Bullions Look Vulnerable as Investors Wait for Economic Data
Precious metals have been on a bouncy ride this year. The looming fear of rising interest rates is one of the most important factors that will determine the prices. All of the precious metals have YTD (year-to-date) losses as of November 3, 2015. Platinum performed the worst. It fell about 20.8% on a YTD basis. Similarly, gold, silver, and palladium fell 5.8%, 3.1%, and 19.1%, respectively, on a YTD basis.
Palladium has been the worst-performing precious metal on a 30-day trailing basis. It lost almost 7.3% of its price. It closed at $644 per ounce on Tuesday, November 3. This is the lowest level in about one and a half months.
The continued weakness in platinum’s price is likely due to the continued concerns about the Volkswagen emissions scandal. Palladium is part of the autocatalyst technology in the production of gasoline engines—not diesel engines like platinum. Excessive production and other fundamental weaknesses have pushed its price lower. The ETFs that are backed with platinum and palladium metals have also seen a fall in their prices. Other ETFs that have shown weakness in the past week include the Market Vectors Gold Miners ETF (GDX) and the Global X Silver Miners ETF (SIL). They fell 6.9% and 6.6%, respectively, on a five-day trailing basis.
Declining car sales in the emerging markets hit palladium hard. It’s widely used in the autocatalyst technology. The rising stockpiles for both platinum and palladium, especially among the South African miners, is another primary concern. The mining equities that have seen a fall in their prices in the past week include Sibanye Gold (SBGL), Gold Fields (GFI), and AngloGold Ashanti (AU). These three companies contribute 10.6% to the price changes in the Market Vectors Gold Miners ETF (GDX).
Browse this series on Market Realist: