Fool's Gold Report: Platinum Surges As Gold, Silver Bounce Slightly

If all you looked at today were the gold and silver markets, you might conclude that nothing extraordinary happened today. Activity in the major precious metals was relatively subdued, with April gold futures settling up almost $4 per ounce to $1,331.80, while May silver rose just over $0.06 per ounce to $21.35. But even as the SPDR Gold Shares (NYSEMKT: GLD  ) and iShares Silver Trust (NYSEMKT: SLV  ) posted tiny moves upward of 0.1% and 0.2% respectively, big gains for platinum and palladium pointed to the differing fundamentals affecting those markets compared to what gold and silver investors have to deal with every day.

Metal

Today's Spot Price and Change From Yesterday

Gold

$1,332, up $2

Silver

$21.26, up $0.04

Platinum

$1,448, up $24

Palladium

$740, up $10

Source: Kitco. As of 5:30 p.m. EST.

What made platinum-group metals move so much today?
The key to understanding the platinum and palladium markets is that you can't judge scarcity based on price. Even though platinum is only a little more expensive than gold, the white metals is much less plentiful than its yellow counterpart. That makes the platinum and palladium markets much more vulnerable to supply disruptions, and with so much of the supply of these metals coming from South Africa, the frequent labor strife in that nation frequently causes bottlenecks that have impacts on prices that can last for weeks or even months.

That's what's been going on for the past five weeks, and today's surge in platinum and palladium prices came amid reports that major producer Impala Platinum had declared force majeure on its supply contracts. In essence, force majeure allows Impala and other miners to avoid their obligations under contracts with their customers under certain unforeseeable circumstances that are seen as beyond the miner's control. One could argue that labor unrest is far from "unforeseeable," but for the metals markets, the declaration would be an admission that the conflict between workers and the miner could last longer than some had hoped.

The news helped boost shares of Stillwater Mining (NYSE: SWC  ) , which is the only U.S. producer of platinum group metals, by 2% today. For now, the price increases for platinum and palladium bullion are relatively small, and key consumers of the metals, including General Motors (NYSE: GM  ) and other major auto manufacturers, usually have enough supply of the metals stockpiled to meet their needs for at least short periods of time. Eventually, though, a prolonged labor problem could cause bigger price increases for platinum and palladium, underscoring the importance of industrial demand in distinguishing the platinum-group metals from gold.

Look beyond gold
By contrast, gold-mining stocks were largely quiet today, with the Market Vectors Gold Miners ETF (NYSEMKT: GDX  ) falling 0.3% and no particularly sharp moves among the biggest mining stocks. But the lesson for new investors in precious metals is that it pays to know the different reasons why various metals move, as you can then avoid the mistake of thinking that gold, silver, platinum, and palladium will always move in the same direction for the same reasons.

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  • Report this Comment On February 28, 2014, at 9:54 AM, TigerPack1 wrote:

    The BIG news today is the -0.5% drop in the U.S. Dollar Index so far this morning. The chart is looking more ugly every day, and may be near an important long-term breakdown point.

    If we start to see daily drops in confidence in the value of the Dollar, commodities will really fly higher when priced in U.S. Dollars.

    We may see an oversized gain in commodities today if the Dollar does not recover, especially for gold and silver going into a problematic geopolitical weekend in Ukraine.

  • Report this Comment On February 28, 2014, at 10:33 AM, TigerPack1 wrote:

    The sad part of the bitcoin fiasco is it is shining a bright light on the truly worthless nature of the U.S. Dollar and other fiat currencies.

    Where bitcoins were backed by nothing but ether, the U.S. Dollar is backed by endless amounts of Treasury debt that can NEVER be repaid in constant value terms, and promises by the FED to print even more worth less Dollars each year through QE PONZI scheme. Bitcoins in fact had more going for them, in the real world, with universal exchange and truly free market based exchange value.

    Speculators and investor confidence turning on the Dollar in 2014 will prove disastrous for BEN's PONZI dream of rewriting economics books and "managing" formerly free market capitalism on the globe. EVERYTHING in U.S. finance revolves around people believing Dollars are actually worth something, when they are worth less than nothing.

    Think about it.

  • Report this Comment On February 28, 2014, at 12:09 PM, TigerPack1 wrote:

    Energy and food spiking higher in last hour. No rest for the weary, working classes in America about to get slammed again, after Obamacare trashing their finances, increasing tax rates at the local level, increasing utility costs across the board, and now in the spring HUGE increases in gasoline and food at the grocery store are coming.

    PONZI is only making the rich, richer. The middle and poor in the country might think about moving to Mexico, where they can actually pay for things to survive.

    Amazing isn't it, China is building cars and losing the bicycle, accumulating gold and silver like crazy, building new warships and armies, and soaking up all the excess food and basic industry commodities on the planet - as they embrace capitalism and free markets.

    America is going in the other direction, as car sales are in decline in favor of bikes, we have no more gold, we are slashing military spending - ending occupations, mothballing warships, sending troops back into the private working pool, etc. - and now we are going to be scrapping for food and gasoline. All while WE throw free market capitalism under the bus in favor of a government managed/socialist economy.

    Go figure!

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