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Global Precious Metals Market Report for June 2014
Gold
Maximum price USD/oz
Date
Minimum price USD/oz
Date
1,334.30
30/06
1,240.80
03/06
Silver
21.23
27/06
18.66
02/06
Platinum Palladium
1,489.50
30/06
1,418.00
04/06
866.00
12/06
806.50
17/06
In June, gold left the volatility trend of the two previous months, and the difference between the lowest and highest
trade price exceeded 7.5%. In absolute terms, it represents 94 dollars per Troy ounce. Gold is currently traded right
below the 1,330 USD/t oz. The majority of traders find the penetration of this limit and long-term stay at this limit a
sufficient signal of exceeding the limit of 1,380 USD/t oz in the near future and will open the path to breaking the
psychological barrier of 1,400 USD/t oz. Traders' technical analyses and statements currently indicate that the
double testing of the 1,180 USD/t oz value hit the price bottom, and now, the bearish trend is reversing to a bullish
trend.
Silver traditionally followed the trend of gold, and its peak levels occurred at the same time as in the case of gold –
i.e., the minimum at the beginning of the month and the maximum during the last days of June. In terms of profits
since the beginning of the month, gold exceeded the expectations and recorded a 12% appreciation. The same
applied to platinum; however, it was rather expected to follow the pattern described in the aforementioned table
concerning palladium. In the middle of the month, after 5 months, the South African mining companies finally
reached an agreement with the unions, and one of the longest strikes in the history of platinum mining ended. It
primarily affected the price of palladium as it dropped below 807 USD/t oz after the agreement announcement. The
price of platinum responded much more carefully and disconfirmed the prognoses stating that it would return below
1,400 USD/t oz after the strike end. It currently trades at approximately USD 100 higher, and the reports from the
South African mining firms indicate that mining will not be resumed that quickly; therefore, there will a lack of this
raw material on the global market. However, in connection with this there are speculations that the mining firms
actually welcome the current development of prices and that they will be in no hurry to satisfy demand outstripping
supply. We may expect the same response from Russia, which through the price of platinum actually "punishes"
Western countries for their sanctions imposed after the Crimea annexation.
The rise in the price of precious metals in June can be seen for two primary reasons. The first is again our fixed
star impacting precious metals – the American FED, which mainly affects the price of gold, and the second is the
conflict in Iraq. This second reason, the situation in Iraq, does not affect precious metal prices as directly as FED
decisions; however, it also proves that the political situation is nowhere as stable as it may seem. After an apparent
stabilisation of the Ukrainian crisis another zone of tension surfaces. The FED's monetary policy decisions are
always expected with anxiety despite market predictions and acceptance ahead of time. The same applied to the
June meeting, during which the bond purchase was reduced by USD 10 billion a month, as expected. However,
much stronger anxiety was associated with the other issue, i.e. interest rates. Prior to the FED's statement in June,
there was speculation that the interest rates may rise; however, this did not materialise and the U.S. dollar fell, and
precious metals recorded profits as a result. The greatest profits were recorded by silver, which grew by more than
4.5%.
The expected event, which could have affected the development of gold and other precious metal prices in June
was the ECB's monetary policy statement for the first decade of the month. For the first time in history, the ECB
reduced its deposit rate below 0, i.e. to -0.1%. In reality, it means that banks pay for their deposits at the ECB;
however, it did not start the expected quantitative release that would have imitated so-called money printing known
from the USA or Japan. However, ECB President Mario Draghi stated that these do not have to be the ECB's final
steps, and numerous analysts understood that a subsequent ECB quantitative release would be implemented if the
negative interest rate is not sufficient.
There is, in my opinion, a relatively interesting report that may positively affect the price of gold within the coming
months, which has not yet been mentioned in the media. This concern's the Indian government's decision to relax
its gold import restrictions. The new government of Prime Minister Modi began fulfilling its pre-election campaign
promises to lift the restrictions on the import of gold into India. This news reduced the average premium charged by
traders for 1 ounce of gold from USD 60 to USD 25, which is the lowest level since February. It is expected that
imports into India will increase in the coming months, and the 35 tons of May, which represents only half of the
regular import value, will be forgotten, and when the demand for gold in India peaks in October and November the
level of gold consumption will escalate alongside its global market price.
Libor Křapka, Manager for Investment Metals, SAFINA
03/07/2014