Kitco Market Nuggets

Market Nuggets: Update: U.S. Mint Gold, Silver Coin Sales In August Are Most Since January

01 September 2011, 3:36 p.m.
By Kitco News
http://www.kitco.com/

(Kitco News) - The U.S. Mint sold more ounces of gold and silver bullion coins in August than it previously had since January. Total sales of American Eagle gold coins rose to 112,000 ounces in August, the Mint’s Web site shows. This is up 73.6% from 64,500 in July and the most since 133,500 ounces were sold in January. Further, the figure represents a 170% rise from the same month in 2010. However, figures for the year to date are down from last year. Sales during the first eight months of 2011 totaled 752,500 ounces, compared to 866,500 ounces in the same period a year ago. Meanwhile, U.S. Mint silver-coin sales rose to 3,679,500 ounces in August, also the most since January, when sales totaled 6,422,000. The August total was up 24% from 2,968,000 ounces in July and up 50% from the same month in 2010. Year-to-date figures show sales of 28,951,000 ounces, up from 23,600,500 in the same period of 2010.

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

Market Nuggets: Ira Epstein: Gold 'Has A Strong Case Going For It'

01 September 2011, 3:27 p.m.
By Kitco News
http://www.kitco.com/

(Kitco News) - Futures veteran Ira Epstein says he remains constructive on gold, even though heavy mainstream media coverage often signals tops in markets. “Think back to the real-estate market in 2007,” says the director of the Ira Epstein division of The Linn Group. Still, while he says vertical moves up and down don’t last long, he also does not expect gold to go the way of past bubbles such as occurred in real estate. “Whether it’s European debt issues or the U.S. election and its impact on Congress being unable to do much, gold has a strong case going for it,” he says. “If world economies were to suddenly change, with spending coming under control and job growth creation, I’d have to change my opinion. Since there’s little chance of either occurring, I remain very bullish.” Technically, he favors buying Comex December if it gets over $1,845.10, “forcing the daily trend to turn up,” or down to $1,799.40. “Obviously, tight stops will be needed…,” he adds.

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

Market Nuggets: Standard: Platinum To Have Trouble Maintaining $1,900/Oz

01 September 2011, 11:06 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) - While platinum prices last week topped Standard Bank’s target of $1,900 an ounce set in March, the bank says the metal could “struggle” to stay above there for now despite supportive supply-side issues such as potential strikes and debate on mine nationalization in South Africa. The bank cites the latest Swiss and Chinese customs data. “Both data releases show a continued slowing down in platinum demand,” Standard says. “Given that the previous month’s figures have all been well above the 2010 average, the July numbers could signal a turning point in Chinese platinum demand, as monetary tightening and the seasonal slowdown in industrial activity take hold.” Meanwhile, platinum speculative length remains high. “The speculative market now seems much less bearish towards platinum than it did three weeks ago,” Standard says. “However, given weak underlying economic conditions, we believe that significant additional length is unlikely to be added at current price levels.” Nymex October platinum traded as high as $1,918.50 an ounce on Aug. 23 but has since backed down. As of 10:26 a.m. EDT, the contract was $10.40 lower for the day at $1,845.80.

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

Market Nuggets: MEPS: Decreasing Nickel Prices Will Negatively Affect Stainless Steel Prices

01 September 2011, 10:55 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) - Recent declining nickel prices are expected to bring down stainless steel prices this autumn, says MEPS, the U.K.-based steel consultancy. “The negative movement in mill input costs could persist,” says MEPS. “This would result in a further reduction in alloy surcharges in Western industrialized nations and, therefore, stainless steel prices in October.” Distributors' inventories in the Western nations are currently low, which most likely means that there will be no de-stocking phase in the fourth quarter, almost certainly leading to a reduction in stainless steel sales during the fourth quarter, MEPS says. Nickel prices are expected to rise by year’s end and “should give distributors more confidence to initiate inventory rebuilding plans,” MEPS says.

