Kitco Market Nuggets

Market Nuggets: RBC's Gero: Gold Stable Amid Offsetting Factors; Silver, PGMs Ease

05 August 2011, 3:28 p.m.
By Kitco News
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(Kitco News) -- Comex gold is little changed late Friday amid offsetting factors, says George Gero, vice president and precious-metals strategist with RBC Capital Markets Global Futures. Traders were factoring in continued low interest rates ahead of an FOMC meeting next week, yet the monthly U.S. jobs report was stronger than forecast. Equities fluctuated widely, and there are reports that Italy and the European Union have agreed to economic-reform measures. Further, many traders were evening up positions ahead of a weekend. “A lot of investors don’t want excess positions for the weekend, short or long,” Gero says. As of 3:05 p.m. EDT, December gold was $1.50 higher at $1,660.50 an ounce. This is a move of only 0.1%, and further, the session high and low were both contained within the prior day’s range for an “inside day” on a bar chart. Meanwhile, Gero says, silver, platinum and palladium are all softer on worries about industrial demand due to a softer economy, as is the case with base metals such as copper. September silver was $1.361 lower at $38.070, October platinum was $11.50 lower at $1,717.90 and September palladium was down $9.90 to $743.05.

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

Market Nuggets: Deutsche Bank: Investors To Keep Looking Toward Gold As Safe Haven

05 August 2011, 3:14 p.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- With financial markets prone to recurring bouts of risk aversion, Deutsche Bank looks for investors to keep seeking gold as a safe haven. “Private- and public-sector buying of gold will continue in an environment of negative real interest rates, which will help precious metals outperform in both absolute and relative terms,” says Deutsche Bank. Much of the recent acceleration in gold appears to be triggered by the possibility of further Federal Reserve action to stimulate the economy and a response to market fears about the euro zone, the bank says. Deutsche Bank forecast average gold prices of $1,630 an ounce for the third quarter and $1,750 for the fourth. The average silver forecast is $37 for the third quarter and $41 for the fourth.

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

Market Nuggets: Deutsche Bank Looks For Aluminum To Outperform Copper

05 August 2011, 3:12 p.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Deutsche Bank looks for aluminium to outperform copper. Overall, the base-metals complex is lower for the year to date due to European debt fears and U.S. macroeconomic data, the bank says. The “one area of hope” for copper and aluminum is much demand is driven by China, particularly public-sector housing construction. “In the near term, we believe that aluminum could outperform copper in an environment where global growth is under attack,” Deutsche Bank says. “We believe downside risk for aluminum is limited as it is trading relatively close to marginal cost and recent power shortages in China could also provide support.” The bank looks for aluminum to average $2,650 a metric ton in the third quarter and $2,800 in the fourth. It looks for $9,500 copper in the third quarter and $9,900 in the fourth.

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

Market Nuggets: Triland: Selling Resumes In Copper After Respite Following U.S. Jobs Data

05 August 2011, 3:03 p.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Copper’s bounce after a stronger-than-expected U.S. jobs report was brief and the slide in three-months metal in London is approaching $9,000 per metric ton. The metal tumbled Thursday with equities on global economic concerns. “Yesterday's nervous markets continued overnight in Asia and during trading hours in London,” says Triland Metals. “Even though better-than-expected employment figures in the U.S. gave a brief respite, the selling resumed later.” LME copper closed at $9,041 per metric ton, well down from $9,355 Thursday, and bottomed at $9,021. “A large part of it was liquidations and a record volume of 35,000 lots was traded on the LME Select platform today,” Triland says. Some Chinese buying emerged at lower levels, Triland adds. Meanwhile, as of 2:47 p.m. EDT, Comex September copper was 11.45 cents lower at $4.1210 a pound and bottomed at $4.0795, its weakest level since late June.

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

Market Nuggets: Barclays Alters Commodity Rankings Due To China, U.S. Growth Fears, EU Debt Crisis

05 August 2011, 1:57 p.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Barclays Capital says concerns over slowing growth in the U.S. and China, and the ongoing European debt problems, prompted changes in its rankings of several commodities. Barclays says in a research note that growth and debt issues will likely continue as the main commodity price drivers in the next month, “irrespective of individual market fundamentals. Consequently, we have altered our rankings to allow for defensive overweight positions in precious metals and grains and are underweight in energy, base metals and softs.” Barclays says in precious metals, it maintains a heavily overweight ranking in gold, and a marginal overweight in silver. It is underweight in the platinum group metals, which it says are vulnerable to economic growth concerns. Barclays raised the rankings on carbon and U.S. natural gas, but sees a slightly weaker outlook for crude oil and products and reduced the rankings for those commodities. Corn also received an overweight ranking.

