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Market Nuggets: Barclays: Fund Withdrawals From Commodities Sector Slowing

Friday February 15, 2013 1:22 PM

The withdrawal of funds from the commodities sector appears to be slowing and could be underpinned by inflation expectations, says Barclays Capital. Assets under management have topped $400 billion for the seventh straight month as price appreciation more than offsets a modest outflow of investors in January, the bank says. "Commodity indices have seen the biggest outflows in the past 18 months, but that outflow has slowed substantially recently," the bank says. "If the year-to-date trends of better returns and lower correlations with other assets persist, then it may not be long before index investment flows turn positive again. Inflation expectations are picking up again as policymakers signal greater tolerance of rising prices; this could also prove supportive for commodity investor flows." The bank says there have been few obvious trends for commodity investors to latch onto, but it still favors a long position in palladium.

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: Societe Generale: Copper Rises In Recent Weeks But So Do LME Inventories

Friday February 15, 2013 1:22 PM

Copper has risen since mid-December despite an increase in London Metal Exchange warehouse stocks of the metal, says Societe Generale. "LME stocks of copper have nearly doubled from a recent low of 210,000 (metric) tons to current levels of 401,675 tons," the bank says. "Copper prices in the face of mounting LME stockpiles of the metal have remained resilient and continue to hold comfortably above $8,000/t. The market appears to be taking a longer-term bullish view concluding that the current trend of rising stocks to be a temporary phenomenon and will be reversed as peak seasonal demand gets underway. The return of the Chinese to the market after their Lunar New Year holidays (is) marking the start, it is hoped, of restocking/increased spot buying." Other factors to consider, Societe Generale adds, is metal moving into LME warehouses for financing deals or in locations such as Antwerp and Johor where they likely would be slow to be delivered again due to lengthy waiting periods. Also, metal potentially could be being held in readiness for planned copper exchange-traded funds, the bank adds.

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: Barclays: Base Metals May Remain In 'Holding Pattern'

Friday February 15, 2013 10:33 AM

Base metals may remain in a “holding pattern” as traders assess how tight conditions might be, says Barclays Capital. They have been in narrow ranges over the past week as market participants await evidence of activity levels in China following the week-long Lunar New Year break. “While Chinese economic data for January were generally in line with expectations, or stronger, in turn supporting optimism regarding demand over the rest of Q1, this has so far been juxtaposed with uninspiring micro signals from the domestic metals markets,” Barclays says. “Physical market conditions in China across the complex remain soft, as reflected in premia trends as well as firmly shut import arbitrage windows across the board. Inventories have also failed to offer signs of significant supply-chain activity in anticipation of a post-holiday pickup in demand. The Chinese themselves remain the most bullish market participants, with the current dominant view that domestic raw material market conditions will retighten. Until we reach a point where that can be accurately assessed, it is likely that base metals prices will remain in this holding pattern.”

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: 'Clearing Of The Decks' In Gold – TD Securities

Friday February 15, 2013 8:28 AM

TD Securities says there's "been a clearing of the decks in precious metals overnight" as gold continues to fall. The firm says two news events this week "underline the market's lack of conviction for higher gold prices." The first was news from the World Gold Council that full year 2012 gold demand fell 4% versus a year ago. The second was from the U.S. SEC fourth-quarter filings that show a number of high-profile fund managers cutting their holdings in gold exchange-traded products. Market pricing is also weak. TD Securities notes one-month gold forward offered rates declined 10 basis points this week, "putting the gold lease rate at flat to positive territory for the first time since April 2011." They say Friday morning saw strong demand for short-dated gold put options too, with the number of puts more in demand than calls, which is more demand for bearish option plays than bullish plays.

