Volatile Precious Metals and China Market Crash

With the recent volatility on the market and the activity in china it a good time to talk about whats happening in the metal markets.

A few key points:
-Metals prices have finally come back off of the lows we have been sitting at for the last 2 months
-China has had a extremely serious correction in their stock market, comparable to the American crash of 1929
-China is currently buying 50 tons of gold per month.

While metal prices have been slipping lower due to the strengthening of the dollar over the last year or so, the trend is now reversing with all of the economic unrest both nationally and abroad. The FOMC just had their meeting yesterday on 8/20/15, and the news from Yellen was that the interest rates would not go up, again. The Fed has been threatening to raise interest rates but that threat is no longer suppressing the market as it was. Hopefully this is the start of a run for our precious metals as the stock market continues to poise for a correction.

China has just had a catastrophic event in their stock market. Basically over the last year and a half thier markets have gone up over 150% and was spurred on by the Chinese creating their own bubble of margin buying and using theoretical gains to leverage further. Over the course of about a week over a trillion dollars vanished as the stock market fell, with the Chinese government stepping in to try and slow its descent. When the market reopened it continued to fall further still. This has lead to China devaluing their currency not once but twice in two days, each time by 1.6 percent. This devaluation is supposed to help Chinese exports stay cheap and spur some growth.

Although the Chinese people have been ht hard by the stock market crash, along with its ripple effects of loans being called on businesses and properties, the central government has not changed their sentiment about buying gold. They are currently taking in over 50 tons of gold per month.

Further moves in the precious metal markets hinge on not only our own stability and stock markets, but that of those abroad in both china and the European union.

Beginners Guide to “Is this Platinum?” and what is it worth?

There is a ton of information online about platinum, but not all of it is reliable. When you have something you suspect that is Platinum, there are a few indicators to help you out.

* Platinum will not melt with a flame/small handheld torch (take safety precautions)
-it will glow red hot and cool very quickly, and come back just as shiny if not cleaner
-it will not discolor in any way

* Platinum is very dense, it will feel very heavy in comparison to other metals.

* Platinum is non-magnetic, if it sticks to a magnet it is not platinum

* Platinum jewelry and other industrial products can be marked with purity of 1000/1000 95/5 90/10 85/15 80/20. Other markings like 925, 1/20, or 14k are not Platinum but may contain other precious metals.

* Platinum meteorites are extremely rare and only occur in a select few places on earth, the chances of anyone finding a Platinum containing rock are extremely small.

* Platinum is bendable, it is generally not brittle unless alloyed with other metals.

* Platinum is usually alloyed with another metal, and this will effect the value since it is not 100% pure.

Knowing where you got the suspected metal will help us greatly in helping you determine if it is in fact Platinum.
Platinum-Scrap-Buyer offers analysis of platinum samples; and with our extensive knowledge will be able to help you determine the value of your scrap Platinum.

Sanctions on Russia, Gaza in flames, Platinum stagnating.

The news headlines as of late have been intense to say the least, it seems the world has gone mad. Additional sanctions against Russia have been laid out, the Gaza strip is being bombed daily, and yet the price of platinum and other precious metals seem to be unaffected by any of this news.

The cause and effect relationships that have effected the price of platinum and other precious metals in the past no longer have the same kind of strength anymore. With the advent of algorithm trading and speculators making up the bulk of the volume of metal trades in any given day, the price no longer seems to reflect real supply or demand. It seems counter intuitive that .1 percent difference in U.S. job data from a FOMC meeting can effect the markets more than major world geopolitical events like Russia or Gaza situations. In the past you would have seen a surge in metal prices and the term “strategic metals” thrown around.

Earlier this year we had serious and lengthy strikes in the Platinum mines, the effects of which are still unfolding. With a Platinum production deficit and a serious loss of supply, the price should have had no where to go but up. Unfortunately this event has done little to move the price of Platinum.

It is becoming harder and harder to determine what catalysts will actually drive the market besides the dollar fluctuating in value or some large hedge fund moving assets around. The lack of movement speaks volumes to me as far as market manipulation. Whoever or whatever is controlling the market obviously does not want to see the Platinum price moving right now in any significant way. It is unfortunate that the days of a reactive and free trading market based on supply and demand seem to have passed us by.

