MINE TO MARKET - March 2015


Gold, which had started so promisingly in January and February, suddenly hit a brick wall in the guise of a stronger US economy and the realisation that interest rate hikes may start occurring as early as June. The euphoria that had gripped the market in mid-January dissipated very quickly and a few vicious spikes down in the US gold price left gold at the lowest levels since the end of November 2014 and only the strong bulls standing in its way.

Some of the only participants who still appear to be happy to average in as the price comes down are the Chinese. Whilst not at the volumes seen before Chinese New Year, demand in the region has remained strong and consistent buying is still being seen on a daily basis from the Mainland and Hong Kong.

The decision by the Indian Prime Minister not to reduce the import duty actually resulted initially in a small uptick in the gold price as buyers who had been sitting on the sidelines waiting for good news and cheaper prices, were forced to restock, regardless of the lack of price incentive. This was short-lived, however, and the price soon came back under pressure from position liquidation in the U.S..

This has resulted in a significant reduction of the speculative long position in the futures market in the US and the overall speculative positioning seems to be generally square to slightly short. The risk overall now is that after such a short and sharp drop back to the USD1155.00 level there is the propensity for a quick rally driven by any number of factors. This could be something as simple as the release of growth numbers from the US that show that the US dollar probably shouldn’t be at its highest level since 2003 (measured against a basket of currencies). As usual, the possibility is that the market has surged ahead of the real story and needs to correct.

From a purely technical perspective, however, with the US gold price dropping below $1180 again, the next target becomes $1080 and then $970 as an overall retracement of the 10 year run that the market has enjoyed. Timing, of course, is everything, and these things rarely move in a straight line, but technical levels are worth watching because other traders watch and trade them.




Silver has shown itself to be a little more resilient than gold and at one point in February staged a 50 cents per ounce rally whilst gold only put on a couple of dollars. The exuberance only lasted a short while, unfortunately, with the gold/silver ratio briefly dipping under 1:71; a level not seen for many months.

The ETF holders in silver must be congratulated for their “courage under fire” as the levels of overall open positions have barely changed even with the large fall in price. It seems the commitment is less flighty than that of gold holders and there is no doubt that the lack of liquidation out of these investment vehicles is helping to cushion the blow for the silver price.


Platinum has come under further pressure as once again its liquidity issues and the impact that speculative positions have on its price are highlighted. Being a smaller market overall in terms of size and control of physical, the demand/supply balance characteristics can be upset far more easily by the impact of speculative interests than for metals like gold or silver. This was highlighted last year when South Africa launched two platinum ETFs. The ensuing demand pushed platinum prices much higher than normally have been the case. Combined with a supply squeeze from ongoing strikes at the mines, the move was exacerbated.

This year the shoe is on the other foot, however, and after a sterling start to the year, it is now continuing to suffer  of increased physical supply as the mines come back on line and liquidation out of the ETFs and futures markets. Interestingly, however, in the last week or so there has been some renewed buying into the ETFs with the bulk of the buying coming into one of the South African ETFs. It is becoming clear that these ETF’s could well turn out to be the “swing factor” for the overall platinum demand and supply in the months ahead.

On the physical side, however, the weakness of the European recovery continues to dog any attempts to revive platinum demand and once the price broke through the US1200 level the gloves were off. Any hopes for increased platinum demand are still viewed to hinge on a turnaround in Europe and a greater appetite for the metal going into vehicles there.   


Palladium escaped relatively unscathed on the pricing side up until the last week or so. Viewed to be one of the industrial metals that will benefit the most from a US recovery, any news of a better story in that economy has bolstered the palladium price. It has weakened since the beginning of the year but seems to be finding good support in the US780-800 range. This is being tested, however, and from a technical viewpoint a breakdown from here will set up a move back to the US740 level.

The palladium ETFs have been suffering from some liquidation in the last couple of weeks but the net long speculative positions on NYMEX have more than offset this, adding another 250,000 ounces of new positions. This will need to continue to give palladium a chance to rally back up through the US800.00 level.

 Written by Mike Ward. First appeared in Jewellery World Magazine March Edition 2015.