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BNP Paribas Favors Lead, Tin, Zinc Over Copper

Thursday March 13, 2014 12:41 PM

BNP Paribas is reiterating its position favoring lead, tin and zinc over copper in the base-metals complex. The bank points out copper fell to its forecast of $6,500 as metric ton even sooner than it expected. BNP Paribas says it still looks for the copper market to move into a “material but far from catastrophic” supply surplus in 2014-15. The bank says it still has a positive view on demand, looking for growth of more than 10% over the next two years. However, the bank also looks for world mine production to rise by about 10% over 2014-15, with refined production outpacing mine output. The bank says a copper rally above $7,000 likely would present a selling opportunity. “But we do not believe the fundamentals warrant a decline below $6,000/t, either in the short term or in 2015, when the market will begin to look to the increasingly positive medium-term story,” says metals strategist Stephen Briggs. “Our preferred trading recommendation remains: short copper versus long a basket of lead, tin and zinc. The price ratios have already come a long way, but we expect copper/zinc and copper/lead both to eventually reach 2.5:1, with tin/copper at 4:1.”

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

 

UBS: Gold Continues To Draw Safe-Haven Bid

Thursday March 13, 2014 7:23 AM

The rally in gold continues, with the yellow metal and silver benefitting from safe-haven bids, says UBS. Recent news out of China has offered a bid, including the first corporate bond failure in the country, disappointing credit growth for February, weakness in China’s currency and a sharp decline in copper prices that spooked investors, UBS says. Meanwhile, a Group of Seven statement on Wednesday denounced a Crimean referendum on joining Russia and the European Union is reportedly preparing sanctions against Russia. “Concerns that current issues in China could morph into something more sinister for the economy and continued tensions between the West and Russia are helping gold make the most of its role as an insurance against tail risks,” UBS says. “Gold prices continue to head north in the slow and orderly fashion that has been evident so far this year.” As of 7:10 a.m. EDT, Comex April gold was nearly steady at $1,370.20 an ounce, down 30 cents for the day, but overnight hit a six-month high of $1,375.70 an ounce.

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

 

MKS: 'Gold Looks Set To Test The Psychological $1,400 Level'

Thursday March 13, 2014 7:22 AM

Gold appears poised to test $1,400 an ounce, says MKS (Switzerland) SA. The Comex April futures traded as high as $1,375.70 an ounce overnight, its strongest level since Sept. 10. The metal was swept higher overnight after the Shanghai Gold Exchange opened, with additional strength coming from a stronger euro against the dollar and buy stops triggered, MKS says. “With momentum clearly on gold's side, the ongoing concerns between Russia and the West as well as credit concerns for the world’s second largest economy (China), gold looks set to test the psychological $1,400 level and possibly well beyond,” MKS says. “Despite all of the negativity surrounding gold at the start of the year, the yellow metal has now risen 14% in 2014.” Key events ahead include Sunday’s Crimean referendum on joining Russia, as well as a meeting of the Federal Open Market Committee next week, MKS adds.

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

 

BNP Paribas: S. Africa Mine Output Slows In Jan.; More Downside Ahead

Thursday March 13, 2014 7:21 AM

South African mine production rose year-on-year in January although at a slower pace, and BNP Paribas says it is “cautious” about the outlook for this sector of the economy amid a strike against producers of platinum group metals that began in late January and tight electricity supplies. Overall mine output rose 3.1% year-on-year in January compared to 12.2% in December, the bank notes. The main contributors in January came from iron ore, up 11.7% year-on-year, and manganese ore, up 25.5%. The largest drag on year-on-year production growth was coal, which slipped 7.9%. Gold production fell 6.3%, while PGM output growth moderated to 4% from 14% in December. “While headline growth in mining production has managed to remain in the black for seven consecutive months now, we remain cautious on the near- to medium-term outlook for this side of the economy,” BNP Paribas says. “Strikes in the country’s platinum sector continue to drag on and are about to enter their seventh week with no wage settlement agreement in sight between producers and labor. Given the longevity of these strikes, we believe that platinum stockpiles must also be wearing thin which therefore also places the export sector at risk should a wage agreement not be struck soon….” Other factors that could limit mine output include curtailment of electrical use for producers, rising input costs and an uncertain outlook for global commodity prices, the bank adds.

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

 

BBH: Chinese Economic Data Shows Loss Of Momentum

Thursday March 13, 2014 7:21 AM

Markets have shrugged off disappointing Chinese data that show a “distinct loss of momentum,” says Brown Brothers Harriman. A series of Chinese fresh economic reports Thursday cover both January and February in an effort to smooth out holiday distortions from the Lunar New Year, BBH explains. “Retail sales rose 11.8% (year-on-year), while the consensus was for 13.5%,” BBH says. “Industrial production rose 8.6%, while the market expected 9.5%. Fixed investment rose 17.9% while the consensus forecast called for a 19.4% increase.”

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

 

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