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Market Nuggets: LME Lead Tumbles On Profit-Taking; Analysts Say Fundamentals Strong

Friday November 9, 2012 01:37 PM

Lead fell more than other base metals Friday, yet analysts say it has a more favorable fundamental backdrop. Lead fell $59, or 2.7%, to $2,149 a metric ton on the London Metal Exchange. “Today's move was a clear initiative to take some profit from recent gains…but the strong fundamentals should continue to play and allow the metal a strong support,” says Triland Metals. Lead is now above all of the key moving averages, Triland adds. Barclays Capital says it looks for lead to outperform other base metals in the short term since its demand is less leveraged to the economic-growth cycle. “Front-end LME time spreads moved into backwardation in October and are currently at the tightest in 12 months,” the bank says. “Similarly, physical premia in all key demand regions ex-China have risen firmly since mid-year. In fact, in the U.S., premia rose to record levels in October. Although delays on the delivery of metal from LME warehouses have exacerbated the tightness in the physical market, we believe that underlying market fundamentals are the key driver with a global deficit projected for Q4.” Barclays says the global refined lead market’s stocks-to-consumption ratio has fallen to its lowest level since 2010 at just over two weeks.

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

 

Market Nuggets: Societe Generale: Price Risk Shifting To Upside In Copper

Friday November 9, 2012 12:47 PM

The price risk in copper is shifting to the upside, says Robin Bhar, metals analyst with Societe Generale. A bearish macroeconomic environment has wiped out copper's gains from Federal Reserve quantitative easing in September. However, economic data is improving in the key consuming nation of China, and Societe Generale anticipates Chinese manufacturers are moving from late-cycle destocking to early-cycle restocking. If so, "base metals should benefit sooner rather than later," Bahr says. "An infrastructure-led recovery with spending brought forward in sectors such as power generation/distribution and the railway network should underpin a pickup in copper demand. However, the timing of any pickup is uncertain, complicated by the country's leadership transition and the fact that fabricators have yet to receive procurement orders from government ministries." Copper inventories in China are high, Bhar notes. Yet, the Shanghai Futures Exchange-London Metal Exchange arbitrage window is re-opening, suggesting that domestic stockpiles of copper are tightly held and not available for consumption. "The narrowing of the SHFE-LME arbitrage could prompt a pickup in metal leaving LME warehouses and destined to be shipped to China," he says.

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

 

Market Nuggets: Barclays Offers Caution On Reports Of Chinese Stockpiling Base Metals Again

Friday November 9, 2012 12:09 PM

Barclays Capital offers caution about the possible impact to base metals from media reports this week suggesting that China may resume stockpiling of for state reserves. "The last time that happened was in 2009 after prices plummeted following the global financial crisis," Barclays says. "There was a subsequent strong recovery in prices with China's stockpiling at the time lending some support. However, two things are different this time: first, prices have not fallen anywhere near the lows reached in 2009; and second, the surpluses for some metals, such as aluminum, are now so large that the 400Kt kind of levels talked about would do little to dent the oversupply."

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

 

Market Nuggets: Kingsview's Nedoss 'Very Positive On Gold'

Friday November 9, 2012 12:01 PM

Charles Nedoss, senior market strategist with Kingsview Financial, says gold's close above the 20-day moving average on Thursday was a sign that gold prices could move higher. "I'm very positive on gold," Nedoss says. "We had a close above the 20-day for the first time since early October. We've made higher highs and higher lows, plus we're doing it in the face of a stronger dollar." For next week Nedoss says resistance is at $1,741.80 and a move above there could take it to the $1,760s area. "From there I could see gold rising in $20 tranches higher," he says. Just before noon EST, Comex December gold was $7.30 higher at $1,733.30 an ounce. The 20-day moving average stood at $1,718.50.

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

 

Market Nuggets: Deutsche Bank Sees Range-Bound To Lower Base Metals Into Year-End

Friday November 9, 2012 9:59 AM

Industrial base metals could remain range-bound to lower toward year-end amid growing concerns about how the U.S. fiscal cliff will be handled, says Deutsche Bank in a weekly commodities report. This fiscal cliff refers to the automatic tax hikes and spending cuts that go into effect next year if Congress does not change them. “Heading into next year, we view ongoing improvement in the U.S. and Chinese macro data as constructive for the complex,” the bank says. “However, elevated inventories could delay or limit price advances, in our view.”

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

 

Market Nuggets: Deutsche Bank Anticipates Further Strength For Gold

Friday November 9, 2012 9:59 AM

Deutsche Bank looks for further gains in gold but for other more industrially oriented precious metals to lag. “We continue to believe gold prices will set new highs,” the bank says. “However, we expect this strength will be contingent on a resumption in U.S. dollar weakness. Since we expect the Fed to announce an extension of its QE (quantitative easing) program to include long-term Treasury debt at its next meeting in December and given the risk of another downgrade in U.S. Treasury debt as the U.S. authorities attempt to tackle the fiscal cliff, we expect these will trigger a fresh rally in the gold price before the end of this year. The under-performance of silver and PGMs (platinum group metals) relative to gold over the past month will continue, in our view, given the uncertainty towards the U.S. fiscal cliff and its implications for U.S. growth.”

