market landscape on which producers and analysts are focusing. The first is the possibility miners will cut back production sufficiently enough that raw material supply will become restricted and, as a result, prices will stabilize and then rise next year.

Glencore has announced the temporary closure of 300,000 mt of production capacity in the Democratic Republic of the Congo and Zambia and there has been talk about output cuts in Chile.

Reuters reported the country’s second-largest copper mine, Collahuasi, owned by Anglo American and Glencore, planned to cut output by 30,000 mt. But, in truth, we are unlikely to see a massive curtailment in supply, not like the 700,000 mt we saw back in the late ’90s and early 2000s, simply because the supply market is so fragmented now, making it tougher to orchestrate wide-scale cutbacks.

According to Goldman Sachs, the top 5 producers control only 35% of global production, compared to iron ore, where the top 4 producers control more than 60%. At the same time that cutbacks appear here, increases appear somewhere else. Copper output in Peru, the world’s third-largest producer, rose 30% in August, according to the paper.

Palladium and platinum continued in the headlines as DieselGate continued to expand. Platinum is trading at 983.40 rebounding almost $30 following cues from gold. While palladium also gained up by just under $9 to 711.50. Even though silver hit a 3-month high this last week, the metal is still in an overall long-term downtrend. And long-term downtrends are where it’s at lately for the precious sectors, mirroring the ferrous and base metal sectors. Platinum isn’t immune to losses either, as prices in the US, China, India and Japan have all come down over the last month. Palladium, however, did tick up a bit across those markets. Palladium and platinum prices have been volatile after investors heard of the Volkswagen Group scandal. Industry reports are suggesting that this could be the end of diesel cars. With 40% of platinum demand coming from the making of auto catalysts for diesel cars, that’s pretty bad news for the precious metal. Platinum fell 4% after the news, although it recovered some of its losses” soon after.