Friday September 28, 2012 12:05 PM

Silver can continue to benefit from gold’s positive momentum on investment interest, but needs improvement in industrial activity, says Suki Cooper, precious-metals analyst with Barclays Capital. Silver has been the strongest precious metal so far this year, rising 22%, she notes. Chinese imports have picked up in the last couple of months, but supply/ demand fundamentals excluding investment have not tightened considerably, leaving silver’s fate in the hands of investors. However, she continues, investment demand has been strong lately. “Silver ETP (exchange-traded-product) holdings have risen to their highest since May last year and inflows for the year-to-date across the open-ended products have reached 775 (metric) tons, almost the equal and opposite of flows last year (-793 tons), and inflows in September are set to be the strongest month since July 2011 with inflows at 411 tons,” she says. “On the retail side, silver coin sales have also gained momentum with the U.S. Mint reporting sales thus far in September to be the strongest since January this year at just over 100 tons. Although short-term positioning on Comex silver has risen to its highest since April last year, it is still below the peak, and the source of the acceleration in demand last year from the investment community in China has also notably gained momentum at the end of August and into September.” She later adds: “Investor interest likely retains the scope to push silver prices higher in the near term, but given its short-term nature, industrial demand would need to follow suit.”

By Allen Sykora of Kitco News


Market Nuggets: BNP Paribas: Zinc May Have Jumped The Gun On Rally

Friday September 28, 2012 11:53 AM

Zinc may have jumped the gun, rising with other base metals after more Federal Reserve quantitative easing but now up some 15% for the year to date. The strong showing could be partially explained by the fact zinc previously was one of the weakest performing metals, says a report from senior market strategist Stephen Briggs. He looks for demand to rise 4% this year, but also sees no reason to lower forecasts of production, with most mines cash positive and a number of new projects coming on line down the road. “In short, we believe that the zinc market will remain in structural surplus at least through 2013, with both mine and smelter capacity ample,” Briggs says. “We are more positive about medium-term prospects, but cautiously so. There is no shortage of possible mine projects and the zinc industry is highly competitive with relatively low barriers to entry. The positive outlook could be further deferred. To us, the zinc price looks too high, too soon. The fundamentals are not so poor that zinc will cease to participate in broader rallies. But it may be particularly vulnerable in risk-off retreats for several months yet. Despite evident investor enthusiasm, not until deep into 2013 or even 2014 will zinc be able, we believe, to sustain itself above USD 2,500/t.”

By Allen Sykora of Kitco News


Market Nuggets: Barclays: Base Metals Could Face Near-Term Retrenchment

Friday September 28, 2012 11:53 AM

Barring further global economic growth, the case for further near-term upside in base metals is lacking, says Nicholas Snowdon, analyst with Barclays Capital. "For several metals, including aluminum and nickel, where current higher prices essentially offset the potential supply-driven move away from a surplus dynamic, a solid pullback looks justified. Why? First, support from short covering has run its course,” Snowdon says. Commodity Trading Advisers have been flushed out of short positions after a rally earlier this month but there has been “limited appetite” for fresh longs. Second, European Central Bank and Federal Reserve stimulus announcements are now seemingly complete, while expectations are for slowing Chinese economic growth. The bottom line, Snowdon says: is that “consolidation and in some cases retracement look likely for near-term base metals performance, at least until current trends in economic or metals fundamentals are broken.” 

By Allen Sykora of Kitco News


Market Nuggets: MKS' Nabavi: Platinum Higher As South African Labor Unrest Continues

Friday September 28, 2012 10:42 AM

Platinum is retaining a firmer tone even as gold dips modestly, with the platinum remaining underpinned by South African supply issues, says Afshin Nabavi, head of trading with MKS Finance. The country provides some three-quarters of the world's mine output, thus labor stoppages can have a significant impact on platinum supply. A wage deal was reached at Lonmin earlier this month but labor unrest has since spread to other mining operations. Four mines of Anglo American Platinum, the world's largest platinum producer, have been shut down for more than two weeks. "The situation in South Africa is not getting any better," Nabavi says. "Only a small percentage of the workers are back to work….There are problems with production and supply at the moment." As of 10:25 a.m. EDT, Nymex January platinum was $10.30 higher at $1,661.40 an ounce, while sister metal December palladium was up $1.60 to $637.

