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Market Nuggets: Citi Sees Signs Of Copper Oversupply In China

Wednesday March 6, 2013 1:20 PM

Citi Research sees signs of an oversupply of copper in key consuming nation China and describes the price outlook as "less than positive short term." Still, consumer buying may limit significant further declines, the firm says. "It is our view that China has a significant over-availability of copper units, built up during 2012," Citi says. The firm estimates "over-availability of copper units of between 1-1.5 mt (million tons) last year alone – i.e. far more significant than the reported 600,000-ton build in bonded warehouse inventory." Meanwhile, Citi says increased government pressure for more restrictions on speculative property purchases will lead to continued "softness" in rates of growth of Chinese demand. Citi trimmed its forecast of growth in Chinese copper consumption for 2013 to 5.9% from 7.5%. Meanwhile, global mine supply grew 2.7% year-on-year in the second quarter of 2012, 8.2% in the third quarter and 9.7% in the fourth. This trend is set to continue in this year and next on continued brown and greenfield expansions, Citi says.

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


Market Nuggets: Nomura: ADP Report Suggests Upside Risk To Non-Farm Payrolls Data

Wednesday March 6, 2013 9:52 AM

The 198,000 increase in February private-sector payrolls shown in the ADP national employment report suggests an upside risk to Friday's monthly jobs report from the Labor Department, says Nomura. The ADP report was above expectations for 170,000, plus the data for the prior month was revised up to 215,000 from 192,000 previously. "There are two main takeaways from this report: 1. the upward revision to January data suggests the Bureau of Labor Statistics (BLS) will also revise upward its original January estimate of 166k for private payrolls, and 2. there is upside risk to consensus expectations for the BLS estimate of private payrolls in February," Nomura says. The current consensus estimate is for non-farm payrolls to rise 167,000, Nomura says.

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


Market Nuggets: Citi: Weaker South African Rand 'Music To The Ears' Of Platinum Miners

Wednesday March 6, 2013 9:10 AM

A weaker South African rand is “music to the ears” of South African platinum producers, points out Citi Research. The firm cites the impact of the rising dollar versus the rand in a research note on Lonmin. Analysts attribute much of the recent pullback in gold, silver, copper, platinum and iron ore to a resurgent U.S. dollar. “However, a resurgent dollar means a weakening SA rand,” Citi says. “This is music to the ears of the SA underground miners, who are hugely labor-intensive (unlike iron ore miners and open-pit gold miners) and who benefit greatly from selling in dollars and have their primary costs in a weakening rand.” As of 8:54 a.m. EST, the U.S. dollar was up 0.24% to 9.0515 rand, not far from the February high of 9.1605 that was its strongest level since April 2009. The dollar had been as soft as the mid-6-rand area back in 2011.

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


Market Nuggets: BBH: U.S. Economy Resilient Despite Tax Change, Sequester

Wednesday March 6, 2013 9:10 AM

Brown Brothers Harriman questions whether the end of the U.S. payrolls savings tax holiday and sequester will undermine the U.S. economy as much as many economists fear. Recent Institute for Supply Management data suggests resilience in the economy, BBH says. “Auto sales have remained strong and steel output is at its highest level since last September,” the firm says. “The wealth effect of rising stocks and home prices is not being lost on U.S. consumer confidence. What we are suggesting is not unprecedented. Just like the tax hikes in Reagan's second term and tax hikes in Clinton's first term were ‘supposed’ to derail the economy, it did not then either. The underlying strength of the U.S. economy is illustrated by two numbers. First, in 2012, U.S. exports exceeded China's, according to the respective government's data. Second, the U.S. oil production exceeded Saudi Arabia last November, the most recent comparative data.”