Platinum Strike Update, Government mediation ending

Mining minister Ngoako Ramatlhodi has been the one who has set up the many meetings of the ACMU and the Platinum mining companies for talks about the strike. Many deal have been offered but no solution has been reached. One last meeting slated for today 6/9/2014 is set to happen. Ngoako Ramatlhodi has stated that if the two parties cannot reach a resolution at this last effort meeting, that the government will pull out of mediation. The strike will then move back into Labor Court for further arbitration. The problem with the court system is that because it is dealing with global companies it really has no way of enforcing any court order if a verdict is reached. The other major problem is if it reaches labor arbitration there is no time table for a resolution so it may drag on for much longer.

Ngoako Ramatlhodi has also recently stated that when the strike is concluded he will be making sure companies are complying with the mineral act and ownership transformation targets. The mining companies could lose their licenses to mine if they are not giving enough of their profits back to the people of south Africa.

So far the stockpiles accumulated by both the mining companies as well as thier various buyers have held out and prevented a increase in the price of platinum, but if a solution cannot be reached between them, and 40+% of the worlds platinum production continues to be shut down, platinum could see a long overdue reaction to this situation.

Today I Learned (TIL) Platinum Early History

We at www.Platinum-Scrap-Buyer.com have come across the full spectrum of Platinum scrap, but recently we received a call for some scrap that sparked my interest in some of the early history of Platinum. The call was about some very old bronze bars from a shipwreck, and since they were from the 1600’s might contain platinum.

Platinum was really an unknown metal as far as refining and uses up until the 1800’s, over 300 years after it was first discovered in mexico by the Spaniards who were gold mining. The Spanish named it Platina, meaning little silver. Platinum originally was believed to be immature gold, since it shared many of the same physical qualities, but was considered a nuisance metal for a long period of time. Because platinum was not of value, but was very close in density to Gold and was also nonreactive to reagents, it was primarily used as counterfeit when gold coins were used. Platinum coins would be produced and then plated with gold, and this lead to the early banning of the use of Platinum.

In 1874 Emil Wohlwill created a process to effectively separate Platinum, gold, and silver from each other. This process produced the first pure platinum and the rise of industrial uses stems from there. Before the discovery of this process, Platinum was contained in varying amounts in gold, copper, and silver products because it was unable to be removed effectively. The Wohlwill process is still in use today in an large industrial scale, and while it is extremely expensive to set up and run, it is extremely effective.

While your average copper/bronze/ect. scrap is probably just that, it is interesting to me that Platinum at one time was not of value, and even went so far as to try and disguise it as other metals.

Update on Week 13 of Platinum Strike.

Today, Tusday April 22, the Platinum mining companies are meeting with the AMCU at an undisclosed location to renew talks that broke down about a week ago.

There is a new offer which was released to the media by the mining companies, which is that the 12,500 rand wage will be met over the next three years. While the workers have been requesting this wage, they are not happy about how it is being given. Instead of a increase to the basic wage before living and other allowances, the Platinum mining companies are only giving around a 10% wage increase and then adding on other allowances and programs to bring it up to the 12500 rand. This is a valid concern by the mine workers because any future wage increase will be based off their base wage, and not the other allowances.

This strike has now been in effect for a full 13 weeks and is not yet over despite this new deal that was released. While the wage number amount was met, the time frame and details are very important. Siphamandla Makhanya a AMCU speaker said that this latest offer was not the final offer, and would not immediately go to a member vote.

There has been little to no political intervention in the matter of the strike, and for good reason. The general election is being held may 7th, and the current President Jacob Zuma does not want to be on the bad side of either the platinum mine owners or the workers. Without pressure from the government to end this strike it will be up to the AMCU and the mine owners to reach their own compromise.

Workers have lost to date a total of 6.3 billion rand, while the mining companies have lost a total of 14.2 billion rand. This strike has most likely expedited a restructuring of the sector as a whole. Talks of closing some mines permanently, large scale layoffs, and liquidizing some companies due to severe deficits are happening.

It is already known that there will be a very large deficit of production vs demand this year. If these strikes continue any longer the bets that the above ground stockpiles will be able to supply this demand may end up backfiring.

Supply and Demand, a thing of the past?

Following Tuesday’s precious metal market drops I was interested in what was driving the prices down. Long gone are the days of seasonal demand, the end of the calendar year rise, or a physical metal supply issue impacting the price immediately. The market has transitioned to a traded commodity, where the volume of trade in a day dwarfs the total precious metal supply available in the world. With the addition of ETF’s like SPDR Gold Trust (NYSE:GLD) and iShares Silver Trust (NYSE:SLV) trading an average 13 million and 44 million shares per day respectively, the speculative market for precious metals has taken control of the markets.

The London bullion market association handles over 70% of all precious metal trades made in a day, these trades are called over the counter (OTC) trades, and the “spot” prices and “London fix” are derived from this. The volume of these trades in a week are more than the total mining production for a whole year.

