Monday June 30, 2014 1:26 PM

Silver continues to play catch-up with gold and has led precious metals for the third consecutive week, with potential to gain some more, says ETF Securities. “Silver rallied 2% last week for a year-to-date gain of 7.9%,” the firm says. “On a 12-month basis, the 13.1% gain in silver has been surpassed only by the 30.5% increase in palladium. Prior to the 2008 crisis, the ratio of gold to silver was about 50. It spiked to near 84 during the 2008/9 crisis and declined to near 32 in 2011. Due to its larger industrial demand base, absent a stumble in the global economy, the ratio of gold to silver is likely to continue to decline in our view.” The ratio measures how many ounces of silver it takes to buy an ounce of gold, with a smaller number signaling outperformance by silver.

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

 

Bank Of America Merrill Lynch Looks For Gold To Bottom In 2014

Monday June 30, 2014 11:20 AM

Bank of America Merrill Lynch says it looks for gold to bottom in 2014. Its most recent forecast calls for $1,250 gold in the third quarter, rebounding to $1,300 in the fourth and $1,350 in the first quarter of 2015. “We believe that market participants are increasingly willing to raise their exposure to gold as a hedge against inflation of some asset prices and the confluence of risks accompanying those,” BAML says. “In addition, with India's elections over, our local economics team anticipates an appreciation of the rupee partially on accelerating portfolio inflows. Keeping in mind that the previous administration had curbed gold imports to contain the country's current account deficit, we believe this should incentivize authorities to facilitate an increase of gold shipments in coming weeks and months. While this may not be sufficient to offset headwinds from the global macro economy, it should give some support to gold, which we believe is unlikely to fall below $1,150/oz as a result.” One risk to the market, however, would be if Chinese buyers from 2013 became sellers in 2014, with offtake more muted than a year ago, the bank adds.

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

 

Citi: Gold ETF Holdings Down For Year But Stabilize In Recent Weeks

Monday June 30, 2014 11:00 AM

Global holdings of gold by exchange-traded funds have stabilized after falling at the start of the year, which in turn followed a sharp decline in 2013, says Citi Research. “Robust bullion price action and improving investor sentiment has also stabilized the decline in ETF physical gold holdings,” Citi says. “Aggregate tonnage in the sector is down some 50 (metric) tons this year but has been holding steady at 1,715 tons for the past three weeks.”

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

 

Citi: LME Warehouse Copper Inventories Continue To Decline

Monday June 30, 2014 11:00 AM

London Metal Exchange copper warehouse inventories have continued to decline, although cancelled warrants suggest the pace may slow in the future, says Citi Research. LME copper stocks were drawn down another 3,900 metric tons over the last week, taking them to 154,675, Citi  says. “Draws over the first half of the year in LME inventory have totaled 211,750 MT,” the bank says. “Continued draws, a full four weeks into the ongoing Qingdao port investigation into multiple collateralization of metals inventory, appears to belie fears that the investigation would prompt significant deliveries of copper into the LME. However, underlying the outright tonnage trend has been a reversal in cancelled warrant trends. Cancelled warrants represent metal that is effectively no longer available to the wider market, but is essentially earmarked for out loading. As of June 30th, cancelled LME copper warrants stood at just 29,475 MT, the lowest level since mid-March 2013, and equivalent to only 19% of total LME copper inventory.” To put this into context, at the end of January, cancelled LME copper warrants accounted for over 60% of copper in LME-monitored sheds, Citi says. “The change has essentially been focused in New Orleans, where cancelled warrants -- as a percentage of totals in that location - have fallen from 40% at the end of May to 11% this month on the re-warranting of 27,250 MT of copper during June,” Citi says. “A falling percentage of cancelled warrants can be interpreted as an indication that the future rate of LME draws will slow going forward.”

