Kitco Market Nuggets
Market Nuggets: Citigroup Sees Gold At $1450 In Next Three Months

06 October 2010, 4:55 p.m.
By Debbie Carlson
Of Kitco News
http://www.kitco.com/

(Kitco News) -Despite the recent sharp rally in prices and stretched net long positioning in futures, gold could rise even further given the worries about fiat currencies and the lack of opportunity cost, says Citigroup Global Markets in a Wednesday research note. In the short and medium term, analysts have bumped up their forecasts to $1,450 an ounce in the three-month time frame and see that holding for another 12 months. “We expect the prices to rally further short term, but we have less conviction for sharper moves one year from now. As the global recovery gains traction and policy actions start being unwound, gold prices will look vulnerable,” they say. The firm added that slowing ETF inflows might be a sign investors are wary of record prices and that scrap supply is emerging too. Physical demand is being pinched by high prices, although Indian festival season demand should be “reasonable.”

By Debbie Carlson of Kitco News; dcarlson@kitco.com

Market Nuggets: Citigroup Sees Silver at $25 In Next Three Months

06 October 2010, 4:54 p.m.
By Debbie Carlson
Of Kitco News
http://www.kitco.com/

(Kitco News) - Citigroup Global Markets has raised its short- and medium-term forecasts for silver to $25 an ounce from $20 previously, the firm says Wednesday. The new forecasts imply a fairly stable gold:silver ratio of 58, compared to 58.7 currently, analysts add. Like gold, it’s supported by possible new quantitative easing; it is also supported by increased global industrial production. “If the industrial cycle continues to improve, demand for the metal should remain robust. Mine output is likely to make only modest gains over the next year,” they say. Although gains in both the futures open interest and buying of ETFs “is stretched,” they think prices have further upside. “We also note that silver is heavily traded by the speculative community, and is vulnerable to sharp pullbacks. Also, the multi-year price highs will attract scrap and force some consumers to reduce their purchases,” they say.

By Debbie Carlson of Kitco News; dcarlson@kitco.com

Market Nuggets: Silver Exchange-Traded-Product Holdings Hit RecordóBarclays

06 October 2010, 4:52 p.m.
By Debbie Carlson
Of Kitco News
http://www.kitco.com/

(Kitco News) - Citigroup Global Markets analysts pick LME aluminum and copper as their favorite base metals in a research note released Wednesday. The firm likes aluminum, citing forced Chinese production cutbacks which means likely higher Chinese demand from other sources and speculation for an ETF. They forecast fourth-quarter prices at $2,500 a ton and prices in the next six to 12 months at $2,750. For copper, they forecast prices in the next three months to rise to $8,350 a ton and then $9,350 in the next six to 12 months. Strong demand in the Northern Hemisphere and from China, along with sluggish mine supply, are giving copper fundamental underpinnings. Support for both comes as the market rethinks a double-dip scenario for the world economy and weaker U.S. dollar ignites expectations of more quantitative easing.

By Debbie Carlson of Kitco News; dcarlson@kitco.com

Market Nuggets: Silver Exchange-Traded-Product Holdings Hit RecordóBarclays

06 October 2010, 9:25 a.m.
By Allen Sykora
Of Kitco News
http://www.kitco.com/

(Kitco News) - Holdings in global silver exchange-traded products rose a "staggering" 103 metric tons Tuesday to set a record of 13,867, reports Barclays Capital. Gold holdings climbed 0.4 metric tons, with the total close to an all-time high, Barclays reports. Record gold prices have begun to weigh on jewelry demand, but investment demand remains "robust," Barclays says.

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

Market Nuggets: MF Global: No More Fed Indications On Quantitative Easing Likely Until Election

06 October 2010, 8:53 a.m.
By Allen Sykora
Of Kitco News
http://www.kitco.com/

(Kitco News) - MF Global precious-metals analyst Tom Pawlicki says he does not look for any more Federal Reserve clues on the potential for another round of quantitative easing ahead of mid-term elections. Expectations for more such accommodation helped send gold to record highs on eight of the last 10 trading days, with some looking for this from the Fed as soon as a Nov. 3 meeting. "We think it's unlikely that the Fed will make any additional indications prior to that Nov. 3rd date for fear that they may influence the mid-term elections on Nov. 2nd," Pawlicki says. "Such lack of comment may keep the gold market buoyed until then."

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

Market Nuggets: Morgan Stanley: "A Perfect Storm For Gold"

06 October 2010, 8:33 a.m.
By Allen Sykora
Of Kitco News
http://www.kitco.com/

(Kitco News) - Morgan Stanley, using the title “A Perfect Storm For Gold” for a portion of an overall commodities report on the metal, says the Sept. 21 FOMC meeting was “a red-letter day” for the gold market. Policy-makers said they would provide additional accommodation if needed to support the economy, which triggered a wave of gold buying on the possibility of new quantitative easing, Morgan Stanley says. “The fear of deflation and its positive impact on gold demand is not new. For many months now, professional and retail investors have sought asset classes that are likely to perform in both deflationary and inflationary environments,” Morgan Stanley says. There is a “paradoxical fear” of deflationary pressures and also future inflation, since more quantitative easing is seen as necessary but potentially inflationary, Morgan Stanley says. Furthermore, Morgan Stanley says it expects investment demand to “strongly support high gold prices for longer than we previously anticipated.” It forecast investment as a share of total gold demand will rise to 46.9% in 2010 and 48.9% in 2011.  Morgan Stanley lifted its average 2011 gold-price forecast to $1,315 an ounce “in our base case view” and $1,512 in “our bull case.” For 2012, Morgan Stanley lists $1,250 for the “base” view and $1,438 for its “bull case.” 

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