Gold prices tripped and fell sharply on Tuesday, as anticipation about the Fed meeting's eventual results turned into apprehension that the massive slide in rates seen since September will not only come to an end shortly, but will likely be partially reversed after a period of no action (say, over the summer). Not helping matters for bullion was a rise of .33 in the dollar index to 72.85 (the greenback traded at 1.5553 against the euro) and a whopping more than $3.30 drop in crude oil to $115.45 a barrel, as BP prepared to restart its UK pipeline.
All of this drama was unfolding against and despite still fragile background conditions, as Deutsche Bank reported its first loss in five years, as it wrote down over $4 billion in soured investments. The culprit(s)? LBO loan values and asset-backed securities. US foreclosure filings spiked 112% in the first quarter, as Nevada, California, Arizona, and Florida's bubbles continued to implode. Las Vegas risks becoming a ghost town of a different kind, as one in every 44 homes is in mortgage trouble. The cleansing cycle sure ain't pretty. Consumer confidence hit a five-year low and housing prices declined 12.5% in February, with Las Vegas, Miami, and Phoenix reporting more like 20% drops.
Spot gold was under liquidation pressure all day today and marked a session low of $871.00 with a loss of $22.2 bid as participants geared up for the critical FOMC meeting taking place today and tomorrow. The market now appears at risk of coming full circle and revisting the previous record of $845, and would thus be wiping out its year-to-date gains. Stale longs are still exiting ahead of what they see as the inevitable shift in Fed policy tomorrow afternoon (certainly in words, if not yet in deeds). Gold will have to make a go of it more on its internal fundamentals than on the fuel that has provided much of its stellar ascent since the fall; the engineered decline of the US currency in the wake of the subprime crisis.
By now, the Fed given a good dose of accommodations that will likely manifest themselves and translate into visible effects some months down the road. In them interim, less than positive economic data will still be in the pipeline and it will take some gritting of the Fed's collective teeth to stomach them and not exhibit further rate panic. Silver caved 46 cents falling to $16.53 despite lonely howls of 'everything is ok in the market' by amateur pundits. At least for the moment, things are not quite ok. The noble metals sank as well, with platinum dropping $49 to $1929 and palladium down $9 to $428 per ounce.
We have previously noted that as metals prices rose sharply, so did the supply of scrap recovery. In fact, last year's scrap-sourced gold supplies came within 150 tonnes (!) of the total investment demand for the metal. It turns out that deep-shaft mining and strip-mining may have now some new competition: urban mining. Mineweb reports on the growing - and profitable - trend of reclaiming precious and rare metals from some unique sources in Japan:
Thinking of throwing out your old cell phone? Think again. Maybe you should mine it first for gold, silver, copper and a host of other metals embedded in the electronics -- many of which are enjoying near-record prices. It's called urban mining, scavenging through the scrap metal in old electronic products in search of such gems as iridium and gold, and it is a growth industry around the world as metal prices skyrocket.
The materials recovered are reused in new electronics parts and the gold and other precious metals are melted down and sold as ingots to jewellers and investors as well as back to manufacturers who use gold in the circuit boards of mobile phones because gold conducts electricity even better than copper.
It can be precious or minor metals, we want to recycle whatever we can, said Tadahiko Sekigawa, president of Eco-System Recycling Co which is owned by Dowa Holdings Co Ltd.
A tonne of ore from a gold mine produces just 5 grams (0.18 ounce) of gold on average, whereas a tonne of discarded mobile phones can yield 150 grams (5.3 ounce) or more, according to a study by Yokohama Metal Co Ltd, another recycling firm. The same volume of discarded mobile phones also contains around 100 kg (220 lb) of copper and 3 kg (6.6 lb) of silver, among other metals. Recycling has gained in importance as metals prices hit record highs. Gold is trading at around $890 an ounce, after hitting a historic high of $1,030.80 in March.
Recycling electronics makes sense for Japan which has few natural resources to feed its billion dollar electronics industry but does have tens of millions of old cell phones and other obsolete consumer electronic gadgets thrown away every year. To some it's just a mountain of garbage, but for others it's a gold mine, said Nozomu Yamanaka, manager of the Eco-Systems recycling plant where mounds of discarded cell phones and other electronics gadgets are taken apart for their metal value. At the factory in Honjo, 80 km (50 miles) southwest of Tokyo, 34-year-old Susumu Arai harvests some of that bounty.
