Kitco Market Nuggets

Market Nuggets: Goldman Issues 'Underweight' Recommendation On Commodities For 3 To 6 Months

15 April 2011, 11:20 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Goldman Sachs says it is recommending an “underweight” allocation to commodities for the next several months. However, Goldman says, “we maintain an overweight on a 12-month horizon on tightening fundamentals over the next year.” Goldman notes commodities have “outperformed” lately largely due to loss of Libyan oil output amid unrest in the Middle East and North Africa. However, Goldman says, crude may have pushed ahead of where fundamentals suggest, leaving near-term downside risk. “Further, softening near-term base metals balances suggest that a stock-out in copper inventories and associated price spikes has now been deferred beyond 2011, and recent gold price strength has pushed us close to our near-term price targets,” Goldman says. “As a result, we now recommend an underweight allocation to commodities on a 3- to 6-month horizon.”

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

Market Nuggets: Goldman Looks For Further Gains In Gold During 2011 But Peak In 2012

15 April 2011, 11:18 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Goldman Sachs says it looks for gold to continue rallying in 2011 as quantitative easing keeps U.S. real interest rates low. “We continue to view the persistently low level of U.S. real interest rates as the primary driver of our bullish outlook for gold over the next 12 months, with U.S. dollar-denominated gold prices expected to peak in 2012 when rising U.S. real interest rates remove this fundamental support,” Goldman says. “Importantly, our bullish view of gold prices has not been based on the expectation of substantial inflation in the near term, but instead on our US economists’ forecast for U.S. inflation to remain relatively subdued, averaging 2.5% in 2011 and 1.6% in 2012. Clearly, a higher level of inflation would present upside risk to our gold price.” In a research report released Friday, Goldman’s gold forecasts are $1,565 and $1,690 per ounce in six and 12 months.    

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

Market Nuggets: Deutsche Bank: Weaker Dollar Sustaining Uptrend In Precious Metals

15 April 2011, 9:31 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- In assessing the precious-metals outlook, Deutche Bank says it views upside inflation risks as more likely than positive growth shocks in the U.S. “This should mean that when the Fed eventually tightens monetary policy, it will not derail the rally in precious metals,” the bank says. “In the meantime ongoing weakness in the U.S. dollar should sustain the uptrend in precious-metal prices, in our view.” The bank’s revised 2011 price forecasts are $1,571 in gold (down 1.8% from Deutsche Bank’s previous forecast); silver, $38.43 (up 1.9%); platinum, $1,850 (unchanged); palladium, $874 (down 0.1%); and rhodium, $2,484 (down 0.7%).

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

Market Nuggets: Deutsche Bank Looks For Range-Bound Industrial Metals In Next Month

15 April 2011, 9:31 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Deutsche Bank says it looks for industrial metals and materials to remain range-bound over the next month, particularly as the summer-slowdown period approaches, beginning in late May. In a weekly commodities report, the bank listed the following forecasts for 2011 prices in base metals: aluminum, $2,641 per metric ton (down 0.3% from prior forecast); copper, $10,160 (down 0.9%); lead, $2,627 (up 1%); nickel, $27,497 (up 0.9%); tin, $29,925 (up 9.8%); and zinc, $2,468 (down 0.3%).

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

Market Nuggets: OptionsXpress: Gold Sought As Inflation Hedge, Currency Alternative

15 April 2011, 9:08 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Gold futures have resumed their uptrend after a “shaky” start to the week, says optionXpress. The most recent rise was helped along Thursday by U.S. economic data that included a 0.7% jump in the March Producer Price Index. Inflation data has led to worries that accommodative monetary policies from the Federal Reserve will mean even greater rises in consumer and producer prices later in the year, optionsXpress says. “Gold has historically been seen as a store of value, and concerns about rising inflation--especially with the U.S. dollar being as weak as it has been--can only help to give added support to the gold market,” optionXpress says. Gold is not only strong versus the greenback, but also against the British pound and Japanese yen. “This shows that gold's strength is not only derived from inflation fears, but that the gold market is also finding support as an alternative to holding ‘paper' currency,” optionsXpress says. “Given the economic difficulties seen in many Western nations, it should not come as a big surprise that investors are looking towards moving some of their assets towards ‘hard’ investments such as gold.”

