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CME Group: Proposed CFTC Rules On Position Limits Not Warranted

Tuesday November 5, 2013 2:30 PM

CME Group says it “supports position limits in our markets” but nevertheless considers proposed rules by the Commodity Futures Trading Commission -- which require that federal position limits be set and implemented by the agency – as unwarranted and not necessary, particularly outside of the spot months. “The proposed conditional limit rules, which would allow a trader to hold up to five times the limit in a cash-settled version of a contract, are inconsistent with the remainder of the proposal, and are a potentially dangerous idea,” CME Group says. “At 125% of deliverable supply, the proposed conditional limits could increase the potential for price dislocation, especially in the final days of trading, and could damage the price discovery that occurs when a futures contract converges with the physical market the closer it gets to delivery.  We are especially concerned about this five times higher limit for cash-settled contracts given the updated deliverable supply information that we recently provided to the CFTC. As just one example, based on our analysis of current data, under this proposed rule structure the limits for Nymex physical crude oil would increase by 500%.” CME Group, which says it employs hard position limits, and also believes that exchanges are closest to the markets and thus “in the best position to manage limits. If implemented, these proposed rules could prevent people from hedging in the first place, or create the unintended consequence of pushing participants out of the best-regulated markets, into less-regulated markets that carry greater risk."

By Allen Sykora of Kitco News; asykora@kitco.com


The Royal Canadian Mint Celebrates The Great Lakes With Silver Coins

Tuesday November 5, 2013 1:00 PM

The Royal Canadian Mint is celebrating five of North America’s great resources – the Great Lakes – with the release of a new five-coin series, the first of which will showcase Lake Superior. “Lake Superior has captured the imagination of generations and this coin will continue to foster the amazement and delight of Canadians and collectors alike for years to come,” says Ian E. Bennett, president and CEO of the Mint. The Mint says the silver coin will feature a reverse image of a bathymetric map of Lake Superior and highlighted with colored enamel. The remaining coins in the Great Lakes series will be launched as follows: Lake Ontario (March 2014), Lake Erie (June 2014), Lake Michigan (October 2014) and Lake Huron (February 2015).

By Neils Christensen of Kitco News; nchristensen@kitco.com


Deutsche Bank: China's Reform Policies Could Shape Commodity Market Dynamics

Tuesday November 5, 2013 11:59 AM

Possible reforms at China’s third plenary session of the 18th central committee of China’s Communist Party could impact commodity market dynamics, says Deutsche Bank. The meeting will occur from Saturday to Nov. 12. Themes this year include policy reforms such as urbanization and financial liberalization, “which have the power to fundamentally change China’s development path,” they say. “The impact will be structural and may only be visible gradually over the coming decade,” the firm says, adding that industrial metals and iron ore demand could be supported by an acceleration in Chinese GDP growth. “In contrast, measures to fight air pollution, strict targets to cut overcapacity, increased use of steel scrap as well as a property tax could result in a peak in steel consumption intensity and lower demand growth for iron ore over the coming decade,” Deutsche Bank says.

By Debbie Carlson of Kitco News; dcarlson@kitco.com


CIBC: ISM Non-Manufacturing Suggests Private Sector Not Impacted By Government Shutdown

Tuesday November 5, 2013 10:32 AM

Like its manufacturing counterpart, the ISM non-manufacturing index exceeded expectations, says Andrew Grantham, economist at CIBC World Markets. The Institute for Supply Management reported a strong increase in the U.S. service sector, with its index showing a reading of 55.4 in October, up from September’s reading of 54.4 and well above economists’ expectations. “However, the uptick to 55.4, from 54.4, only reversed part of the decline seen during the prior month and remains in line with the average over the past couple of years. The rise in the employment index, to 56.2, from 52.7, is somewhat encouraging for Friday’s payrolls report and suggests private-sector hiring was not greatly impacted by the government shutdown,” says Grantham.

By Neils Christensen of Kitco News; nchristensen@kitco.com


Correction: TD Securities Sees Upside Potential For Platinum

Tuesday November 5, 2013 8:25 AM

(Correcting earlier Nugget to reflect NUM, not AMCU, striking against Northam)

TD Securities is upbeat about platinum’s prospects into next year, although the firm says the metal may need to see some uptick in European automotive demand. There are worries about labor-related supply disruptions in South Africa again, although the market does not seem worried about an immediate shortage, TDS says. “Based on the poor pricing of industrial-grade platinum, the so-called sponge, relative to ingots, traders see ample availability,” TDS says. “As such, it is unlikely that platinum will move to the upside, as we believe will happen next year, until European and indeed global auto demand starts looking much healthier. Given the expected SA output reductions due to strikes, when demand does improve, prices should surge.” The National Union of Mineworkers went on strike against Northam Platinum early this week. There is potential for other strikes in the industry as well. “This realization is attracting investors into platinum, with more surely to come,” TDS says, saying it anticipates platinum averaging $1,700 an ounce in the first three months of 2014.   

By Allen Sykora of Kitco News; asykora@kitco.com


MKS Capital: Gold Consolidating As Traders Await U.S. Payrolls Data

Tuesday November 5, 2013 8:13 AM

Gold, which was quiet in overnight Asia-Pacific trade, may consolidate ahead of what many expect to be the key event of the week – Friday’s report on U.S. non-farm payrolls for October, says Alex Thorndike, senior trader for precious metals and forex with MKS Capital. Just before 8 a.m. EST, Comex December gold had been confined to a $9 range since electronic activity began early Monday night, which in turn followed an $11.60 range from Monday. “We would expect to see some consolidation across the metals from here, particularly ahead of Friday's NFP figures with gold probably limited within a $1,300-$1,330 range in the meantime,” Thorndike says. “Physical demand has improved at these lower levels in Asia but is still a far cry from the volumes and demand see in Q2. Speaking to a number of physical traders in HK (Hong Kong) over the past few days, general consensus is that a move below $1,300 will draw out more demand, and should act as support in the interim. On the flipside, if dollar strength persists, the gold and silver will still be subject to selling on rallies from the spec and hedge fund communities.”

By Allen Sykora of Kitco News; asykora@kitco.com


Comex Gold Volume Monday Described As Uncommonly Low

Tuesday November 5, 2013 8:12 AM

Volume in Comex gold was unusually low on Monday as prices hovered in a narrow trading range, observers say. Preliminary data on the CME Group website shows that Globex electronic futures volume was 80,224 lots and open-outcry was 1,495. Dennis Gartman, publisher of The Gartman Letter, describes this as “far, far below normal levels” and volume “usually seen around Christmas time or in the midst of the summer doldrums.” Edward Meir, commodities consultant with INTL FCStone, described the volume as “running about 45% below the 30-day average, among the weakest daily turnover so far this year.”  

By Allen Sykora of Kitco News; asykora@kitco.com



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