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REPORT ON THE GLOBAL PRECIOUS METALS MARKET FOR NOVEMBER 2017

December 1st, 2017, Prague – November was the month of a very low volatility of the metals observed. The lowest difference between the maximum and minimum price could be seen
in gold, namely 2.7%, platinum 4.8%, silver 6.0%, and the most volatile metal was palladium
with 6.1% (if we can speak of volatility at all). The low volatility is given by the fact that no unexpected events occurred on the market. The third business week in November was as usually virtually paralyzed by the biggest American holiday – Thanksgiving Day. In the USA, the life almost stops thanks to this traditional family holiday, millions of people take their journey and stock exchange transactions go sideways. This is the main course of low volatility
in November. 

 

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  Gold Silver Platinum Palladium
Highest price USD/oz 1,299.84 17.40 960.20 1,034.28
Date 27-11-2017 17-11-2017 28-11-2017 29-11-2017
Lowest price USD/oz 1,265.60 16.41 916.15 974.00
Date 03-11-2017 30-11-2017 03-11-2017 15-11-2017
 
However, the end of the month was not so calm. With brokers and speculators coming back to work, commodity markets started to move again, and the three metals observed recorded their peaks in the last week of the month. This time, silver “went against the tide”, which by contrary reached its maximum at the end
of the month. However, it was not caused by any difference from other precious metals, but by the fact that the sale of silver was stronger compared to other metals.
 
Share trading had a huge impact on the price of precious metals in November. Speculators with shares keep on going on the train to the station “whoa”. Stock indices record their peaks. Dow Jones exceeded the limit
of 24,200 points. Even such a supporter of shares like Goldman Sachs warns against this dangerous growth not reflecting economic reality. The long-term stocks and bonds growth trend has driven market valuations
to the highest level since 1900. The bank thinks that this situation is unsustainable and it shall have a very hard impact on investors sooner or later. The stocks and bonds were similarly expensive only in the twenties and fifties of this century. The exact words of the bank were as follows: “All good things must come to an end, a bear – i.e. a falling market will certainly return.” They recommend to investors to shorten the maturity
of the assets hold while being prepared for leaving these markets as fast as possible. The only result of this escape for precious metals shall be as follows. Investors shall transfer their funds to a safer harbour –
to gold. This situation occurred in the history of financial markets on several occasions, and there is no reason why it could not occur again. It shall result in a very steep increase in prices of all precious metals, with the gold reaching the highest value.
 
In November, we experienced a slight increase in the interest in investment in platinum on the Czech market. The reason was that there were several PR articles in the press and on news websites that platinum was relatively cheap at that time and it was good to buy it. Similar articles occurred there several years ago when silver fell below 20 USD per ounce while encouraging to its purchase. At this moment, silver is traded under
14 USD per ounce, and there was no increase as promised in the articles. The reason of gold decrease was
a demand of firms manufacturing solar panels. The initial boom was overcome, and there are no indications that the demand should return. The same can also happen to platinum. It is always necessary to ask for a reason of the decline. A coincidence? Anomaly that can be utilized? We believe that it is not the case for platinum. Its decline is given mainly by low demand on the part of the automotive industry where production of diesel engines, which are being replaced by petrol engines, is in decline. This ratio change is confirmed by the fact that there has been a relatively significant palladium price increase. Though we do not recommend to buy it either.
As we have already mentioned for several times – the automotive industry faces an unexpected change –
a replacement of combustion engines for a different drive mechanism, resulting in the tilization of palladium and platinum in catalysts. Even as for the investments in precious metals, it is true that – it is not good to be guided by first impressions, it is good to be well informed.
 
In December, we expect higher volatility on the market, especially in case of gold. The reason is an expected increase in interests on the part of the American FED as well as the fact that gold belongs to assets that have experienced an increase in their value since the beginning of the year, which is always a reason 
for managers of huge funds to sell these assets at the end of the year. They want to sell profit assets before the end of the year because their yearly bonuses, which form an essential part of their incomes, are based
on the fund profit, and they do not want to lose them. This process is repeated every year – to sell in December and to buy again in January. 

 

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