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

 

Barclays: Gold ETPs Post Modest Outflows So Far in June; U.S. Mint Coin Sales Higher

Monday June 30, 2014 8:20 AM

Global exchange-traded products have posted outflows so far in June, but U.S. Mint coin sales for the month to date are the most since January, says Barclays. ETP outflows are 5.6 metric tons so far this month. “Flows have been positive for roughly a week, though, which has eaten into otherwise more negative flows,” Barclays says. “While ETPs have turned from the hefty net redemptions seen last year, we do not expect a sustained upward trend in holdings in the near term, as at best, daily flows should continue to bounce between inflows and outflows in our view,” the bank says. Meanwhile, U.S. Mint data show that combined sales of American Eagle and Buffalo coins are 60,000 ounces so far this month. This makes June the most robust month since January, when sales were 133,000, Barclays points out.

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

 

Mitsubishi: Palladium Fundamentals Should Support Market Over Medium To Long Term

Monday June 30, 2014 8:18 AM

Mitsubishi looks for tighter supply/demand fundamentals to be favorable for palladium over the medium to long term. A strike in the South African platinum-group-metals sector was resolved last week, with Anglo American Platinum reporting its deal would add an average of 8.4% to the wage bill over three years. “We remain of the view that cost inflation, albeit relatively contained, will contribute to lower capex in the years ahead and a possible restructuring of the older western limb assets, which are principally mining high palladium and rhodium content UG2 ore,” Mitsubishi says. “The resulting tight palladium-market fundamentals should continue to keep prices well supported over the medium to longer term. More immediately, with palladium now back above the 50-day moving average, the MACD (moving average convergence/divergence) in positive territory and the momentum indicator trending higher, we would look for palladium to extend its gains, possibly testing the $864 resistance level.” Exchange-traded-fund investors continue to favor palladium over platinum, Mitsubishi says, pointing out that in the first half of 2014, palladium ETFs have seen 844,000 ounces of net inflows, compared to 335,000 for platinum.

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

 

BNP Paribas: No Rise In Eurozone Inflation Should Limit Euro Gains

Monday June 30, 2014 8:18 AM

The eurozone harmonized index of consumer price inflation was unchanged at 0.5% year-on-year in June, which should limit any further euro gains, says BNP Paribas. This comes after Germany’s data had surprised to the upside last week. “Over the next couple of months, our economists expect headline HICP inflation to remain around its current levels on the back of higher euro-denominated oil prices,” BNP Paribas says. “In contrast, core HICP inflation will drift lower to 0.6% y/y in Q3 from 0.8% y/y in June. The ECB meeting on Thursday should prove to be considerably less eventful than the last one, not least because some of the policy actions announced at the last meeting will be put into place and policy-makers will need to take some time to assess their effectiveness.” The bank anticipates ECB President Mario Draghi will signal that the option of quantitative easing remains on the table, which should be enough to prevent any significant euro rally. “We maintain our short EURUSD trade recommendation with a $1.32 target,” BNP Paribas says. Metals traders tend to monitor foreign-exchange moves since they can influence precious and base metals alike.

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

 

Morgan Stanley: Aluminum Rising As Monthly Output Remains Flat

Monday June 30, 2014 8:18 AM

Aluminum prices rose in seven of the previous 11 trading sessions on the London Metal Exchange. “Aluminum has become a surprise performer, steadily climbing higher as global monthly production rates remain relatively flat – a welcomed development for a commodity entering its eighth year of supply surplus,” says Morgan Stanley. “This demonstrates that price signals eventually persuade producers to trim output, though it can take years.”

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

 

Morgan Stanley Sees Precious Metals Range-Bound In Near Term

Monday June 30, 2014 8:18 AM

Morgan Stanley looks for sideways trading in precious metals in the near term. “Last week, gold prices largely chopped sideways amid the lack of macro news flow and little change in Iraq,” the firm says. “These trends should dominate near-term price direction, but over the medium term, we remain bearish. In the PGMs (platinum group metals), with the South African labor strikes now officially over, the (platinum) market looks to settle into the current price range above $1,450, while volatility looks to fall as the imminent threat of wild price swings abates along with the union strikes.”

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