Due to the precious metal markets being so effected by speculator and high volume trading, as well as being used as a hedge against currency inflation by many different banks and countries, it is behaving more and more like a stock and less like the limited physical substance that it is.

Precious metals dropped anywhere between 2-3% on Tuesday, contrary to the fact that physical demand is going up, the Russian conflict, and that mining has been having strike issues. Saying that the dollar is strong feels like a joke, making the precious metal markets drop. In talking with some of our peers, the market sentiment is that the market has to turn around, there are just too many reasons for it not to. Any one or combination of reasons could cause a surge in the precious metal prices, whether it be a further prolonged platinum strike, mines declaring force majeure invalidating their contracts, a palladium supply freeze out of Russia, or a call on contracts for physical supply.

When any number of events occur that transition the markets back to the physical realm, and the reality of true supply and demand take back over, only then will the precious metal prices reflect what they really should be. That day can not come soon enough.

Platinum Mine Strike now on week #11

There are a lot of different reports and figures coming out of the mine strike in southern Africa, with varying numbers on lost wages and production coming from both the miners the producers and everyone in between. So the question is, what do we know?

Latest news and figures:

  • Anglo American Platinum CEO recently said “If we run out of metal we will go to the market to buy it … to supply our customers,”. This comes after news that Anglo american has declared force majeure to some of its suppliers in its south african mines.
  • Anglo American CEO recently said that if Amplats under-performs it may be sold, “every asset has to deliver return and if the business can’t deliver return than we’ll look at all options”
  • At the end of week ten, the employees have lost 5 billion Rand in wages, while the Mining companies have lost 11 billion Rand in revenue.
  • Amplats still has around half of thier initial platinum stockpile, 215,000 ounces.
  • Platinum production takes about 2 months to go from ore to physical metal, so that means we are closing in on the production aspect of the mining companies drying up and the outflow of the stockpiled metal to go up.
  • The sharp divide between the Miners and Mining companies demands has had little concession, while the miners want double the wages they are currently paid, and the mining companies only offering a 9% increase over three years.
  • It has been stated that for every month that the mines are closed, it will take an equal amount of time to bring them back to full production
  • Pallinghurst chairman Brian Gilbertson recently commented about the stagnating platinum price, saying that the price of platinum has hardly responded to the loss of production and that it is unlikely that the price of platinum will remain depressed for much longer
  • The G-8 is now the G-7 with Russia being sanctioned

    The planned G-8 meeting in Sochi Russia is being cancelled and will instead be hosted in Brussels without Russia. This change occurred after the Russian annex of Crimea, with the group of 7 (the U.S., Germany, the U.K., France, Italy, Canada, and Japan) trying to dissuade Russia from any further Ukraine conflict. The International Monetary Fund is releasing an announcement tomorrow after talks about a bailout loan for Ukraine in the order of 15-20 billion dollars.

    The proposed plan to stop further Russian conflict is to establish new economic sanctions that aim to cripple the struggling Russian economy, and draw nearly 75 billion out of Russia in the next year if necessary.

    With Russia being one of the largest Platinum producers, and platinum being in a huge deficit with the continuing mining strikes in south Africa, Russia may turn to platinum as a saving grace to bail out their economic woes. It is speculated that the Russian reserves of platinum and palladium are dwindling and along with the crunch on supply we could be nearing the point where the demand simply far exceeds the available supply, and by the laws of economics the price has no where to go but up.

    The Golden Yuan and what it means for precious metals

    The central currency of China, the Yuan, is becoming more widely accepted and traded for in the global economy. With China’s ever increasing economic growth they are looking to de-Americanize the global economy. There are a few opposing viewpoints on what China is going to do, and if it would be possible to back their currency with Gold. The total amount of Gold in the world is now estimated to be valued at 9 trillion dollars, China currently owns approximately 110 billion worth of that in physical Gold. Even if China was to acquire every ounce of Gold in the world, they could only back 49.5% of its total currency, so what does this mean? In my opinion with China being a very large producer of Gold, as well as buying it feverishly, the value of Gold as well as everything tied to it can only go up.

    There is more than one way precious metals go up in value, demand can go up, which it is, or the currency they are being purchased with can go down in value. If the Yuan becomes the new reserve currency you can expect the relative value of the dollar to go down and the price of precious metals to rise. Combine increased demand and the currency issues and you have a volatile situation.

    There are several scheduled meetings to discuss the possibility of backing the Yuan with Gold, as soon as the 10th and 11th of April, so expect to hear some new news about this topic soon enough.