By Debbie Carlson of Kitco News dcarlson@kitco.com

 

Market Nuggets: Traders: Gold Under Pressure; Return Of Chinese Buyers May Be 'Saving Grace'

Friday February 15, 2013 8:14 AM

A number of factors put gold on the defensive lately but traders say buying from China may offer some support when Lunar New Year festivities end. Spot gold fell as far as $1,621.65 overnight, its weakest level since August. "The market now seems to be getting used to the more positive frame of mind of a recovering U.S., which entails lower probability of continued QE (quantitative easing) and in turn a lower gold price," says Alex Thorndike, senior trader for precious metals and foreign exchange with MKS Capital. Also, expectations of faster growth have investors instead loading up on risky assets such as equities, says bullion dealer Sharps Pixley. Thorndike and Sharps Pixley both cite news of reduced holdings in gold exchange-traded funds by prominent funds as Soros Fund Management and Moore Capital Management. "Many investors look towards and mimic these prominent investors; their liquidation of gold assets will certainly not do any favors to the already shaky short-term gold price," Thorndike says. One prominent investor, John Paulson, retained his ETF position, however, according to news reports. Technically, gold is testing an important pivot region, Thorndike says. "A break and close below $1,625 would confirm that the bear channel dating back to October 2012 remains intact, opening the door to $1,600 and increasing the risk of a move as low as $1,530, where the May 2012 lows were. This may be a tad overzealous, however, as Chinese physical demand at these lower levels will be seen when they return to the market next week. It just depends to what degree." Adds Sharps Pixley, "The saving grace will be a pick-up in the Chinese physical demand after the Lunar New Year holiday."

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: TDS: More Zimbabwean Resource Nationalism Adds To PGM Supply Woes

Friday February 15, 2013 8:14 AM

The bullish outlook for platinum group metals was further aided this week by resource nationalism in Zimbabwe since this adds to supply concerns, says TD Securities. This comes on top of supply issues in South Africa. Zimbabwe's government said this week it intends to repossess land with platinum reserves held by Zimplats and allocate it to new investors. The mines minister also says platinum products will have to be refined locally within two years to add value to the economy. "These type of government measures are a fairly strong form of resource nationalism, which could well prevent mining companies operating in the country from making new investments required to expand production, which is needed to fill global demand growth in the coming years," TDS says. "The current investment 'environment' is very likely to give miners a very long pause before they pour money into mining projects that might be situated on repossessed claims. Similarly, risk capital is unlikely to flow into the country to build refineries that will be needed to process the metal for final consumption if semi-processed PGMs ores (are) not allowed to be shipped to South Africa for refining." The bottom line, TDS says, is that the new risks to mining mean platinum and palladium have "significant upside risk" into 2013 and 2014.

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: CPM: Chinese Conditions To Support Tungsten Demand Growth Over Long Term

Friday February 15, 2013 8:14 AM

Tungsten prices hit a two-year low in December but demand growth should be supported in the longer term by China's economy, says CPM Group. The consultancy released its 150-page Tungsten Market Outlook 2013, with an analysis of global supply, demand and price trends, with projections for the next decade. Tungsten demand, because of its heavy end-use applications in machinery and steel, is highly sensitive to worldwide economic conditions, CPM Group says. "Tungsten price activity over the past year largely reflected a slowing Chinese economy in which overall tungsten demand is estimated to have contracted in 2012," the consultancy says. "In addition, as prices rose precipitously in 2011, many consumers built inventories; these inventories were partially worked down last year. In December 2012, APT prices averaged, basis Metal Pages, $318/mtu (metric ton unit), the lowest level since December 2010. Over the longer term, CPM Group expects Chinese economic conditions to continue to support tungsten demand growth rates, albeit slower than in the previous decade."

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: HSBC Sees Potential For Further Platinum Supply Constraints In South Africa

Friday February 15, 2013 8:14 AM

HSBC sees potential for further supply issues in South Africa that would support platinum group metals. The bank cites news this week that Impala Platinum Holdings reported a decline in mine-to-market platinum production in the second half of 2012 compared to the same period the previous year. "Implats, the world's second-largest producer of platinum, also reported a 42% increase in the unit cost of platinum production to ZAR15,983/oz, or USD1,815/oz using today's ZAR-USD spot rate, during the same period," HSBC says. "According to Implats, operations at its Rustenburg division continued to be impacted by the labor issues stemming from the wildcat strike and the subsequent events in the region. Furthermore, Implats said that operations have been impacted by safety stoppages, lower ore reserves, and ore grades. The PGMs rallied in late-2012 from supply concerns stemming from the wildcat strikes in South Africa. We see concerns for the potential of further supply constraints in South Africa as supportive of the PGMs."

By Allen Sykora of Kitco News asykora@kitco.com

 

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