By Allen Sykora of Kitco News


Market Nuggets: Commerzbank: Gold To Retain Demand As ‘Store Of Value’

Friday September 28, 2012 9:44 AM

Commerzbank looks for gold to maintain its lure as a “store of value.” The metal hit a record high of 1,380 euros an ounce Thursday and spot metal has been above $1,780 several times this week. “Given the current market environment, the price is likely to continue on its upward trajectory,” the bank says. “The debt crisis in the eurozone has escalated again, for example, as evidenced among other things by what are in some cases violent public protests against the new austerity packages in Spain and Greece. What is more, rating agency Moody’s is about to make a decision on Spain’s credit rating--the country is at risk of being downgraded to junk status. In addition, the loosening of monetary policy by central banks is contributing to growing inflation concerns and fears about a ‘currency war’ between major currencies. Gold should therefore remain in high demand as a store of value and alternative currency.” Silver has risen in gold’s slipstream and has drawn further support from strong inflows into exchange-traded funds, Commerzbank adds. “September alone has seen inflows so far of 410 tons or 2.2%,” the bank says.


Market Nuggets: RBC’s Gero: Some Profit-Taking Occurring In Comex Gold

Friday September 28, 2012 9:32 AM

Comex gold is slightly softer and some profit-taking is occurring, says George Gero, vice president and precious-metals strategist with RBC Capital Markets Global Futures. Some traders may be opting to exit positions ahead of the delivery period for October gold. “It’s the end of the third quarter and some funds may want to lock in a little money,” Gero continues. However, Gero says, he is “encouraged” by gold’s prospects, especially with strong open interest (number of open positions at end of the business day) in the December, February and June contracts. As of 9:28 a.m. EDT, Comex December gold was $4 softer at $1,776.50 an ounce.

By Allen Sykora of Kitco News


Market Nuggets: RBC Looks For Base Metals To Consolidate Late-Summer Gains

Friday September 28, 2012 9:09 AM

RBC Capital Markets looks for base metals to consolidate in the weeks ahead before picking up later in the year. Sentiment for now turned stronger after the Spanish budget announced Thursday, with commodities also getting a lift since U.S. dollar weakness made them cheaper in other currencies. "China begins its week-long holiday on Monday, so we should see activity slow to a crawl for the next five or six sessions," RBC says. "We still see the base metal market consolidating the late-summer rally while it also digests poor numbers coming out of Europe and Asia and slightly better numbers coming out of the U.S. We see October through early November as a period where the risk could be to the downside; however, we feel this would prove to be a buying opportunity as a strong end of year is forecast. Look for price tests back to the 200-day moving averages as a first test of the bulls' resolve."

By Allen Sykora of Kitco News


Market Nuggets: INTL FCStone: ‘Tug-Of-War’ Occurring In Gold After September Price Run-Up

Friday September 28, 2012 8:59 AM

A “tug-of-war” has emerged in gold during recent sessions after the market previously ran up to six-month highs, says Edward Meir, commodities consultant with INTL FCStone. “Intense” fluctuations have occurred, with a sell-off Wednesday followed by a snapback on Thursday. “As far as gold is concerned, it seems that the general easing theme is a significant tailwind that is driving prices higher and one that needs to be taken seriously,” he says. However, with an absence of inflation, rather sharp corrections have been setting into markets following weak macroeconomic readings, and these often feed their way back into the gold market. This has resulted in a “tug-of-war” lately. Meir says. However, if gold takes out its 2012 highs, “this would be a significant game-changer as far as the technical picture is concerned, and will likely make a strong case for another leg higher.”

