Precious Metals Weekly Round-Up: Gold Falls, Palladium Down 30 percent

After slipping as low as US$1,556 an ounce yesterday (March 12) following four consecutive days of losses, gold began to trend higher this morning (March 13), but was still on track for its worst week in nearly three years.

The broader precious metals sector was battered this week as markets were sent into bear territory on growing concern that COVID-19’s impact will be much more significant than first expected, with more cases being reported in North America daily.

Palladium bore the brunt of the volatility, dropping 22.9 percent by midday — its greatest single day decline.

The widespread volatility bruising markets was further compounded late Wednesday (March 11), when US President Donald Trump announced a travel restriction on flights originating from 26 countries in Europe, effective Friday (March 13) at midnight.

The news drove global markets into a frenzy, with the S&P/TSX Composite Index (INDEXTSI:OSPTX) displaying its worst showing in 80 years on Thursday, while the Dow Jones Industrial Average (INDEXDJX:.DJI) recorded its poorest day since October 1987.

The losses were so large and immediate the 15 minute temporary trading halt circuit breaker was activated shortly after the morning bell.

Gold’s safe haven nature wasn’t enough to pull it out of the red as investors looked to mitigate losses in other sectors by liquidating the yellow metal. Stimulus packages and the emergency US Federal Reserve interest rate cut last week have also worked against the currency metal as buyers look for cash instead of bullion.

Despite gold’s inability to gain traction this week, analysts remain convinced the metal will perform well in the long term, especially with bonds moving into the negative yielding territory and fears that a global recession is close at hand.

“If your bonds are yielding nothing, gold suddenly becomes interesting,” John Kaiser of Kaiser Research said during the Prospector and Developers Association of Canada (PDAC) convention last week.

He continued, “I think we’re heading into a major repricing of gold into the US$2,000 to US$3,000 range, which now I’m an even stronger believer in with the uncertainty that this coronavirus is injecting.”

Gold was trading for US$1,564.26 at 10:57 a.m. EDT.

Silver fell 9.9 percent this week from US$16.93 per ounce on Monday (March 9) to US$15.25 this morning.

The white metal is locked in the red as safe haven demand falls flat and the industrial sectors that usually demand the metal contract.

Even though gold’s sister metal has been on a downward trend since late February, analysts the Investing News Network spoke with at PDAC still see value in the versatile metal.

“I would play silver exactly the same way as gold, and that is own a good silver equity that has a business case, and then benefit from the silver price when it eventually spikes up again,” said Lawrence Roulston, managing director WestBay Capital.

An ounce of silver was trading hands for US$15.17 as of 10:59 a.m. EDT.

Platinum has also been locked in a downward trend since February 17, when it breached the US$1,000 per ounce level.

The automotive metal started the five day period at US$873, and dipped as low US$764 Thursday, before climbing back to the US$800 range.

Platinum was selling for US$763 as of 10:59 a.m. EDT.

The metal that experienced the greatest losses this week was palladium, which fell by as much as 30 percent. After hitting an all-time high of US$2,754 at the end of February, the metal has steadily trended lower.

The autocatalyst metal has displayed an excellent showing over the last 12 months as demand increases due to the need to use more palladium in emission-reducing catalytic converters.

Palladium may not recover its highs; however, Randy Smallwood, president and CEO of Wheaton Precious Metals (TSX:WPM,NYSE:WPM), sees the metal retaining its higher value as emission reduction targets are heightened in Europe and China.

“With the shift away from diesel engines, palladium is outperforming and outperforming very strongly. And we don’t see an end to it,” he said. “These are real shortages that are impacting the automobile industry in terms of being able to find enough palladium to satisfy the needs — the increased needs — for the catalysts on the gasoline side.”

Palladium was trading for US$1,636 per ounce as of 11:00 a.m. EDT.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.