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

 

Market Nuggets: Barclays: Platinum Moves From Surplus To Balanced Mkt.; Not Enough To Boost Prices Yet

Friday November 9, 2012 9:42 AM

Barclays Capital says it now looks for a roughly balanced platinum market in 2012 after previously forecasting a supply surplus of just under 200,000 ounces. Demand expectations have been revised down but supply forecasts have been revised even lower after labor and other issues in the key producing nation of South Africa. The bank estimates that wildcat strikes have meant 400,000 ounces of lost production there. Still, this may not be sufficient to drive platinum higher just yet, even though supply risks still linger, Barclays says. The bank says demand is “fragile” in the near term, speculative positioning still close to all-time highs and the pick-up in prices that has already occurred means less production is “under water” and at risk of being cut. “Given the downward revisions to European auto demand over Q4 12 and Q1 13, as well as our equity analysts highlighting that excess stocks in the region of 500-800k units would benefit from an extended industry holiday, the demand picture is unlikely to provide aggressive support into the end of this year,” Barclays says. “However, we believe this weakness is likely to persist in the near term, and that the longer-term demand trends will remain supportive of a more constructive balance as 2013 unfolds. We continue to forecast prices to average $1,615/oz in Q4 12 and $1,760/oz on an annual average basis in 2013.”

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

 

Market Nuggets: INTL FCStone: Fiscal Cliff To Support Gold But Retracement Likely When Issue Settled

Friday November 9, 2012 9:02 AM

INTL FCStone looks for gold to tick higher in the weeks ahead during an expected standoff in Washington over the so-called fiscal cliff, but for the metal to then retrace whenever the issue is resolved. President Obama's re-election is expected to mean continued easy-money policies with Ben Bernanke remaining at the helm of the Federal Reserve. "In theory, this should weaken the dollar further and boost gold prices over the longer term," INTL FCStone says. "Short term, we expect prices to firm up as well--liquidity concerns going into year-end, along with the Congressional dogfight that is going to take place before the fiscal cliff issue gets resolved, should be supportive for gold. However, once a deal is announced, we could see a rather substantial retracement, as spec money pours into the dollar and U.S. equities. We are looking for an eventual push to $1,775 (an ounce) over the course of November, with good support at $1670 and $1650, both attractive entry points."

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

 

Market Nuggets: INTL FCStone: Aluminum Should Find Support In Mid-$1,800 Area

Friday November 9, 2012 9:02 AM

Aluminum should find support in the mid-$1,800s per metric ton, if it continues to retreat, since this is an area where some producers may be forced to cut output, says INTL FCStone. Aluminum was one of the worst performing base metals in October, with "no respite from the vicious cycle of overproduction and low prices that is plaguing the sector," the firm says. It cited International Aluminum Institute data showing that supply outside of China edged marginally higher in September. The latest Chinese numbers show a marginal cutback by an annualized 250,000 metric tons, but this is a "drop in the bucket" since that output hit a record high of 20.6 million tons in August, INTL FCStone says. "Moreover, China's September decline had more to do with temporary bottlenecks as opposed to any strategic decision to cut back on output," the firm says. "In the meantime, premiums remain high, and ironically, are maintaining the perverse incentive for marginal producers to keep production where it is. Prices will likely work a little lower over the weeks ahead, possibly getting down to the mid-$1,800 level. At that stage, we should see some good support, as even with the added bonus of high premiums, producers will feel increasing pressure to cut back on output."

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

 

Market Nuggets: INTL FCStone: Supply Deficits May Push Palladium Higher In 2013

Friday November 9, 2012 9:02 AM

Palladium has potential to run higher in 2013, says INTL FCStone. The firm cites market expectations that the metal will be in a supply deficit this year and next. "In addition, sales from Russian stocks are projected to decline to 150,000 ounces next year (this according to Barclays), but it is also possible that stocks are depleted already, since what is being stored is a Russian state secret," INTL FCStone says. Analysts also cite increased use of palladium in automobiles, particularly as the amount of palladium climbs in catalytic converters of diesel-powered cars that mostly rely upon more expensive platinum. "With this kind of backdrop, we could see prices move higher over the course of 2013," INTL FCStone says.

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

 

Market Nuggets: HSBC: Rising ETF Holdings Signal Good Demand For Bullion

Friday November 9, 2012 8:16 AM

Demand for gold-backed exchange-traded funds remains strong, with says HSBC. Analysts cite data from Bloomberg showing holdings hit a record high this week, with the top 14 gold ETFs combined having accumulated 2,592 metric tons. "Despite bullion price declines in October, gold holdings in ETFs rose throughout the month and continued to rise into November," HSBC says. "Investors of gold ETFs typically have a longer-term holding period, and the increase in gold holdings may signal good demand for hard assets including bullion, we believe."

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

 

Market Nuggets: MKS Capital: Gold Regaining Safe-Haven Status, Nearing 50-Day Moving Average

Friday November 9, 2012 8:01 AM

Gold appears to be regaining its safe-haven allure and has nearly returned to its 50-day moving average, says Alex Thorndike, senior trader for precious metals and foreign exchange with MKS Capital. Gold rose Thursday even though U.S. equities softened, and the metal is up again early Friday even though the S&P 500 futures are softer. "With risk generally lower across the board overnight and gold and silver higher, we may again be seeing a shift in sentiment towards gold and in particular it regaining its safe-haven status," Thorndike says. With the Bank of England, European Central Bank and Federal Reserve all keeping interest rates low, the medium- to long-term outlook for gold remains constructive, he says. "On a short-term basis, I believe volatility will continue with dips seen from time to time as profit taking kicks in," he continues. The 200-day moving average lies a little above $1,740 and both spot gold and the December futures have been to $1,738 or slightly higher so far Friday. "On the downside, bids are building around the $1,700-$1,710 level, with those who missed the move up looking to initiate new positions there," Thorndike says.

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

 

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