A ribbon of molten gold flows into a mould where it sizzles and spits fire for a few minutes before solidifying into a dull yellow slab, on its way to becoming a 3 kg (6.6 lb) gold bar, worth around $90,000 at current prices. Wearing plastic goggles to protect his eyes while he works, Arai said he was awestruck when he started his job two years ago. Now I find it fun being able to recover not just gold, but all sorts of metals, he said. Eco-System, established 20 years ago near Tokyo, typically produces about 200-300 kg (440-660 lb) of gold bars a month with a 99.99 percent purity, worth about $5.9 million to $8.8 million. That's about the same output as a small gold mine. Eco-System also recovers metals from old memory chips, cables and even black ink which contain silver and palladium.
In other news, Platinum Today took a closer look at the Mitsui silver-based auto catalyst and has filed the following report:
Mitsui Mining of Japan announced on 23rd April 2008 that it has developed silver-based technology which could be used as a replacement for platinum in a diesel particulate filter (DPF). Mitsui claims that as the market price of silver is much lower than that of platinum, this technology could reduce the pgm cost by more than 90%. Mitsui also said that it intended to use the technology for industrial diesel applications – agricultural machinery and generators – after 2012.
In diesel engine exhaust, a DPF is used to trap particles of soot emitted as a result of combusting diesel fuel. Accumulated soot is periodically burned off the filter (i.e. the filter is regenerated). A platinum catalyst is used to generate this combustion at relatively low temperature. The DPF is preceded by or combined with a diesel oxidation catalyst (DOC) using platinum and palladium to oxidise hydrocarbons (HC) and carbon monoxide (CO) produced by the engine.
Is this a high potential technology?
Mitsui hopes to extend the application of this catalyst to trucks, buses and passenger cars. This will require extensive testing and development in order to prove that silver can be a more cost-effective material than already existing platinum DPF systems and to overcome its known drawbacks. Silver can easily sinter and may even vaporise at elevated temperature. It is also susceptible to poisoning by sulphur, reacting with sulphur to form silver sulphate (AgSO4), a very stable compound which cannot be decomposed or reduced back to silver except at high temperature. Stabilisation of silver is essential in order to provide the thermal durability required for commercial use.
Will platinum be superseded in diesel applications because of this technology?
Assuming the above challenges are solved, there is a possibility that this technology could be used for combusting soot in a DPF for some diesel on-road or non-road applications. However, unlike platinum, silver is a poor catalyst for oxidising nitric oxide (NO) to nitrogen dioxide (NO2), which is essential for regenerating the filter in circumstances where the vehicle operating temperature is low, as in city driving.
Silver is also not a good catalyst for oxidation of HC and CO, thus cannot be used instead of platinum and palladium in the oxidation catalyst (DOC). Moreover, a second DOC containing platinum would be needed to oxidise any residual HC and CO which would pass through a silver-based DPF unconverted. Any use of silver in a DPF is thus likely to be in conjunction with a pgm catalyst, while any pgm replaced by silver in a DPF would to a greater or lesser extent need to be added back into the system elsewhere.
Mitsui is targeting tractors and generators for the first application of the silver catalyst. Currently these engines are not required to have catalysts so if Mitsui's catalyst is used it will not replace any existing demand for platinum.
In summary, the technology may, if successfully developed, have limited application in diesel engine emission control for off-road vehicles in several years' time but it is too soon to know whether it could challenge platinum in filters on wider diesel engine applications in the long term. It is very unlikely that silver will replace any of the platinum and palladium used in diesel oxidation catalysts or gasoline three-way catalysts.
Yesterday's upward tilt has evaporated and the metals appear to have resumed the trend that started on the 18th of this month. We do not have to advise staying tuned for the Fed's get-together. That process is well underway. It is the end result of same that will have players on edge for hours. Some 24 of them. Better catch some actual 24 reruns for a welcome distraction.