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Rising global political uncertainty drives investors to precious metals

Precious metals traded positively during the week ended March 15 as investors sought safe-haven assets to mitigate risks amid increased global political uncertainty.

A majority in the U.K. House of Commons supported delaying Britain's exit from the EU on March 14. Prime Minister Theresa May now hopes to win over the Democratic Unionist party in talks March 18 to table a third meaningful vote before March 20 to get her Brexit deal approved.

A meeting between U.S. President Donald Trump and his Chinese counterpart, Xi Jinping, to end the trade war may be pushed back to April, Bloomberg reported. Chinese state media Xinhua News Agency reported that Vice Premier Liu He and U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin have made material progress over the wording of a potential deal.

China passed a foreign investment law March 15 taking effect in 2020 that aims to affirm the equal standing of foreign companies with state-owned enterprises. Beijing had pledged to allow foreign companies to operate in more sectors and had said it would introduce supportive measures in industries including mining, agriculture, manufacturing and service.

Price ring

Most of the precious metals ended the week higher. Gold rose 0.3% over the prior week to close at US$1,302 per ounce, and platinum grew 1.6% to US$831/oz. Rhodium was the biggest winner, increasing 5.6% to US$3,200/oz. Palladium saw a gain of 2.7% to close at US$1,557/oz. Silver was down 0.2% to US$15.30/oz.

Base metals had a more mixed run. Zinc rose 5.7% to US$2,880 per tonne, and lead was up 1.9% to end the week at US$2,111/t. Nickel dropped 1.6% to US$12,799/t.

Steelmaking materials trended lower in the week. Thermal coal declined the most at 4.5% to US$74.6/t, and metallurgical coal fell 2.8% to US$204/t. Iron ore was 1.1% lower at US$81.30/t.

Aluminum was 1.4% higher at US$1,874/t.

Talking points

Analysts at ANZ Research said in a March 15 note that bulk commodities have recently been suffering from pressures amid market worries over Chinese demand, and Chinese iron ore futures continue to retreat after the Vale dam collapse.

ANZ Research said the recent strength in gold demand, which saw prices breaking the "psychological resistance" of US$1,300/oz, was supported by the market's reaction to the Brexit deal and weak inflation data in the U.S., which indicated the U.S. Federal Reserve may not raise interest rates.

With the recent increases of alumina prices, BMO Capital Markets now expects any price above US$400/t to encourage Chinese exporters back into the market.

"With no further developments around the Alunorte refinery in Brazil getting back towards full capacity, and the arbitrage for Chinese exports closed, the market has once more found itself short of material," BMO wrote.

In a March 11 note, Sanford C. Bernstein analysts wrote that they expect iron ore prices to remain elevated for over a year, with upside potential for Rio Tinto's share price.

"We have no indication that the majors have any ability or desire to expand their production volumes to plug the gap left by Vale's Southern system, whilst other global producers find themselves equally constrained," analysts wrote.


Continental Gold Inc. secured a US$175 million financing package backed to fund the construction of the Buritica gold-silver project in Colombia.

Imperial Metals Corp. said Edco Capital Corp. agreed to subscribe for US$98.4 million of additional senior notes.

Alara Resources Ltd. secured a €60 million loan to develop the Washihi-Mazzaza copper project in Oman.

SSR Mining Inc. launched a debt offering of US$200 million of unsecured convertible senior notes due 2039.

Baoshan Iron & Steel Co. Ltd. launched a 3 billion Chinese yuan short-term debt offering.

Hbis Co. Ltd. plans to raise up to 8 billion yuan through a share placement.

Emirates Global Aluminium unit Guinea Alumina Corp. SA is nearing a financing deal of between US$700 million and US$750 million for its US$1.4 billion bauxite project in Guinea.

Sierra Metals Inc. entered into a new six-year senior secured corporate credit facility of up to US$100 million.