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Market Nuggets: ETF Securities: 'Fiscal Cliff' To Dominate Precious Metals In Final Days of 2012

Monday December 17, 2012 2:10 PM

U.S. "fiscal cliff" talks are likely to be the biggest news event monitored by the precious-metals market during the remainder of 2012, says ETF Securities. The ETF provider describes this issue and European economic-growth risks as the "dark cloud" for an otherwise-improving outlook for the more industrial precious metals. The firm cites data last week showing U.S. November industrial production rose 1.1% and China's flash December Purchasing Managers Index hit an eight-month high. "Normally, the more cyclical precious metals such as silver, platinum and palladium should perform well in this environment," ETF Securities says. "However, businesses remain reluctant to invest because of the uncertainty surrounding potential automatic tax rises and benefit cuts if the U.S. Congress doesn't agree to a new fiscal program. With minimal economic data to be released in the final weeks of the year, the markets will be particularly sensitive to outcomes from the budget negotiations."

By Allen Sykora of Kitco News asykora@kitco.com


Market Nuggets: R.J. O'Brien: Concerns Over Fiscal Cliff Growing In Gold Market

Monday December 17, 2012 1:02 PM

Concerns about resolution of the so-called U.S. fiscal cliff issue are growing in the gold market, says R.J. O'Brien & Associates in a weekly metals report. The firm says the "good news" is good physical interest that has emerged in the $1,690-an-ounce region. However, bulls are disappointed the market has not benefited more from the Federal Reserve's continuation of quantitative easing announced last week. "Concern about a speedy resolution of the U.S. fiscal cliff seems to be growing, which suggests that the market may start to price in the low-growth consequences of the imposition of higher taxes in the U.S.," R.J. O'Brien says. "This would result in a further decline in money velocity within the country and therefore an offset to the growth in money supply implicit in the Fed's QE announcement. The gold market could remain under some pressure until the fiscal cliff problems is resolved one way or another. This could take us well into January on a worse-case scenario."

By Allen Sykora of Kitco News asykora@kitco.com


Market Nuggets: FOREX.com: Yen Softer After LDP Gains In Japanese Elections

Monday December 17, 2012 10:36 AM

The Japanese yen remains weak after weekend elections in Japan, says Eric Viloria, senior currency strategist with FOREX.com. As expected, Shinzo Abe's Liberal Democratic Party won an outright majority in the lower House and with the New Komeito party, and the new coalition government will have a two-thirds majority which should allow the government to enact new legislation with little resistance, Viloria says. "For now, we expect monetary policy to remain largely similar with the BOJ (Bank of Japan), led by Governor (Masaaki) Shirakawa, to continue its interpretation of 'powerful easing' with incremental increases to the asset purchase program with the aim of achieving the 1% inflation target," Viloria says. "In the longer term, the appointment of Shirakawa's successor by the new coalition government is likely to weigh on the currency as new BOJ members' attitudes are more likely to be aligned with the LDP/New Komeito coalition." As of 10:32 a.m. EST, the U.S. dollar is up to 83.70 Japanese yen and has been as high as 84.36, compared to 83.52 late Friday.

By Allen Sykora of Kitco News asykora@kitco.com


Market Nuggets: RBC's Gero: Book Squaring Expected In Gold During Final Full Week Of Trading For 2012

Monday December 17, 2012 9:28 AM

Year-end book squaring can be expected in the gold market this week, which is the final full week of trading ahead of a Christmas-shortened trading next week, says George Gero, vice president and precious-metals strategist with RBC Capital Markets Global Futures. Also, he says, U.S. fiscal-cliff concerns are "keeping investors from new commitments." Still, Gero says, a "positive note coming from Japan, with possible stimulus, is keeping sellers on a short leash as well. The possible easy money continuing next year is underpinning gold prices for now, even though a fiscal-cliff problem would be viewed as recessionary."

By Allen Sykora of Kitco News asykora@kitco.com


Market Nuggets: Morgan Stanley: Conference Panelists Upbeat On Gold; Mixed Toward Base Metals

Monday December 17, 2012 9:28 AM

Morgan Stanley says panelists were generally constructive on gold during the firm's recently concluded commodities conference in Miami. Gold only accounts for 1.5% of overall financial assets, and the "institutionalization" of gold is likely to drive the next leg of a bull market, Morgan Stanley says in a recap of panel discussion at the event. "Relatively low holdings of gold by pension funds will likely increase moving forward, also supporting the notion of an increased reallocation of the yellow metal to portfolios," Morgan Stanley says. Supply-side fundamentals were also described as supportive as new projects face rising capital and operating costs, Morgan Stanley says. Meanwhile, the firm says panelists offered diverging views toward base metals at the event, with disagreement over macroeconomic trends for 2013. "One view held that the deleveraging cycle will drive negative demand growth for commodities generally, with the base metals already relatively expensive given poor fundamentals," the firm says. "Additionally, future infrastructure projects within China, a large source of global base metal demand, will likely be less metal intensive. Other panelists offered a different opinion, seeing the macro improving on 1) additional capital availability following the U.S. elections, and 2) a trough in the economic cycle in both the EU and China."