By Terry Wooten of Kitco News; twooten@kitco.com

Market Nuggets: CME Metals Contracts Set Volume And Open Interest Records.

05 August 2011, 12:40 p.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Three CME Group metals products set volume and open interest records Thursday, according to the exchange. Comex gold options daily volume reached a record of 110,144 contracts,  advancing beyond the previous record of 102,292 contracts set on Oct. 7. The Comex E-micro gold futures daily volume established a record of 5,077 contracts, surpassing the previous record of 3,335 contracts set on Feb. 3.  The CME also says the Nymex palladium options open interest reached a record of 9,248 contracts on Thursday, beating the previous record of 9,165 set on Aug. 1.

By Terry Wooten of Kitco News; twooten@kitco.com

Market Nuggets: Standard Favors Buying Platinum Around $1,700, Palladium Near $700

05 August 2011, 10:33 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Standard Bank favors buying platinum on approaches of $1,700 and palladium on approaches of $700. Both metals have fallen sharply lately with base metals on worries about the economy and thus industrial demand. Standard says the short-term upside may be limited, but still targets $1,900 and $950 toward the end of the year largely based on seasonal restocking and an eventual uptick in economic activity. Wage negotiations continue at platinum mines in South Africa as companies improve their offers. “Independent of potential strikes, our view stands: buy platinum on approach of $1,700 and palladium on approach of $700,” says Standard, which previously said it sees market deficits for 2011. “Our view is further supported by a platinum/gold spread which is fast approaching zero. We have little doubt that the relative cost of platinum to gold would benefit platinum jewelry demand.”

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

Market Nuggets: Standard Bank: Physical Gold Buying Limited But Scrap Sales Also Moderate

05 August 2011, 10:31 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- The recent run-up in gold prices has limited physical buying, but the scrap flows from two weeks ago have also moderated substantially, says Standard Bank. “We foresee physical buying if gold drops to sub-$1,650 levels. With August well on its way, we believe that the probability of further scrap coming to market decreases rapidly. Seasonally, Q4 is the strongest quarter for gold jewelry demand, and we would expect buying interest to ramp up in August ahead of seasonal demand.”

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

Market Nuggets: Country Hedging's Smith: Copper Pares Loss On Jobs Data, Stronger Equities

05 August 2011, 10:03 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Comex copper has rebounded from five-week lows as equities bounced in early trading and after the monthly U.S. jobs report came in stronger than markets were anticipating, says Sterling Smith, analyst and commodity trading advisor with Country Hedging. July non-farm payrolls rose 117,000, when economists were expecting 75,000. A softer dollar is also helping copper. Earlier, Comex September copper fell to a $4.1390 low that was its weakest level since June 29. “The market has come down sharply over a pretty quick period of time,” Smith says. “Being the end of the week, some profit-taking from the short end of the market is going to be there.” The recent weakness was part of a wider “risk-off” trade affecting most other commodities and equities, all due to worries about the economy, Smith says. Some longs also may have exited positions on news that workers voted to end a strike at Chile’s Escondida, the world’s largest copper mine, he adds. How copper performs from here may depend on the direction in equities, he says. As of 9:43 a.m. EDT, Comex September copper was down 3.4 cents to $4.2015 a pound. Smith put trendline support near the day’s low at $4.13, with chart resistance at $4.25 and $4.28.

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

Market Nuggets: Platinum, Palladium Weaker But Bounce From Lowest Levels On Bargain Hunting

05 August 2011, 9:37 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Platinum group metals have been beat up lately on worries about the economy, but have bounced off of their worst levels when the U.S. jobs report topped forecasts, says a trader. Nymex October platinum bottomed at $1,682 an ounce early Friday and September palladium at $731.50, both five-week lows. They fell hard Thursday with equities and most other commodities on general uneasiness with the economy, as weaker conditions mean less industrial demand for the PGMs, used in auto catalysts. “We were looking at sell-offs out of any risky assets,” says the trader. However, he says, bargain hunting emerged around the lows, particularly when a report showed U.S. non-farm payrolls grew more than forecast last month. “Platinum was down around $1,690 when I got in, and here we are sitting around $1,720,” he says, describing a volatile market. Around 9:13 a.m. EDT, October platinum was still $9.30 lower at $1,720.10 an ounce, while September palladium was $7.95 softer at $745.  