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


Market Nuggets: UBS: Central-Bank Gold Buying Continues; South Korea Announces Purchases

Wednesday March 6, 2013 8:25 AM

Overnight headlines show that central banks remain buyers of gold, particularly on price pullbacks, says UBS. South Korea's central bank bought 20 metric tons last month. "This comes as a confirmation to market chatter of potential official sector activity over the last few weeks, especially during the move below $1,600," UBS says. "The buying marks South Korea's first purchase this year, and follows a total of 30 tons of buying in 2012. Interestingly, one of the two bouts of buying last year occurred in July when prices were around similar levels; South Korea bought 14 tons back then. Indeed, during gold's weakness in May to July of last year, central banks were quite active in buying a total of about 71 tons of gold."

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


Market Nuggets: UBS: Palladium Benefits From Prospects For China Emissions Control

Wednesday March 6, 2013 8:24 AM

Palladium has been boosted by calls at the National People's Congress to address air pollution in China, says UBS. "The emphasis on environmental issues bodes well for PGMs (platinum group metals), particularly palladium, as this translates into tighter emissions standards, which would in turn require auto catalysts with higher PGM loadings," the bank says. There is upside potential for palladium in the coming years since the gap between China's current standards and those of the developed world remains large, UBS says. Further, Chinese auto sales have been strong so far this year, the bank adds. Spot palladium has been as high as $742.75 so far Wednesday, its strongest level since Thursday.

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


Market Nuggets: Chinese Gold Premiums Remain Near $20, Reflecting Continued Demand

Wednesday March 6, 2013 8:10 AM

Chinese market participants remain buyers of gold, as reflected by the premium, traders and analysts say. Gold, while still range-bound, initially tried to move higher in overnight Asian trading, "chewing through some chunky" offerings in the $1,578-80 area for cash gold although unable to hold $1,580 for long, says MKS Capital. Chinese participants "were buyers, with the premium still remaining around $19-20 over spot, as it has been the entire week," MKS says. HSBC notes gold initially rose on Tuesday on Far East buying, noting the premium on the Shanghai Gold Exchange was above $20 an ounce. The bank says gold-jewelry sales during the Chinese New Year holiday period rose sharply year-on-year. "Emerging market physical bullion buyers are traditionally price-sensitive and are often active after periods of steep declines," HSBC says. "Thus, gold's recent price break below USD1,600/oz has coincided with a pick-up in physical buying. Further improvement in physical bullion buying may help stem further price declines, in our view."

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


Market Nuggets: Ironbeam: Gold Traders Eye Strong Equities, Approaching Economic Data

Wednesday March 6, 2013 8:09 AM

Gold might be having trouble gaining ground as the Dow Jones Industrial Average hit a record high Tuesday, yet the metal is also holding above nearby chart support, says Ironbeam. "Higher stock prices may have helped to dull gold's safe-haven appeal and recent rallies in the indices have, in my view, potentially stunted any continued advances in both gold and silver," says precious-metals analyst Sean Lusk. "I believe investor sentiment seems to be favoring equities for now, but the fact that both gold and silver have stayed above last week's lows may signal that a bottoming formation could be underway. It is also important to note that we have a heavy amount of important economic data coming out in the next few days, highlighted by Friday's unemployment data. Precious-metals traders could possibly be sitting on the sidelines and refraining from loading up until some of the data is released later in the week."

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


Market Nuggets: Gartman Adds To Gold Position In Sterling Terms

Wednesday March 6, 2013 8:08 AM

Investor and newsletter writer Dennis Gartman, who has held gold in yen terms for some time, has added to his position by buying gold in British pound sterling. He has long favored holding gold in currencies other than the U.S. dollar, which he does by establishing a long position in gold and a short position in a currency. As he wrote his daily The Gartman Letter, gold was trading near 1,040 sterling. He says "the longer it remains at or near this level, the more powerful shall be the movement to the upside." He says "we cannot preclude the possibility that the market may try to test our resolve sometime in the next few days" and gold falls back below 1,040 sterling. "We suspect, however, that the major trend to the upside will assert itself and the propensity for the market to break to the upside above £1,050-1,055/oz. shall eventually obtain." Around 8 a.m. EST, gold was up 4.74 sterling to 1,045.22 sterling.

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


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