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REPORT ON THE GLOBAL PRECIOUS METALS MARKET FOR DECEMBER 2017

3 January 2018, Prague – in December, the difference between the lowest and the highest current price of the metals observed was almost twice as high as in November. We predicted this trend in our November report. Palladium with almost 10% difference of prices was the most volatile metal. It was followed by silver with 9.6%, platinum with 8.5%, and by the metal with the lowest difference of prices, which was gold with 5.8% as usually. 

 

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  Gold Silver Platinum Palladium
Highest price USD/oz 1,308.00
17.12
947.58
1,074.00
Date 29-12-2017 29-12-2017 01-12-2017 28-12-2017
Lowest price USD/oz 1,236.55 15.6191 873.21 978.60
Date 12-12-2017 08-12-2017 13-12-2017 05-12-2017
 

The development of palladium is still very interesting. Its price exceeded the limit of 1,070 USD per ounce while slowly approaching the moment of overcoming its maximum of January 2001 when it exceeded the level
of 1,090 USD per ounce. And even then, as now, the price was driven by the strong demand on the part of the automobile industry. Reaching the limit of 1,090 USD/ounce was followed by a sharp decrease to the limit of
300 USD/ounce at the end of 2001. We also experience the same situation at this moment. We dare to predict that the palladium price shall be also lower at the end of 2018. Therefore, we recommend our clients to sell the palladium now.

 
The end of year is always an opportunity to take stock. Let’s have a look at how individual precious metals did. 
  • What happened when investors bought them on the first day of trading in January 2017 and sold them on the last day of 2017?
    The investors earned fair 12% from gold, 6 % from silver, and more than 50% from palladium.
    The platinum price was almost the same both at the beginning and at the end of 2017, it means no profit. 
  • What would happen if the investors had a brilliant estimate and bought metals on the day
    with the lowest price and sold it on the day with the highest price?
    They would make 17% from gold, 17.7% from platinum, 22% from silver, and 50% from palladium. 
  • It has been the best year for gold since 2010. The whole year was accompanied by low volatility, and despite the fact that FED had increased the rates of the U.S. Dollar three times; the annual gold profit was the above-mentioned 12%. 
 
The most important event in December was the meeting of central bankers in the US. FED, based
on presumptions, increased the U.S. Dollar interest rates by a quarter percent. Now, they range
from 1.50 to 1.75%. The estimate for the next year is that the rates shall be increased three times,
namely by 0.75% in total. At the end of 2018, the basic interest rate of the U.S. Dollar should range
from 2.25 to 2.50%. However, everything will depend on economic development. As for the outlook for the US economy, FED is very optimistic. Though, the market has not been sharing their optimism yet. January data, mainly data on industrial production and unemployment development, shall be important for further development. If they are positive as so far, the increase can be as expected and notified by FED. 
 
Gold and other precious metals reacted to the increase of interests as usually. The gold had kept
on weakening till the moment of its notification, namely below the value of 1,240 USD/ounce. After its increase and subsequent comments of bankers, it started to strengthen while ending above the value
of 1,300 USD/ounce. The first part of our presumption is thus being fulfilled – December experiences a decrease in the price of gold. If the second part is being fulfilled – the first months of the new year are the months experiencing growth in prices of precious metals – only time can teach us. 
 
December also brought interesting news. In the autumn, big investment banks such as JP Morgan and Goldman Sachs bought physical gold and silver. There has been speculation of 80% of all physical gold and silver traded on the American Stock Exchange COMEX being delivered to stocks of these two big banks. The word “physical” is important. It is normal that investment banks buy and sell commodities but it is made exclusively in their paper forms with the purpose of mere speculation on the market. In case of physical purchase, the whole value of the delivery must be paid. In case of paper speculation, only approximately
5 to 10% of the total value is paid because the trading is made via so called “lever”. Why would anyone bind
90% of monetary value unnecessarily when it is possible to trade with paper form of commodities? Analysts see the main reason in the fact that big investors are afraid of a lack of physical metal while using a current low price of gold (given mainly by its so called paper form) in order to buy real gold and silver conveniently.

 

Libor Křapka
Chief Executive Officer of IBIS InGold®, a. s.