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Nichols: Surprise 'Yes' Vote On Swiss Referendum Would Underpin Gold

Monday November 24, 2014 12:27 PM

Gold should benefit if Swiss voters surprised market participants and voted in favor of a Nov. 30 gold referendum, says Jeffrey Nichols, managing director of American Precious Metals Advisors and senior economic advisor to Rosland Capital. The main focus of the gold market is a provision that would require 20% of the country’s central bank reserves to be in gold, which Nichols says would require purchases of 1,500 metric tons likely spread out over five years. He says this is “an amount that could be fulfilled by the world gold market without any difficulty but would nevertheless provide considerable support to the price.” The central bank and Swiss Finance Ministry have opposed the referendum. Recent polls show the referendum likely will not pass, therefore the market is not expecting any change in Swiss central bank gold policies, Nichols says. “However, major bullion dealers and a number of leading analysts are of a mixed mind,” Nichols says. “A ‘no’ vote against raising Swiss gold reserves would likely have no lasting influence on the metal’s price...but a surprise ‘yes’ vote would likely prompt a short-term rally followed by a higher long-term average gold price.”

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

 

BNP Paribas: Copper Likely To Remain Under Downward Pressure

Monday November 24, 2014 12:27 PM

BNP Paribas sees copper as a weak link in the base metals sector. “Even assuming above-trend demand growth and large supply losses, we expect further modest surpluses in 2015-16,” the bank says. A mining “mini-boom” is not over yet, with output rising another 3.5% this year and taking cumulative growth since 2011 to more than 15%, BNP Paribas says. “Moreover, there is plenty of scope for mine production growth to re-accelerate in 2015-16,” the bank says, listing 18 new mines and expansions could contribute 1.8 million metric tons to growth over the two years. Chinese stockpiling has helped mask surpluses but has not prevented price weakness, the bank says. “Not only do we expect copper to continue to struggle to sustain rallies much above $7,000/t (ton), but we still think there are fundamental reasons for it to remain under more downward than upward pressure,” BNP Paribas says. “This will persist until deep into 2015, dragging copper down to at least the March 2014 low of $6,320/t (basis three-month copper on the London Metal Exchange).” The bank expresses doubt copper will trade much below $6,000, however, as this might trigger Chinese reserve buying and producer cutbacks.

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

 

H.C. Wainwright & Co. Trims Long-Term Gold, Silver Forecasts To Reflect Current Market Conditions

Monday November 24, 2014 12:27 PM

H.C. Wainwright & Co. has lowered its long-term, or five-year, assumptions for gold and silver to $1,200 and $17.50 an ounce from $1,300 and $20 previously. “While we believe current pricing levels are not sustainable over the long run, we believe it is prudent to remain cognizant of the various macroeconomic factors that may keep metals prices lower…,” the firm says in a recent report. “While we believe future gold and silver prices must rise to sustain current production levels, at present various macroeconomic factors may keep pricing lower for now.” Analysts cite potential for higher interest rates in the U.S. next year, as well as more monetary accommodation in other nations that could boost the U.S. dollar. However, potential for continued central-bank buying should serve as support, the company says. “In conclusion, we take a cue from the wisdom of the band Journey, 'Don’t Stop Believin’,”  the firm says. “We believe that over the long-term, a return to higher precious metals pricing is possible. While we believe the current market may be oversold, we recognize the various headwinds facing precious metals. Therefore, for now, we are lowering our price deck to account for current prices actually received for concentrate and doré bars.”

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

 

Barclays: Gold Nov. ETP Outflows Nearly 30 MT So Far; 100 MT Would Be Cash Negative At $1,000/Oz

Monday November 24, 2014 7:48 AM

Outflows from gold exchange-traded products are closing in on 30 metric tons so far in November, with the year-to-date total now exceeding 150, says Barclays. “As we have argued previously, current ETP holdings are not vulnerable, but if the gold price were to fall to $1,000/oz, an additional 100 tons would become cash negative,” the bank says. “On a gross basis, almost 900 tons of gold were accumulated between $900-1,000/oz, or almost 700 tons on a net basis, and this represents the early money in gold. Perhaps more worrisome is the amount of cash-negative silver held in physically backed ETPs. More than 9,000 tons of silver was accumulated above $30/oz on a gross basis and, taking into consideration net outflows, at least 7kt (7,000 tons) is loss-making at current price levels, assuming last in, first out. If we assume shares that have been redeemed were those first in, then 19kt of metals held in trust is loss making.”

