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Blue White Metals

By Jon Nadler       Printer Friendly Version Bookmark and Share
May 11 2009 8:59AM

Due to travel schedule there will be no afternoon commentary.

Good Morning,

Gold prices eased back towards $910 overnight and early this morning, as risk appetite made a comeback and was seen as a hunger for stocks and certain currencies. Investment demand for gold as a safe-haven was waning in the wake of dissipating angst in various local markets. ETF-related demand has gone into drought mode since reaching a record high last month.

Some of today's easing in values was seen as being related to news that US Bancorp, Capital One, and BB&T Corp will offer common stock and are intending to check out of Hotel Geithner (TARP) in the near future. What's in your wallet? Enough money to pay back kind Uncle Sam. So much for bank nationalization, Nostradamus.

In addition, gold sales have plunged in several key regionally-oriented locales, such as Dubai (gateway to India) and Hong Kong (gateway to you-know-where). Local chain store spokesmen have characterized the situation as " high gold prices having hit the bullion trade" and opined that "gold sales will now pick up only when the prices come down."

March/April figures show a sharp (50%) drop in offtake in Dubai. Hong Kong and Singapore fared not much better, on the back of persistent recessionary forces at work, and on the lack of available funds to buy gold with. Bear in mind that investment demand has been the key (and some -such as ETF Securities- say, the 'sole') driver/support for gold in Q1.

Gold's year-to-date average price has been near $905 per ounce (the highest such average, yet). This, against a background that had the average gold price (since 2001) hover near $540 per ounce, and near $390 (for the 36 years between 1974 and 2009).

New York spot dealings started the new week with a $6.20 loss in gold, which was quoted at $910.00 per ounce against a backdrop of a slight improvement in the dollar (up 0.24 to 82.73 on the index) and a sizeable loss in crude (spec funds took profits after inventory-related apprehensions arose) which was off $1.56 at $57.02 per barrel. Silver started off with a 30 cent drop on the day, quoted at $13.69 an ounce. Fourteen was so close...

News that Italian and French industrial production slumped far more than had been expected by forecasters did not sit well with metals or with oil this morning. The raw numbers show that that which has been ailing the US economy has spread to the Old World almost as fast as the swine flu and that despite little green saplings emerging from isolated places (Germany) the EU's 16 nation-large economy will reveal a 2% shrinkage rate for Q1 2009.

More Monday selling was seen in the platinum and palladium pits, where a decline of $17 and $4 dragged platinum to $1130 and palladium to $235 per ounce, respectively. The near-to-medium term outlook in the noble metals niche is cloudy with scattered bouts of selling. Clearing is not expected for a while (like 2012-ish). Dow Jones relays the latest from the sector:

"There's unlikely to be any significant recovery in platinum group metals prices in the next 12 months, the world's third biggest platinum producer said Monday. Lonmin PLC (LMI.LN), which earlier announced a rights issue in the face of uncertain metals demand, said it anticipates ongoing short-term weakness in the sector with "no near-term relief." More than half of platinum output is consumed by the automotive sector, largely in the form of autocatalysts.

"For platinum in particular, despite the moderate rise in price during the latter part of the period, an anticipated short-term improvement in jewelry demand coupled with investment interest is not enough to compensate for the ongoing weakness in automotive demand," the company's Chief Executive Ian Farmer added.

The London-listed miner said it expects some "continued recovery" in second half demand from the jewelry sector, which accounts for around 20% of platinum consumption, supported by the growing Chinese market. Investment interest in platinum has meanwhile resulted in record high levels of stocks held by exchange traded funds, the company noted. [Looking] Further ahead, Lonmin is more positive.

"Demand for motor vehicles is expected to recover, supported by anticipated significant medium to long-term demand growth in emerging markets," the company said, noting that further tightening of emissions standards is expected to continue to increase platinum group metals loadings in autocatalysts. At the same time, the company said the collapse in platinum prices, which have halved since peaking in March 2008 at $2,299 a troy ounce, will help boost jewelry demand, especially from the growing Chinese market.

"These factors, combined with the significant curtailing of investment in new projects which are focused on both replacing mines that are coming to the end of their lives and on growing production, give us confidence in the medium- and longer-term outlook for platinum group metals pricing," Lonmin added."

Back to the New York Hard Assets Show. It promises to be as lively as anything one can encounter in nearby Times Square. And more. It is the end of the world, but people are traveling, dining, standing in line for theatre tickets, buying up tchotchkes in every "Going out of Business" (since forever) gift shop, and are finding the time to visit with their old friends in the show's many booths. Including ours, to which you are welcome.

Happy New Week.


Jon Nadler
Senior Analyst
Kitco Bullion Dealers Montreal
Direct: 1 (514) 875-4820 ext. 1360
US & Canada Toll Free: 1 (877) 839-8036
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