There’s been a deluge of news over the last two months about the shortage in the supply of silver bullion around the globe. Although it’s true that investors have been scrambling to get their hands on as many government-issued silver coins as they can, the actual crunch has been on the manufacturing side of things, as minting facilities simply haven’t had the production capacity to meet the strongest wave of demand the silver market has seen since right after the financial crisis.
As most precious metals stackers know, there’s a distinctive difference between owning physical gold and owning shares of gold securities (“paper gold”) or gold mining companies. Neither gold mining stocks nor gold-backed funds are quite the same as holding physical metal, but both offer an alternative means of exposure to the gold market.
These two types of paper gold investments, however, do not necessarily track exactly together. For one, they cater to somewhat different kinds of investors: those who buy gold miners are usually more attuned to the actual industry dynamics, while those who choose gold ETFs are more likely to be interested in a quick and easy way to hedge their portfolios with gold. (These are only generalizations, of course.)
Secondly, where mining stocks tend to trade largely in lockstep with actual spot prices, exchange-traded funds may not. There’s a lot more than just the value of the metal that goes into the operations and overall performance for gold miners, of course, but this has persistently been the case during the current commodities slump.
The markets opened to a Friday morning surprise that may have made many traders wish they’d stayed in bed and called it an early weekend. This month’s non-farm payrolls report was expected to be upbeat (generally taken to be 200,000 jobs added or more), but it turned out that employers only added 142,000 jobs to their payrolls in September—a huge miss. This sent the dollar tumbling about 0.8% to 95.4 on the dollar index while gold was the beneficiary, gaining more than $25 per ounce in early trading to nearly $1,142/oz. Before Friday morning’s rally, the gold price had been on pace for its worst monthly performance since March.
Silver also surged more than 2.5% to cross back above the $15/oz mark. Platinum and palladium added $6 and $20 per oz, respectively.
There’s no doubt that platinum and palladium, the oft-forgotten sister metals of the Platinum Group, are almost always overshadowed by their precious metal cousins, gold and silver. There are several disadvantages that work against the Platinum Group Metals (PGMs), including how hard they are to work with (as in fabricating jewelry) and that their shared hue tends to resemble a duller version of silver.
In short, platinum and palladium aren’t ideal for ornamentation. This distinguishes them from the other two precious metals. The PGMs are also distinguished by their market: the majority of demand for platinum and palladium comes from industry. The two metals are necessary components of the pollutant-filtering mechanisms that scrub toxins from automobile emissions.
These two metals have been busy in the markets lately, experiencing rapid price movements over the last few weeks. Interestingly enough, these moves have mostly been in opposite directions—up for palladium and down for platinum.
For all of the talk that gold demand from China was waning along with the slowing wheels of manufacturing in the People’s Republic, the country sure seems to be importing a lot of the yellow metal.
The People’s Bank of China added 16 more metric tonnes of gold to its reserve during August, fully a 1% increase to nearly 1,700 tonnes officially held by the central bank.
Even with a considerable amount of domestic gold production being absorbed into the country. Chinese gold jewelers have increased their fabrication volumes, so a bit more gold leaves the country for international markets than it used to; nonetheless, the vast majority of gold mined in China (and, when Chinese-owned South African mines are counter, by China) stays in the country. This is a considerable total when you realize that China has been the planet’s top gold producer for about the past 8 years.