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

 

MKS Looks For Gold To See-Saw Around $1,200/Oz Into Options Expiry

Monday November 24, 2014 7:46 AM

Gold could oscillate around $1,200 an ounce Monday until expiration for Comex December options, says MKS (Switzerland) SA. The firm notes that gold was sold off following the Shanghai Gold Exchange open, testing underneath $1,200, but electronic Comex trade propped up the market. The trading firm says “the primary reason for a lot of interest around the $1,200 level today is due to the Comex option expiry due later today. The Dec expiry has decent open interest at the $1,200 level with (nearly) 3,700 lots of calls and (nearly) 7,100 lots of puts. This will likely see gold continue to see-saw around that level until expiry so expect a fairly slow day ahead, especially when combined with very little data.”

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

 

Mitsubishi: European Car Sales, Euro 6 Emissions 'Doubly Positive For Platinum'

Monday November 24, 2014 7:44 AM

Mitsubishi looks for platinum to post gains, especially relative to gold, on signs that European demand should pick up. Diesel-powered vehicles are popular on the continent and require platinum for catalysts. The most recent data show that new car sales in the region increased in October, raising year-to-date car sales to 10.6 million units, some 6% higher than the same period last year, the firm says. “This is doubly positive for platinum as it coincides with the start of Euro 6 emissions legislation, which requires on average higher platinum loadings per diesel vehicle,” Mitsubishi says. “Platinum began to rebound from deeply oversold levels against gold, having closed at parity against the yellow metal for the first time since May 2013. Platinum’s recent support at $1,197 and two days of closing above $1,200 late last week now sets it up for further gains in the short term, with $1,259 -- 23.6% Fibonacci retracement of July to November price drop --  forming the next significant resistance level.”

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

CME Group Launching New Iron Ore Futures Contract

Monday November 24, 2014 7:44 AM

CME Group is launching a new iron ore futures contract. Pending review by the Commodity Futures Trading Commission, the new cash-settled futures contract will be listed on CME Globex and the New York Mercantile Exchange trading floor, and will be available for clearing on CME ClearPort, for trade date Dec. 8. "The commodities boom in Asia has created an increased need for risk management," said William Knottenbelt, senior managing director, international, CME Group. "The launch of this new iron ore futures contract will build on the company's global suite of iron ore futures and options products, including the iron ore 62% Fe CFR China futures contracts, which serve the growing markets in Asia and Europe." The commodity code for the new iron ore 58% Fe, Low Alumina, CFR China (TSI) futures contract will be TIC. It will be listed for the current calendar year and the next two calendar years, with January 2015 as the first listed contract month. The contract will be 500 dry metric tons in size, with a minimum price fluctuation of one cent per tick.  

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

 

Morgan Stanley: Indian Authorities Re-Evaluating Rules On Gold Imports

Monday November 24, 2014 7:44 AM

Indian authorities are thought to be considering implementing curbs on gold imports beyond those already imposed last year, says Morgan Stanley. The curbs were put in place to take pressure off the current-account deficit. However, from August to October, gold imports surged by over 300% year-on-year, helped by a seasonal lift in demand, recovery of the Indian rupee and comparison to a small base a year ago, the firm points out. This is increasing uneasiness for the new administration, Morgan Stanley says. The current account deficit had narrowed to 1.7% of gross domestic product in April-June compared to a high of 4.8% last year, Morgan Stanley says. “To protect this position, the Finance Ministry and RBI (Reserve Bank of India) are evaluating the scale and timing of further gold trade constraints,” Morgan Stanley says. 

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

 

HSBC: Lower Oct. Chinese Precious Metals Imports Reflect 'Slower But More Stable Growth'

Monday November 24, 2014 7:43 AM

China’s imports of precious metals other than gold declined in October, reflecting slower economic growth, says HSBC. The Chinese government released import data for the platinum group metals and silver late last week. (The government does not release gold data; market participants monitor Hong Kong data for gold exports to China to gauge Chinese demand). Net palladium imports in October fell 36.3% year-on-year to 1.3 metric tons, while platinum imports were down 17.4% year-on-year to 6.3 tons. Silver imports fell 5.2% year-on-year to 99.3 tons. “The decline in precious metals imports in October reinforces the notion of slower growth in China as Chinese President Xi Jinping recently said the country’s economy is shifting to a ‘new normal’ of slower but more stable growth,” HSBC says.

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

 

 

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