By Alex Létourneau of Kitco News; aletourneau@kitco.com

Market Nuggets:Barclays Does Not Expect Replay Of Spring Silver Tumble In Gold After Margin Hikes

01 September 2011, 09:48 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) - Gold corrected lower but is holding up far better after CME Group margin hikes last month than was the case with silver earlier this spring, say analysts with Barclays Capital. The spring margin hikes were more dramatic in silver, after prices had risen by 57% to their peak at the end of April. Silver subsequently fell nearly 30% in a week as investors who struggled to meet the new requirements had to liquidate positions. After two CME gold hikes in August, there were worries about still-higher margins. However, Barclays notes, an all-time high in the price/initial margin ratio already was hit in August, when 30% of the price of an ounce was needed as an initial margin. The margin as a percentage of contract value stands at 4% for gold and is less than for other commodities such as silver (11%), gasoline (9%) and corn (6%). “But that is not surprising given that gold, by its nature, has the highest contract value of all commodities after only silver (because each silver contract is 5,000 ounces while each gold contract is only 100 ounces),” Barclays says. In fact, for the margin in gold to reach 8% of contract value, either the initial margin would have to double or gold would have to fall to $900 an ounce, Barclays says. Gold is less volatile than silver, and volatility is one of the key reasons put forward to CME to hike margins. “All in all, our view remains that a replay of silver’s trajectory earlier this year is unlikely for gold given the different fundamental picture,” Barclays concludes. 

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

Market Nuggets:Harbor: Barclays: Labor Deal Provides ‘Higher Cost Floor’ For Platinum

01 September 2011, 09:24 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -A labor settlement diminishes the prospects for a supply disruption in South Africa, yet wage increases were sufficiently high to help put a longer-term floor under platinum prices, say analysts with Barclays Capital. The nation’s largest producer, Anglo American Platinum, reached an agreement with the National Union of Mineworkers calling for wage increases of 8%-10%. Talks with Impala Platinum are in arbitration, while talks with Lonmin and Northam Platinum are set to resume in September. “The wage increase is substantially higher than current inflation, (and) in turn continues to provide a higher cost floor for platinum prices,” Barclays says. Essentially, it increases the cost of production and means companies would need a higher metal price for any new projects or expansions to be economically viable. -

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

Market Nuggets:Harbor: ‘Our Models Suggest Resumption Of Upward Trend’ In Aluminum

01 September 2011, 09:03 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Analysts with Harbor Intelligence say their models call for a resumption of the uptrend in aluminum. LME prices fell 3.7% in August on weak physical demand and fund selling, hurt by stalled manufacturing activity and plummeting market confidence. However, Harbor notes, Chinese prices rose as its physical market tightened. Meanwhile, the VIX, or fear, index has fallen by around a third from a peak of 48 in early August and is now approaching levels considered “normal,” Harbor says. “Our models suggest resumption of upward trend,” Harbor says. “Leading economic indicators, level of global interest rates, our best price leading indicators, SHFE-LME arbitrage and the secondary market strongly suggest (the) current price decline is temporal and a pause before next wave up.” Further, Harbor says its proprietary indicator showed bullish sentiment is rising. Harbor’s models calls for aluminium to average $2,702 a metric ton for the rest of 2011, then $3,100 in 2012 and $3,400 in 2013-14.

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

Market Nuggets: Gartman: Gold Has Tended To Consolidate, Advance, Consolidate Again, Advance

01 September 2011, 08:41 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Newsletter writer Dennis Gartman says the gold market has shown a consistent propensity to “consolidate; then advance; then consolidate; then advance again,” and “we see every reason to believe that that trend shall continue, especially into the days ahead of the German Supreme Court ruling.” Around Sept. 7, the German court is expected to rule onwhether it is constitutional for the German government to buy the debts of countries that have not adhered to the mandates put forth in the Maastricht Treaty. Gartman, who prefers to hold gold in non-U.S. dollar terms, says he will feel better when gold breaks up through a triangle pattern around 1,275 euros. “For now, we can and we will be patient,” he says. Currently, while gold is slightly softer in dollar terms, the metal is up 5.25 euros at 1,274.62.

