Author Archives: platinum440

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.

With London giving up on the Silver fix, there is a current struggle to establish a new norm. There are several competing companies and countries with different systems and claims to right. It is to be seen as to which one of these will dominate the market.

So who are the major players in the fight for the silver fix?
The global banks want to maintain control of the silver fix, but under stricter and more active monitoring of price manipulation and investigation, are stepping down from their positions. The gap that they are creating is allowing others to try and step in.

China is the largest producer and importer of gold, as well as a large importer of silver. It only makes sense that if you are buying a lot of something that you would benefit highly if you were able to set the price of that product. The end of the silver fix is bringing a new time where all the fixes will be challenged and the price manipulations of banks will make setting new standards for precious metals prices very difficult. In an effort to establish themselves as a major player china has set up the Shanghai Gold Exchange (SGE), which aims to open to outside trade brokers and possibly expand into the silver or other precious metals.

Several global websites have expressed interest in setting a silver fix. Kitco is a precious metal seller who has had live quotes and other market information, and they have come out with a new averaged silver fix that uses the data from the market bid/ask to establish a silver fix. They are doing this in four different times zones, 10 AM New York Silver Fix, 10 AM UK Silver Fix, 10 AM Hong Kong Silver Fix, and the 10 AM Mumbai Silver Fix. They believe that having more than one a day and having them based in the major silver buyer time zones will help the market reflect the true silver price.

Why is this fight over the silver fix important?
There are nearly 100 billion ounces of paper based silver (stocks, derivatives, ect) that are bought and sold based on a contract system that uses the silver fix as the price. Without this daily silver fix the losing party of the silver contact will be able to argue the real price of silver, and without a standard for the industry may decide to default on this contract. China has stated that it was reserving the right to default on commodity derivatives including silver. China is also thought to be behind JP Morgans extensive short position on silver for hedging on their physical silver buying. The Silver fix is so important because it will likely set the standard for what will happen with the rest of the precious metal markets.

For a 117 year span, the London Silver Market Fixing Limited has been setting a A.M. price fix on Silver. It has become the industry standard worldwide to use to the London fix price for the vast majority of buying and selling. While there is the spot market which is open and trades live, the logistics of agreeing on a exact time of a transaction can be hard for many businesses. This is solved by having a set price every day.

With the rise of a digital market that is available around the clock, as well as increased availability of knowledge and news, there has been a increased amount of scrutiny of the Silver fix price. Getting any group to agree on a fair Silver price and for what reasons will always be hard with so many contributing factors. There have also been many allegations of interference, price manipulation, insider trading, or other corruption as far as the Silver price.

The Deutsche Bank, HSBC and Bank of Nova Scotia will stop issuing a Silver fix after Aug. 14. This three months will give businesses and investors a chance to explore other alternatives for pricing Silver. There have already been interests in a few different price fixing models that use direct market data and are a bit more transparent as far as the reasons for the Silver fix price.

The good news in all of this is that we may end up with a more reliable source for accurate Silver prices, and one that is market based that is not able to be manipulated by an individual or company. It will be interesting to see how this will effect the price of Silver as well as physical Silver investment, since most of this was done using the London Silver Fix.

All of this news comes the same day as the news that the Silver trade data came out. The trade data said that investment was up especially in the physical sector, scrap Silver sales are down so less metal is reentering the market, and that Silver in a deficit of production of over 100 million troy ounces.

Silver has been the go-to metal for coinage for thousands of years. Its availability, physical properties, as well as its ability to be coined into a usable denomination have all contributed to its success.

Now with the highly fluctuating stock market, inflation, and other economic volatility, investors are looking for the old safe haven of precious metals. There are many different ways to invest in silver, but one of the most popular is in american coin.

According to the US Mint, the recent price drop in silver has investors eager to buy mass quantities of the Silver American Eagle bullion coins. In 2011 a total of about 39.8 million coins were sold. This year is starting out strong with an average of 900,000 coins sold per week, which would equate to 46.8 million coins sold this year if the trend remains constant.

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 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 meeting 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.

The most recent reports have concluded that negotiations are still ongoing between the miners and mine owners, with the gap between demands shrinking very little. The secondary problem that is now developing is that the power supply to those same mines are now being rationed, causing further issues with production. This is now the eighth week of limited production bringing the total deficit of platinum production to over 600,000 Toz.