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

Market Nuggets: Barclays: South African Metals Supply Susceptible To Labor Disruptions

15 April 2011, 8:57 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Analysts with Barclays Capital say that metals supply from South Africa is vulnerable to potential labor disruptions this year. The country is one of the world’s largest platinum producer. In years past, labor issues have often sent prices higher. South Africa is also one of the world’s largest gold producers.  “This year marks the next round of biennial wage negotiations in South Africa with the current agreement expiring in July, in turn supply remains susceptible to potential industrial disruptions in the near term,” Barclays says.

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

Market Nuggets: MF Global Raises Buy Recommendation For Comex Gold

15 April 2011, 8:49 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- MF Global has raised its recommendation on where to buy Comex June gold, now favoring a long position on a dip to $1,460 rather than $1,440. “Support will come from budget negotiations, accommodative monetary policy, and tensions in the Middle East,” says analyst Tom Pawlicki. Potential pressure could come mainly from fear that metals are trading at “overbought levels” and any lack of follow-through in investment inflows. “We favor raising the buy recommendation on our June gold trade…to $1,460 from $1,440, with an objective at $1,550,” MF Global says. MF Global would take a risk to $1,435. Meanwhile, MF Global maintains a long position in July platinum from $1,740, with a target of $2,000 and taking a risk to $1,700.  The position was entered on March 28.

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

Market Nuggets: HSBC: Bullish Factors Outweighing Any Negatives For Gold

15 April 2011, 8:27 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- A range of factors have been pushing gold higher lately, says HSBC. “The bullion market has found support one day from economic uncertainty and changes in risk sentiment and on another day by high oil and food prices, and on yet another by sovereign risk and fiscal concerns,” HSBC says. On days such as Thursday, all of these factors come together. “In this climate, we expect that gold prices are likely to trade higher and that they also will play a role in boosting other precious metals,” HSBC says. “The market is still sensitive to monetary policy, and any sudden shift by the Federal Reserve away from its highly accommodative monetary-policy stance could trigger a gold-price correction. On balance, however, the bullish factors appear to outweigh the negative factors for gold.”

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

Market Nuggets: Brown Brothers Harriman Looks For Further Chinese Monetary Tightening

15 April 2011, 8:14 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Brown Brothers Harriman looks for further monetary tightening in China this year after strong economic data overnight, including a Consumer Price Index that rose to 5.4% in March from 4.9% in the previous two months, as well as 9.7% first-quarter economic growth. So far in this cycle, Chinese authorities have added 100 basis points to lending rates and 450 basis points of reserve-requirement hikes.  “Given that the mainland economy remains very strong, we would characterize PBOC (People’s Bank of China) policy as still moderately accommodative and behind the curve, and suggest that another 75-100 bp of rate hikes and 550 bp of reserve requirement hikes at least could be seen in 2011, with risk to the upside in terms of tightening potential,” BBH says. Analysts add: “Real lending rate remains at an ultra-low 0.7% in March, much too low for this stage of the business cycle.” Chinese monetary tightening has been a focus for metals traders in recent months, especially those in the base complex.

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

Market Nuggets: Gartman Adding To Gold Position In Sterling Terms

15 April 2011, 8:03 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Investor and newsletter writer Dennis Gartman says he is adding to his position in which he bought gold in sterling terms. Gold has traded up through 900 sterling, which he says had been formidable chart and psychological resistance. “Indeed, earlier this morning gold was trading 903.55, clear of the 900 resistance rather readily and sufficiently so to force us to add to our position this morning,” he says in The Gartman Letter.

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