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Data Wrap Up – November 2014

Metals Prices
ResourceLast1 Month Ago3 Months Ago1 Year Ago

Gold extended its losing streak this month, falling 4.3% on the heels of a strengthening dollar and a winding down of the Federal Reserve’s monetary stimulus. Although gold prices have been buoyed at least in part by the announcement of a massive quantitative easing program in Japan, the US dollar has continued its ascension. This is most apparent when you look at the US dollar index, which has appreciated 3.5% over the last 30 days and nearly 10% year to date.

Gold’s weakness can be traced directly to the US dollar, as it and other commodities are priced in dollars. Silver had a similarly weak month, as spot prices were down nearly 6% over the last 30 days.

Like gold and silver, platinum also succumbed to the strengthening dollar, falling 5.8% over the last month. The metal also crossed into rarely charted territory, as it now trades below gold’s spot price. Over the last 20 years, this price action has reared its head on 7 out of every 100 trading days; most of those instances occurred during the summer of 2011 and early 2013 when the Federal Reserve’s quantitative easing was in full swing. This time around, it’s a result of weakening industrial demand.

On the other hand, palladium was in positive territory this month, rising 1.9%. However, it still lagged far behind the S&P 500, which was up 9.6% after a weak performance in October. Even so, palladium has performed well on a year-over-year basis, as prices are up 5.2% over this period. Palladium prices have been supported by strong auto demand in the US, Canada, and China, as about half of the world’s palladium is used in catalytic converters.

India’s Love Affair with Gold

Gold holds a special place in the hearts of 1.3 billion Indians. The nation’s love affair literally spans millennia, as gold has long been viewed as symbol of prosperity, purity, and good fortune. Despite holding roughly 10% of the world’s above-ground stock, India’s appetite remains as insatiable as ever.

According to the World Gold Council, Indian jewerly demand was one of the few bright spots last quarter, rising nearly 60% year over year after import restrictions and a consequent spike in local prices crimped demand in 3Q 2013.

Although the strict import tariffs on gold remain in place, newly elected Prime Minister Narendra Modi has restored faith in the Indian economy, as evidenced by the recent upgrade to the nation’s growth forecasts. The combination of improving economic sentiment and bargain gold prices fueled an exceptional third quarter. This trend is expected to spill over into India’s seasonally strong fourth quarter, especially with gold still trading at multiyear lows.

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