Kitco Market Nuggets

Market Nuggets: Record Set Again For Open Interest In Comex Gold Options

21 September 2011, 04:30 p.m.
By Kitco News
http://www.kitco.com/

(Kitco News) - Open interest for Comex gold options once against set a record on Tuesday, CME Group says. The number of open positions at the end of the day reached 1,456,677 contracts, surpassing the previous record of 1,448,222 contracts from Monday. On that day, Comex gold options open interest eclipsed a record of 1,444,251 contracts that had just been set on Friday.

By Allen Sykora of Kitco News asykora@kitco.com

Market Nuggets: Barclays: China’s August Import Data Does Not Hint At Serious Economic Slowdown

21 September 2011, 04:01 p.m.
By Kitco News
http://www.kitco.com/

(Kitco News) - There were few signs in China’s August commodity trade data suggesting any serious economic downturn, say analysts with Barclays Capital. In fact, the August report is “the strongest for a long time,” Barclays says. “Furthermore, with some of the macro-economic concerns surrounding the Chinese economy starting to ease and a period of de-stocking for several industrial metals and energy commodities apparently drawing to an end, the prospects for overall commodity import demand look firm.” Among base metals, imports rose for refined copper, as well as aluminum and zinc. “A similar picture is evident in energy markets,” Barclays says. In agriculture, corn imports hit their highest in 10-months, wheat imports stayed high, 44% above year ago levels, while sugar imports hit an all-time high. A decline in silver imports was one of the few weak spots in the August trade data for commodities, but imports of platinum group metals rose in line with the recovery in domestic auto sales, Barclays says.

By Allen Sykora of Kitco News asykora@kitco.com

Market Nuggets: BNP Paribas Trims Base-Metals Forecasts, But Says Some Props Still In Place

21 September 2011, 03:41 p.m.
By Kitco News
http://www.kitco.com/

(Kitco News) - BNP Paribas has cut its price forecasts for base metals and says risks are skewed to the downside. The metals have been hit by economic and financial-market worries. “But we believe firm demand in emerging nations, supply constraints and loose monetary conditions will support base metal prices into 2012,” BNP says. Some metals have remained in surplus this year, but Chinese destocking has masked deficits in the copper and tin markets, says the report from strategist Stephen Briggs. “There are signs that this destocking is winding down, which should be supportive for all metals, given copper’s outsize influence on the sector.” BNP’s most recent fourth-quarter forecasts are aluminum, $2,415 a metric ton (previous forecast $2,475); copper, $9,050 ($9,700), lead, $2,465 ($2,830); nickel, $22,425 ($22,775); tin, $25,150 ($26,400); and zinc, $2,190 ($2,440).

By Allen Sykora of Kitco News asykora@kitco.com

Market Nuggets: Fed's 'Operation Twist' Could Be Neutral To Negative For Gold Prices – MFGlobal

21 September 2011, 08:32 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) - At the end of the Federal Open Market Committee meeting Wednesday afternoon, the Fed is expected to announce “Operation Twist” which would extend the duration of maturities on its balance sheet and try to lower long-term interest rates. Tom Pawlicki, analyst at MFGlobal, says this could be bearish for gold. “We don’t anticipate that it will offer much impact on gold prices. If anything, it may be negative because the risk of monetization won’t increase as the size of the balance sheet remains static,” he says. Further, it may already have been discounted by the bond market. Pawlicki says the spread between 10-year and 3-month yields has shrunk from around 3% in early-July to near 2% currently. “Expectations of Twist increased over that period as did the expectations for QE3. Gold prices have fallen since QE3 was not suggested by Fed Chairman Bernanke in his Aug. 26 speech at Jackson Hole,” he says.

By Debbie Carlson of Kitco News dcarlson@kitco.com

Market Nuggets: Euro Likely To Slide Vs Dollar As Eurozone Problems Worsen – Barclays

21 September 2011, 08:32 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) - Problems in Europe have deteriorated significantly and are likely to worsen before stabilizing, say analysts at Barclays Capital.  “Heightened risk, coupled with more dovish language coming from the European Central Bank and the Swiss National Bank floor, has made a lower EUR/USD likely in the short run. We are therefore lowering our EUR/USD forecasts significantly to 1.33 in one month and 1.25 in three months,” Barclays says. Previously the bank had expected a move higher.  A stronger dollar can put pressure on gold prices as the metal is denominated in dollar terms.

By Debbie Carlson of Kitco News dcarlson@kitco.com

Market Nuggets: Fed Unlikely To Stand Pat - BBH

21 September 2011, 08:12 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) - U.S. economic data suggests modest improvement in the second half of 2011 from the first half, the Federal Reserve will likely announce action following the two-day monetary policy meeting, given that the jobless rate is over 9% and economic growth under potential, says Brown Brothers Harriman.  The Fed has three options:  “Operation Twist,” a cut in the rate on banks’ excess reserve holdings, known as IOR, and more long-term asset purchases.  BBH says the most likely is “Operation Twist” which is a duration extensions, with the low probability of a cut in IOR from 0.25%.  BBH says some market watchers suggest that further policy action is likely to be negative for the dollar “but we strongly disagree…  Operation Twist would generally expected to be more positive for the dollar.” Operation Twist is just a duration shift along the yield curve and therefore would not lead to an expansion of the balance sheet.  Also, the 2-year yield is already at record lows so a duration shift is likely to send the front-end of the curve marginally higher. That would likely to be more supportive of the dollar through the relative 2-year yield spread. 

By Debbie Carlson of Kitco News dcarlson@kitco.com

Market Nuggets: Gold May Still Hold Good Value At $1,800/Oz - R.J. O'Brien

21 September 2011, 07:54 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) - Wednesday’s focus will be on the outcome of the Federal Open Market Committee meeting set to conclude in the U.S. afternoon, says Janet Mirasola managing director R.J. O'Brien.  The focus will be on whether any real action will be taken or will the Fed just launch “Operation Twist” where they seek to buy up longer-dated Treasury maturities to lower long-term rates. “Don’t expect too much from this meeting but be prepared for the usual soothing words designed to stabilize investor confidence.  Continue to keep risk at a minimum while talk is the name of the game and action is lacking.  The Shiny One (gold) may still hold good value as it trades close to $1800 with a potential on any breakdown in talks or weak eco data result will send traders looking for safety,” she says.

By Debbie Carlson of Kitco News dcarlson@kitco.com