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REPORT ON THE GLOBAL PRECIOUS METALS MARKET FOR FEBRUARY 2017

2 March 2017, Prague - In February, all precious metals followed the growth started in January. The lowest prices had been observed in the first days and the highest prices of the most of the metals observed at the end of the month. The exception was palladium, which achieved its highest value, approximating 800 dollars per ounce, in the middle of February.

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  Gold Silver Platinum Palladium
Highest price USD/oz 1,264.50 18.5200 1,047.55 797.85
Date 27 Feb 2017 27 Feb 2017 27 Feb 2017 16 Feb 2017
Lowest price USD/oz 1,197.75 17.2475 984.50 740.45
Date 1 Feb 2017 3 Feb 2017 3 Feb 2017 3 Feb 2017

 

February 2017 was special in that there was no dramatic fluctuation in prices of precious metals. The lowest difference between the highest and lowest spot price was observed in gold, namely 5.5%. It was followed by platinum with 6.4%, then silver with 7.3% and the most volatile metal was palladium with 7.7%.
 
Developments in the global financial market are not usual. American shares keep on growing and the Dow Jones Industrial Average has reached its record values again. Under normal circumstances, when shares are growing, prices of precious metals are supposed to stagnate or decrease. However, the actual situation is different. Shares have been increasing and so have the prices of precious metals. It has shown that investors still want to take advantage of the growth of precious metals while slowly buying gold in order to ensure themselves against a sharp drop in shares which can be expected, and the only question is when. A signal for getting out of the „train in the station called Shares“ may be the slightest remark of FED or fluctuations in published statistics. And while filling the train and achieving new highest values of shares, getting of this train shall be even more dramatic, and let’s bet that many travellers shall be trampled down. 
 
Gold has strengthened by more than 8% since the beginning of the year. The growth in gold is given mainly by the fact that funds that invest in gold had increased their assets by more than 34% and they keep on buying. They are not discouraged even by the fact that the probability of FED increasing its interest rates at its March meeting is 70% at this moment. The reason is mainly growing inflation. However, interest rates on US dollar  shall range from 0.75 to 1.00% after their expected increase, and inflation in February reached more than 2%, which means that the real yield on interest rates shall be the real loss – now 1.50%, after increasing the rates, 1.25-1.00% of each dollar saved. Therefore, funds, which are promising a certain evaluation to their investors, are so desperately looking for a chance of saving money in order to bring at least some profit. As a result of this, the price of shares has been growing because most of the money from private investors ends in funds which invest in these shares. However it leads to the fact that the prices of shares have been beyond the economic reality for a long time and they have nothing in common with the value of firms which they emit. 
 
As already mentioned above, precious metals grew continuously throughout the month. The exception was only palladium with its peak – 797 USD per troy ounce in the middle of the month. Right in the middle of the month, Toyota published its report on developing a new technology, which should be able to decrease the need for precious metals in catalytic converters of motors by 20%. The overwhelming majority of mined metals from so called group of platinum metals, i.e. platinum, palladium and rhodium, is used in the automotive industry for catalytic converters of cars. These metals are now at a crossroads. On one hand, car companies report record sales (be it from the USA or from the fast-growing market in China and India), i.e. good news for palladium, and on the other side, there are new technologies (see Toyota as well as fast development of electromobiles), which do not need any catalysts. However, it is not that clear in case of electromobiles as it might seem. Even when cars are almost quiet and ecological, they use electricity and this electricity must be produced by someone and somewhere. Only a small amount of electricity has been produced from renewable energy resources. The majority (mainly in Asia) is produced in coal power plants, which also use platinum metals for decreasing emissions in order to decrease the amount of NOx gases. The more electricity is needed in the future (be it for driving electromobiles or for further technologies), the more palladium, platinum and rhodium must be used for reducing greenhouse gas emissions. This topic is actual mainly in China which literally suffocates in winter, with dispersion conditions worst of the whole year. Therefore, there is an assumption that the consumption of platinum metals will be moved from car companies to the companies producing electricity in the following years.

 

 

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