Wednesday looked to be a quiet day on the markets as more and more participants head home for the holidays. Trading hours will be normal today while U.S. stock markets close early, at 1 pm ET, on Thursday (Christmas Eve). Trading in the precious metals will stay open until 1:45 pm ET on Thursday.
Spot gold was just slightly lower, down just 0.15% to hold above $1,071/oz. Silver was even more steady, down just 1¢ to $14.35/oz. The PGMs fell a bit farther, with platinum down more than 0.50% to $870/oz and palladium 0.90% lower to $553/oz.
The key technical levels for the gold price right now are support at $1,066/oz and then $1,060/oz if the price falls. Resistance can be seen at $1,080/oz and then $1,086/oz. Remember that liquidity on the markets will remain low throughout the holiday season due to the thin volumes on the markets.
Reprieve for Industrial Metals
Another consequence of the thin volumes on the markets is that it’s rather easy for just a few participants to move prices. This is what appears to be happening with the industrial metals, which got a lift on Wednesday as traders took a more optimistic view of economic data in the U.S. and China.
Many expect construction activity to rebound next year as China balances its economy (and adds economic stimulus, to boot), which led to gains for copper, lead, zinc, aluminum, and nickel. Nickel has been the worst performer among the base metals this year, losing 43%. Consumer spending in the U.S. has also been on the rise, gaining 0.3% in November while wage growth showed encouraging signs, as well.
The rebound for the base metals helped boost beleaguered mining companies. Mining shares rose sharply, with three of the biggest players each adding more than 6%: BHP Billiton (NYSE, ASX:BHP) gained 6.1%, Anglo American PLC (LON:AAL) added 6.4%, and Glencore PLC (LON:GLEN) surged 7.2%.
Impact on Precious Metals
Despite Wednesday’s surge, one effect of the year-long slump for base metals (and commodities generally) is support for higher silver prices. If companies are scaling back output from their industrial metal mining operations, it means that the supply of newly-mined silver will dwindle. Much of fresh silver supply is actually recovered a byproduct of zinc, copper, or lead mining, for example.
A similar dynamic may be seen in the Platinum Group Metals (PGMs) next year, as well. Keep in mind that prices for platinum and palladium are even more closely tied to their industrial uses than silver is. The use of these precious metals in emissions-reducing catalytic converters in automobile exhaust systems means that the recent trend of strong auto sales should support higher PGM prices. This will be especially true if the “dirty emissions” scandal surrounding German automaker Volkswagen forces the company to use more platinum in its diesel engines. (Palladium is the main component of regular catalytic converters, but diesel engines rely more on platinum for these purposes.) HSBC analysts predict that supply deficits and slowing mine output due to low prices will help push platinum to average $1,005/oz in 2016 while palladium will average $655/oz.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.