SWOT Analysis: Palladium at $2,500 an Ounce
By: Frank E. Holmes
GoldSeek.com
Tuesday, 21 January 2020
Strengths
The best performing metal this week was palladium, up 17.92 percent on tight supplies and strong demand. One-week lease rates for palladium rose for a seventh day to 32.56 percent. The majority of gold traders and analysts were bullish on gold in the weekly Bloomberg survey, as attention turns to the next stage of the U.S.-China trade deal. Turkey’s gold reserves rose $478 million from the previous week to total $27.9 billion as of January 10, according to data from the central bank. South African gold output rose for the first time in more than two years in November, according to Statistics South Africa. Output rose 5.2 percent from a year earlier, compared to a 1.4 percent contraction in October. Producers have been able to take advantage of higher gold prices.
Palladium has surged to a whopping $2,500 an ounce and had its biggest one-day increase since 2008 on Friday. Bloomberg data shows that the metal jumped as much as 9.3 percent on Friday to $2,528.51. Palladium has added over 70 percent in the last 12 months, driven by a combination of tight supply and strong demand for use in autos to meet emission standards.
BloombergNEF says that mines, especially those in remote locations with high energy costs, can now develop onsite renewable energy as a cost-effective way to reduce carbon emissions and electricity costs. According to BNEF, an off-grid copper mine in Western Australian could use onsite renewables to meet up to 40 percent of its electrical demand at a lower or equal cost to diesel generation. Renewable energy costs continue to fall, with solar down 11 percent and wind down 6 percent in the last year.
Weaknesses
The worst performing metal this week was silver, down 0.41 percent. Gold was under pressure early this week before the signing of phase one of the trade deal between the U.S. and China. “Investors who bought gold for the trade uncertainty will likely take profit,” said ABN Amro strategist Georgette Boele to Bloomberg. The SPDR Gold Shares saw more than $1 billion of outflows last week – the most since 2016. Russia’s gold buying spree has slowed. Russia purchased 149 tons of gold in the first 11 months of 2019, which is 44 percent less than the year before.
The Treasury Department monthly budget released on Monday shows that the U.S. budget deficit widened to $356.6 billion in the first three months of fiscal 2020 and is on pace to exceed $1 trillion by year-end. A deficit of that amount would be the highest since the financial crisis when the government boosted spending.
According to Bloomberg data, shareholder activists launched 518 new campaigns in 2019, up slightly from 512 campaigns in 2018. Vinson & Elkins, known for its energy-related work, said “2019 was the busiest year our shareholder activism defense practice has ever had.” Endeavour Mining Corp announced that it has closed merger talks with fellow Africa-focused gold miner Centamin Plc this week after it didn’t receive enough information in the due diligence process to make a formal offer.
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