Palladium Retests $800 While PMIs Weigh on Markets: Morning Market Update March 24

March 24th, 2014 by

 A nugget of palladium

A nugget of palladium

 Palladium is hanging on to its big gains from Friday, as it nudges up against the $800 level again. The platinum mining strike in South Africa, which began in January, is showing no signs of resolution. Since palladium is found with platinum, the strike is affecting the supplies of both metals.

Both palladium and platinum were estimated by Johnson Matthey to see supply shortages this year, even before the strike started. The market has finally awoken to this fact with the announcement of two physically-back palladium ETFs opening in South Africa.

Gold retreated moderately overnight, then dipped on the COMEX open to test support around the $1,319 level. Silver briefly dropped below $20 in a stair-step spike in Asia, but soon recovered. It remained between the $20 and $20.25 levels in volatile trade through London trading, and into the New York open. Platinum saw early strength in Asia, but eased again in volatile trading to near unchanged from Friday’s close. As mentioned above, palladium, the “forgotten metal”, has managed to hold on to Friday’s big gains, even as worries about China’s economic slowdown pressure industrial metals.

factoryThe big news today is “PMI” – Purchasing Managers’ Index. The private Markit/HSBC flash PMI for China in March dropped to 48.1 from 48.5 in February. Any reading below 50 signifies a contraction in manufacturing. This is the third drop in a row, and an eight-month low. Chinese and Hong Kong markets actually rose on the news instead of declining, because, surely, this means that the government will have to institute quantitative easing policies and interest rate cuts. Right? We shall see.

The Chinese news did nothing to help the European markets, which are still antsy on whether real sanctions will be imposed by the EU against Russia. Stocks got a brief lift when it was reported that French PMI for March took a big jump into expansionary territory, 51.6 from 47.9. The joy was short-lived though, as composite Euro PMI nudged down to 53.2 from 53.3, and German PMI dropped to 55.0 from 56.4.

Not helping matters was the news that Russia once again made weekend raids against Ukrainian military installations in Crimea, storming and seizing two more bases. Using the turret-mounted machine guns on armored personnel carriers and stun grenades to lay down covering fire, the gates of a major airbase were breached, and Russian troops swarmed into round up the Ukrainian servicemen.

Wall St. didn’t seem to care, as it opened the day higher. However, a little PMI voodoo was waiting for it as well. U.S. PMI was reported to have dropped to 55.5 from 57.1, sending stocks into the red.

On the currency front, the dollar is trying to claw some room above the 80 mark on the DXY dollar index, while the euro dropped under the 1.38 mark against the dollar. The dollar is marginally higher against the yen, and slightly lower versus the yuan.

by Steven Cochran

Gainesville Coins Portfolio Tracker and Financial News