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

Market Nuggets: Barclays: SHFE Aluminum Inventories At Lowest Level Since June 2009

05 August 2011, 9:13 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Aluminum inventories in Shanghai Futures Exchange warehouses have fallen by some 283,000 metric tons since the beginning of the year and are now at the lowest level since June 2009, says Barclays Capital. Analysts say they believe this is reflective of wider trends of inventory drawdowns along the supply chain. “Even though smelter production is running at a record, high consumption has been exceptionally strong with semis production rising over 25% y/y,” Barclays says. “This tightness in spot-market conditions is further illustrated by price spreads with the SHFE flat price premium to the LME rising to $380/t and the cash to three-month and cash to six-month spreads have tightened to above $60/t.” The most recent weekly inventory data showed SHFE stocks fell 23,585 metric tons to 158,130.

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

Market Nuggets: Copper, Aluminum Are Morgan Stanley's Top Picks Among Base Metals

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

(Kitco News) -- Copper and aluminum are Morgan Stanley’s top picks among the base metals, but analysts have downgraded their nickel forecasts. “Our bullish copper view is predicated on the powerful combination of supply challenges that continue to confront the industry and regional demand patterns that remain robust, even in the face of an increased global growth risk,” MS says. Supply will be curtailed by strikes, weather-related issues and ore grades, MS says. Analysts look for annual consumption growth of 4.5% to outpace mine-supply growth of 2.9% for the 2011-16 period. MS looks for copper to average $4.40 a pound this year and $4.60 next year. Aluminum has been supported by a tightening supply situation, with trends in auto production, canned sheet demand and aerospace orders supportive, MS says. Analysts also expect supportive inventory-financing deals to remain in place for some time. Aluminum is forecast to average $1.20 a pound this year and $1.26 next. Meanwhile, MS looks for nickel prices to be hurt by substitution toward nickel pig iron production in China. Nickel is forecast to average $11.13 a pound and $11 next.

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

Market Nuggets: Morgan Stanley: Gold, Silver To Be Supported By Safe-Haven Demand

05 August 2011, 8:37 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Morgan Stanley looks for gold and silver to be supported by heightened demand for safe-haven commodities due to lingering investor concerns over sovereign debt and growth risks in the U.S. and Europe. Investment demand for gold has picked up since the 2008-09 financial crisis, which prompted concern about a debt deflationary spiral and the long-term purchasing power of the world’s major fiat currencies, MS says. “In these circumstances, we expect the long-running bull market in gold will gain further momentum, even if there is no return to QE in the U.S.,” MS says. “At the same time, we believe the potential for QE3 adds further upside risk to prices.” MS looks for central banks to remain net buyers, especially now that the International Monetary Fund has completed its planned sales. “We also have a positive outlook for silver, although investors must remain cognizant of the greater levels of volatility,” MS says. “We believe silver’s precious metal status and therefore its links with gold have been strongly reinforced by investors’ preference to hedge systemic financial risk through a cheaper vehicle with similar ‘store of value’ characteristics as gold.” MS has upped its full-year forecasts in gold to $1,511 for this year and $1,624 for next year. It upped its full-year forecasts for silver to $36.21 and $36.90.

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

Market Nuggets: R.J. O'Brien: Crude, Copper Run Into Liquidation Overnight, Gold Fares Better

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

(Kitco News) -- Crude oil and copper are lower with most commodities on economic worries, although gold has held up better. “The global economic slowdown cannot be ignored and the last-minute resolution of the U.S. debt ceiling debate was a poorly planned political play that may have caused more damage than was imagined, had a rating downgrade been implemented,” says Janet Mirasola, managing director of R.J. O’Brien & Associates. “The euro debt crisis may have been the pre-cursor to the global ‘de-risk’ and has still to be resolved as contagion ripples through Italy and Spain, who may still need additional bail outs.” Equities sold off sharply Thursday on uneasiness with economic conditions, and the move in stock-index futures overnight hints at further weakness. Against this backdrop, copper and oil have attracted further liquidation, Mirasola says. Gold has held up better as it has both commodity and currency “personality traits,” she says. “If it should attract liquidation and see a correction in price, then buying opportunities will be available on any pullback towards $1,600.” As of 7:39 a.m. EDT, Nymex September crude oil was 26 cents softer at $86.37 per barrel, Comex September copper was 6.15 cents lower at $4.1740 a pound and Comex December gold was $8 stronger at $1,667 an ounce.

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