Editor’s Picks: Gold Faces Bumpy Week on Trade Tensions, Platinum Stages Breakout
The gold price saw peaks and troughs this week.
After rising to almost US$3,350 per ounce on Monday (May 26), the yellow metal took a dive, dropping just below the US$3,260 level on May 28 (Wednesday). It was back on the rise the next day, hitting US$3,324.
Trade tensions were in focus throughout the period.
Concerns lessened early in the week, when US President Donald Trump said he would delay raising tariffs on the EU, but uncertainty ratcheted back up on Wednesday (May 28), when an American trade court issued a ruling that blocked most of his tariffs put in place by his administration.
“It is not for unelected judges to decide how to properly address a national emergency” — Kush Desai, White House spokesperson
The decision prompted a flurry of activity and backlash from Trump and his supporters, with a federal appeals court ultimately reinstating the tariffs on May 29 (Thursday).
The turmoil was beneficial for gold, as was news that the US economy shrank by 0.2 percent annually in Q1. The GDP estimate is the second of three from the Bureau of Economic Analysis, and comes in lower than the first calculation of a 0.3 percent contraction.
Bullet briefing — Glencore restructures, Anglo completes spinoff
Glencore restructuring move sparks M&A talk
Commodities giant Glencore (LSE:GLEN,OTC Pink:GLCNF) has quietly moved billions worth of global coal and ferroalloys assets into an Australian subsidiary.
The Australian Financial Review was the first to report the news, and it’s already sparked speculation about renewed M&A talks between Glencore and Rio Tinto (ASX:RIO,NYSE:RIO,LSE:RIO). The two major companies reportedly engaged in discussions last year, but in the end did not move forward.
With this restructuring from Glencore and Rio Tinto’s CEO due to step down later this year, market watchers see potential for a deal to be done.
Anglo American spins off Valterra Platinum
Anglo American (LSE:AAL,OTCQX:AAUKF) made headlines elsewhere this week as the firm finished demerging its platinum-group metals unit, Valterra Platinum (JSE:VAL).
Valterra, formerly Anglo American Platinum, began trading on the Johannesburg Stock Exchange on May 28, and will have a secondary listing in London as of June 2.
Anglo made the decision to spin off Valterra after heading off a US$49 billion takeover bid from BHP (ASX:BHP,NYSE:BHP,LSE:BHP) last year. The company embarked on a restructuring plan that will see it hone in on copper and iron ore.
Interestingly, Valterra’s debut comes alongside a platinum price boost. The metal recently broke out to its highest level in about two years, nearly reaching US$1,100 per ounce.
Edward Sterck of the World Platinum Investment Council believes it’s too soon to tell whether the rise is sustainable, but he does see a ‘perfect storm’ brewing for platinum.
Here’s how he explained it:
I think platinum’s fundamentals are just highly attractive at the moment. You’ve got really constrained supply, you’ve got demand that is actually beginning to show some real signs of growth, driven principally by an inflection in jewelry demand and by ongoing growth in investment demand.
And so given those things are resulting in these really significant deficits — this is the third year of almost a million ounces of deficit out of an 8 million ounce market — those are just rapidly depleting those aboveground stocks … this has all generally come together as a perfect storm. We are seeing that tightness in the market, and I feel quietly optimistic that we’re going to see that long-awaited price response come through.
Watch the full interview for a more in-depth look at supply and demand dynamics for platinum.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