By Allen Sykora of Kitco News asykora@kitco.com


Market Nuggets: Barclays Senses 'Cautious Optimism' Toward Base Metals At Seminar In China

Monday December 17, 2012 8:56 AM

The mood toward base metals at a Barclays Capital seminar in Guilin, China, last week was one of "cautious optimism," say analysts with the bank. Clients indicated modest improvements in order levels and overall economic conditions, although "order books remain a worry." Clients' inventory levels remain lean, and many market players remain cautious, with "hand-to-mouth" purchasing still the main trend, Barclays says. Clients also now view boosting consumption as the China's government's top priority, rather than infrastructure. "Overall, we detected a general tone of cautious optimism this time and sense that the recovery in economic activity will gradually lift the fortunes of the base metals market," Barclays says. "However, the expected pace of recovery is not considered as strong enough to instill a great deal of confidence among market participants."

By Allen Sykora of Kitco News asykora@kitco.com


Market Nuggets: TD Securities: Gold Could Remain Stuck In Trading Range

Monday December 17, 2012 8:48 AM

Gold could remain range-bound for a spell, based on options positioning, says TD Securities. "Gold volatilities are lower again as we approach the holiday season," TDS says. "There is reasonable open interest in January Comex options which expire next Wednesday. The $1,675 strike has over 13,000 contracts and the $1,700 strike has over 10,500, TDS says. "This could lead to us being stuck within the recent range for a while yet--uptrend support comes in at $1,685 and overhead resistance now around $1,715."

By Allen Sykora of Kitco News asykora@kitco.com


Market Nuggets: Commerzbank Sees 'Positive Undertone' For Base Metals

Monday December 17, 2012 8:14 AM

Commerzbank sees a "positive undertone" for base metals, even though they have a "subdued" tone and are softer at the start of a new week. Support is coming from a firming Chinese stock market, says Commerzbank. "Coupled with positive economic data in China of late and an expected recovery of demand, there is much to suggest that metal prices will continue on their upward trajectory," Commerabank says. "This is also likely to be boosted by yesterday's election in Japan, whose victor (Shinzo) Abe intends to kick-start the economy with a raft of extensive economic stimulus programs and an aggressive monetary policy. After China, Japan is the second-biggest consumer of metals in Asia." Commerzbank also cites a tailwind from speculators, who have increased their net-long position in copper futures to a two-month high, based on weekly data from the Commodity Futures Trading Commission. Factors that could provide some headwinds for copper, however, include the potential for profit-taking from those speculators and rising London Metal Exchange inventories, Commerzbank says.

By Allen Sykora of Kitco News asykora@kitco.com


Market Nuggets: Barclays: Gold Macro Backdrop, Investor Flows, Technicals Bullish; Fundamentals Neutral

Monday December 17, 2012 8:03 AM

Analysts with Barclays Capital describe the macroeconomic backdrop, investor flows and technicals for gold as bullish for gold but the fundamentals as neutral. The macro picture includes more monetary accommodation from the Federal Open Market Committee last week, Eurogroup formal approval of an aid disbursement for Greece, the possibility of U.S at least temporarily falling off the "fiscal cliff" and the Bank of Japan likely to increase its asset purchases. Barclays says exchange-traded-product holdings "continue to scale record highs," although inflows for December so far are a modest 4 metric tons. Metal held in trust is now 2,650 tons, up 275 so far for the year. As for neutral fundamentals, Barclays reports that "while the physical cushion for prices has responded, it has not recovered its strength from 2011, when India and China were buying upon price dips." The gold price in Indian rupee terms has fallen and importers are restocking, but the buying has not been aggressive, Barclays says. Technically, the bank adds: "Reasons to buy are building near the $1,670 area in gold and this is helping to form a base from where we look for the next leg higher to emerge. A break above $1,755 would confirm our bullish view and signal further upside toward our initial targets in the $1,800 area. We would then look for a clear break above the latter to promote a push toward the record highs near $1,921 into next year."

By Allen Sykora of Kitco News asykora@kitco.com


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