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

Market Nuggets: HSBC: Uncertainty About South African Mine Nationalization Supportive For PGMs

01 September 2011, 08:29 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Uncertainty about nationalization of South Africa’s mines is supportive for platinum group metals, even though government takeover of the industry appears unlikely, says HSBC. The bank cites comments from an adviser to the mines minister saying South Africa’s debate on nationalizing mines is discouraging investment. The position will become clear by mid-2012, when the ruling African National Congress party holds its policy conference and either adopts or rejects the idea, according to the adviser. Nationalization has been rejected by senior members of the government, including the mine minister, and there is no government process to formulate a policy on nationalization. However, the leader of the ANC Youth League has repeatedly called for nationalization of the mines. “Even if nationalization is highly unlikely, uncertainty about the issue should limit foreign investment in the mining industry, including the PGM mines,” HSBC says. “PGM production would therefore be lower than would otherwise be the case. This should be supportive of prices.”

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

Market Nuggets: HSBC: Gold-Silver Ratio May Widen As Silver Production Rises

01 September 2011, 08:22 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Mounting mine supply may contribute to a widening in the gold-silver ratio, says HSBC. Mexico has overtaken Peru as the world’s largest silver producer. Mexico’s June production was up 4.2% from the previous month. According to the executive director of the Mexican Mining Chamber, several new large silver mine projects will reinforce Mexico’s position as a leading silver producer. “Unlike gold and the PGMs, silver mine production has been robust, with most producers increasing output,” HSBC says. “We expect this to help restrain silver gains and to play a role in widening the silver-gold ratio back to 50:1 from its current 44:1.”

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

Market Nuggets: R.J. O’Brien: Copper Prices Retreat After PMI Data

01 September 2011, 08:01 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Copper slid overnight in reaction to Purchasing Managers Indexes for manufacturing activity, says Janet Mirasola, managing director of R.J. O’Brien & Associates. China’s official headline PMI improved to 50.9 in August from 50.7 the previous month, but the HSBC Markit PMI recorded a 49.9 reading that left it below the key 50 level for the fourth straight month. Later, the euro-zone PMI fell to a two-year low of 49.0, also below the 50 level generally seen as the breaking point between contraction and expansion. The European PMI fell from 50.4 in July and was below the consensus forecast of 49.7. This contributed to weakness in European equities. “Base metals are lower in reaction to weak PMI with the Red One (copper) giving back 1.5% from yesterday’s steady month-end close,” Mirasola says. “The Red One and its commodity friends are likely to continue to trade lower as recent risk trades are reduced and anemic growth on a global scale will give consumers less reason to reach out at these levels to fill their short-term needs.” Focus now shifts the U.S., where economic data Thursday includes motor-vehicle sales, weekly jobless claims, productivity, the ISM manufacturing survey and construction spending. As of 7:43 a.m. EDT, Comex December copper was 5.85 cents softer at $4.1460 a pound.

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

Editor's Note:

Kitco News will provide readers with comprehensive print and video coverage of three-major precious metals market events in New York, Toronto and Montreal during the next two weeks.

First, Kitco News will supply live coverage on Wednesday, Sept. 14, of the CPM Platinum Group Metals Seminar in New York. That will be followed by the Toronto Resource Investment Conference September 15-16, and then the London Bullion Marketing Association meeting in Montreal September 18-20.

The CPM Group's Platinum Metals Group Seminar Sept. 14 will showcase presentations from some of the leading analysts and investors in the PGM sector. Register to watch the CPM Platinum Group Metals Seminar Live (Free Registration): http://cpmevents.kitco.com/