Kitco Market Nuggets

Market Nuggets: Hackett Financial Advisors: Commodity Bear About To Pay Visit

15 June 2011, 3:35 p.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Shawn Hackett, president of Hackett Financial Advisors, looks for commodities collectively to tumble in the near future. A research report to clients Wednesday says agricultural stocks and Chinese equities have underperformed lately, just as they did before the commodities crash in 2008. “Copper prices declined in advance of the major commodity top in 2008 and the recent weakness in copper prices should offer similar topping signs,” he says. Meanwhile, the U.S. dollar could be reversing trend after relentless selling by large speculators, and strength would be a headwind for commodities, Hackett says. Commodities are in their 11th year of outperforming equities, which is the average for bull runs. “History has not been kind to commodity bulls in year 12,” Hackett says. Further, he says, speculators have started selling commodities as they take off overcrowded inflation trades.    

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

Market Nuggets: BNP Paribas Increases 2011 Gold Forecast Modestly

15 June 2011, 10:43 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- BNP Paribas has upped its average 2011 gold forecast by $10 an ounce to $1,510, but kept its 2012 forecast at $1,600. “While interest in gold remains strong, the consensus seems less clear than it was a year ago,” says Anne-Laure Tremblay, precious-metals strategist. “The fundamental picture for gold remains largely unchanged during our forecast period. Inflationary pressures will remain high in emerging markets through 2011. In addition to a more supportive inflation environment, gold will continue to benefit from the euro-zone fiscal crisis, which is likely to extend into 2012, and fragile fiscal environments in other developed economies (US, Japan).”

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

Market Nuggets: BNP Paribas Lowers 2011 Silver Price After Spring Correction

15 June 2011, 10:43 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- BNP Paribas has lowered its 2011 silver forecast, in line with the sharp correction at the beginning of May, to $37.70 from $41.40 an ounce. The bank says it now looks for silver to average $38.10 in 2012, compared to a previous estimate of $37.80. “Silver has been by far the most volatile metal of the precious-metals complex since our last forecast update,” BNP says. “The correction in the price was initially triggered by a rise in margin calls by the Comex in the last week of April. However, the extent of the decline was a direct consequence of the previous speculative excess.” BNP looks for silver interest to be “muted” over the summer, particularly on a lack of support on the economic front. “While silver may outperform gold towards the end of the year, we do not expect the gold/silver ratio to decline back to the low 30s.”

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

Market Nuggets: BNP Paribas Trims 2011 PGM Forecasts But Say Outlook To ‘Gradually Brighten’

15 June 2011, 10:43 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Demand for platinum group metals has been more subdued since an earthquake in Japan disrupted auto production this spring, but the outlook should gradually improve, says BNP Paribas. The bank now looks for platinum to average $1,845 an ounce this year (compared to a previous forecast of $1,880), then average $2,000 next year (unchanged from previous forecast). “The probability of supply disruptions adds an upside risk to our forecast,” BNP says. Palladium is expected to average $835 in 2011 (from $860 previously), while the 2012 forecast was left at $990. “Since the earthquake in Japan, demand for platinum and palladium has been subdued,” BNP says. “Not only is Japan a major consumer of both metals (respectively 15% and 17% of global demand) but it is also a key country in the global supply chain. The platinum and palladium markets also have to contend with a deceleration on the demand side as the global economy slows down.” Longer term, the bank says, “The outlook should gradually brighten for platinum and palladium.”

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

Market Nuggets: FuturePath's Lesh: Comex Gold Recovers In Range-Bound, Conflicted Market

15 June 2011, 9:55 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Comex gold has recovered from its early losses and remains range-bound, with some conflicting forces at the moment, says Frank Lesh, futures analyst with FuturePath Trading. On the one hand, there is safe-haven buying due to Greece’s debt problems and its citizens protesting austerity measures. But this also contributed to strength in the dollar, which often hurts gold and was blamed for the earlier weakness in precious metals. At 9:33 a.m. EDT, Comex August gold was down $1.30 to $1,523.10 an ounce but up from a $1,514.50 low. Technically, on Tuesday and this morning so far, gold has held above Monday’s low for the week of $1,511.40. Below this, Lesh puts support at $1,508, $1,498 and $1,481, with resistance at $1,540 and $1,555.

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

Market Nuggets: Lind-Waldock's Pavilonis: Dollar Gains Create 'Headwinds' For Gold, Silver

15 June 2011, 9:17 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Gold and silver are softer in reaction to movement in the forex market, says Daniel Pavilonis, senior market strategist with Lind-Waldock. “The dollar going up since yesterday gave gold and silver some headwinds,” he says. This in turn is being influenced by worries about Greek debt and news that Moody’s placed France’s top three banks on review for a possible downgrade due to their exposure to Greece. U.S. economic data, which included a stronger-than-forecast Consumer Price Index, added to the dollar gains, Pavilonis says. At 8:53 a.m. EDT, Comex August gold was $4.70 lower at $1,519.70 an ounce, while July silver was down 31.1 cents to $35.10.       

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

Market Nuggets: Barclays: No Magellan Decision Until Autumn Means Tighter 2H Lead Balance

15 June 2011, 8:44 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Ivernia won’t decide whether to restart its Magellan lead mine in Australia until October at the earliest, which Barclays Capital says supports its view that the lead market will tighten in the second half. Ivernia is awaiting a review on the mine by the Office for the Environmental Protection Agency of Western Australia. “We have not been optimistic on any restart of this mine and removed it some time ago from our market balance, which is partly why we forecast a tighter H2 11 balance than the consensus and higher lead prices,” Barclays says. “Given the difficultly in sourcing skilled labor, particularly in Australia, the company’s decision to lay off 83% of its workforce suggests to us that any restart is some time away. Furthermore, the growing pressure from environmentalists in Australia may scupper future restarts of a mine dogged by environmental issues.”

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

Market Nuggets: Gartman: Gold Holding Support In Euro, Sterling Terms

15 June 2011, 8:30 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Newsletter writer Dennis Gartman, who has favored holding gold in non-U.S. dollar terms, says the metal has held the support “that needed to hold” in a number of currencies, including the euro, British pound and Japanese yen. “Gold/EUR needed to hold at or near 1,040 (euros) and…it has done so and is trading near 1,060 this morning as we write,” he says in The Gartman Letter. Gold fell to 920 sterling, but bounced to around 930 as he wrote. “We now know our risk: gold must hold above 920 (sterling) or we shall admit error and turn to other markets.” However, Gartman notes holdings in silver exchange-traded funds have fallen to their lowest levels since September, with the bloom “clearly off” for this metal. Further declines may be on the near-term horizon, he says.

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

Market Nuggets: BBH: Euro Weaker On Continuing Impasse Over Aid For Greece

15 June 2011, 8:20 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- The euro is weaker as a European impasse over more aid for Greece continues, says Brown Brothers Harriman. Further, Moody’s put three French banks on credit watch due to their exposure to Greece. To an extent, BBH says, there is a tug-of-war in markets between global cyclical economic sentiment—with better U.S. and Chinese economic data Tuesday—but growing uncertainty about fallout from Greece in the short term and concerns about spreading debt contagion fears. Adding to the fears of a potential disorderly Greek default, Greece’s socialist MP rejected the austerity plan, while Greek unions stage a 24-hour protest.  “That now leaves the government with a majority of four and more importantly questions the political will to pass the medium-term fiscal strategy which is necessary to keep Greece afloat through external loans,” BBH says. Foreign-exchange movements have the potential to impact base and precious metals alike.

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