It’s safe to say that the Greece and China crises that have hit the global economy are going to be the biggest issues to watch as far as the precious metals markets – and prices – are concerned.
Over the past month, the monthly Global Precious Metals MMI® fell 4.8% from 84 in June, and it may have further to fall before July is out.
* Read what we said in last month’s analysis.
China’s Star is Falling
One may think that the Chinese equity market crash may help investors flock to gold as a safe haven – but not so fast.
A leading precious metals consultancy called Metals Focus, which interestingly, according to this article, has booted GFMS as the primary supplier of statistical data to the World Gold Council, points out that due to China being a gambling culture, “reckons there is more the likelihood that weak equity prices may end up adversely affecting physical gold demand. Losses generated by the impact of the stock market crash may well hit jewellery and gold artefact purchases, while the scale of the fall is such that potential investors nursing big losses may well not have the liquidity to move back into gold.”
Which would likely mean that gold prices won’t see a whole lot of support. As my colleague Raul de Frutos has noted around the office water-cooler recently, “gold’s safe haven thesis” is not really playing out, probably because of a strong dollar.
Saturday Night at the Palladium: Also Down
The palladium prices from all three global markets we track on our IndX (the US, China and Japan) fell by double digits over the past month. Platinum prices also haven’t looked so hot, looking at 6-year lows, mainly driven by weakness across other commodities and industrial metals.
Palladium spot price since 2012. Source: MetalMiner.
So what to watch in palladium and PGM markets in general?
- Keep an eye on that US dollar – a strong dollar means a weak South African rand, and that means good news for SA producers to boost supply
- Investment activity – ETF and other inflow/outflows
- Next China PMI -> What that means for China automotive demand -> What that means for China auto production
by Taras Berezowsky