By Allen Sykora of Kitco News


Market Nuggets: TD Securities: ‘Economic Protein’ Needed To Maintain Commodity Strength

Friday September 28, 2012 8:54 AM

Commodities rose this month on a “sugar injection” in the form of monetary easing but need “economic protein” to maintain strength, says TD Securities. Investors anticipate accommodation in a number of nations will improve demand for commodities heading into 2013, yet have become cautious amid European debt worries and soft Chinese economic data. Commodities have corrected from their September highs. Still, TDS remains optimistic into 2013, looking for demand to respond to expansionary policies. “Given the Fed’s promises of open-ended quantitative easing for a prolonged period, precious metals should be among the first and biggest winners, followed by actively traded commodity futures and then the largely physically settled bulks,” TDS says. Still, commodities could trade sideways until they get another positive catalyst, such as more fiscal spending in China or partial resolution to Europe’s debt crisis. “As such, buying the dips for a longer-term hold may be a good idea, particularly for oil, platinum, palladium and silver,” TDS says. However, there could also be negative catalysts, such as the looming so-called U.S. “fiscal cliff” when tax hikes and budget cuts kick in next year without action from Congress. This could mean pressure for a few months, before an improved future for commodities, TDS concludes.

By Allen Sykora of Kitco News


Market Nuggets: Sharps Pixley: Sparkle In Gold 'Not Just A Weak Dollar Story'

Friday September 28, 2012 8:48 AM

The recent sparkle in gold is "not just a weak dollar story," says Sharps Pixley. In a note to clients, the bullion dealer notes gold is on the way to a roughly 11% rise in the third quarter in dollar terms, although it remains around 7.5% below its all-time record hit slightly more than a year ago. However, analysts note gold prices have "recently peaked in Indian rupee, euro and Swiss franc terms, indicating monetary stimulus particularly benefits gold and this is not just a weak dollar story." Gold in euro terms hit a record high of 1,380 euros Thursday, says TD Securities in a research note.

By Allen Sykora of Kitco News


Market Nuggets: Gartman: Portfolio Managers Now Talking About Gold More Openly

Friday September 28, 2012 8:31 AM

Investor and newsletter writer Dennis Gartman says the mood at an investment conference he spoke at in New York this week suggests interest in gold has been perked up among portfolio managers. Gartman, who holds long positions in gold against the dollar and euro, says he was surprised by some of the discussions among portfolio managers. At past such events, he said, "there was little, if any, talk ever of gold, and when there was talk, gold was dismissed as a disdainful, amateurish asset without class. That is no longer the case. Gold is now discussed rather openly; however, few if any own even the slightest sums of gold. Most own none; all eventually shall, but that is some while into the future."

By Allen Sykora of Kitco News


Market Nuggets: MKS Capital: Gold Faces Overhead Resistance, Attracts Buying On Pullbacks

Friday September 28, 2012 8:24 AM

Gold both faces resistance not far above recent highs but continues to attract buying on price retreats, says Alex Thorndike, senior trader for precious metals and forex with MKS Capital. “For the gold, the main resistance will be between $1,790-1,805, with offers likely to be heavy through there,” he says. “Once through, however, there is little but air up to $1,850. With the focus on central-bank easing throughout the world, gold should continue to see investor support into year-end. As evident on Wednesday's washout when we broke through $1,750, there is still solid demand on the downside.” After falling as far as $1,736.85 on Wednesday, spot gold has climbed as high Friday as $1,783.25, not far from the six–month high hit on Sept. 21.

By Allen Sykora of Kitco News


Market Nuggets: Barclays: Chinese Copper Imports To Bonded Areas Normalizing After Rise In Spring

Friday September 28, 2012 8:13 AM

The apparent flow of Chinese copper imports into bonded warehouses is normalizing after a rise this spring, but still-high levels will take time to be drawn down, says Barclays Capital. Analysts undertook an analysis of the amount of Chinese imports that go into bonded warehouses, with the metal often used for financing arrangements, as transparent data are not readily available. They looked at data showing the top importers, the amount and whether they are registered in bonded areas in China’s major ports. This gives a read on copper imports into bonded areas, which are more likely to end up in bonded stocks. The Barclays analysis found that as much as 53% of total copper imports back in April were booked by importers in bonded areas, suggesting much went into bonded stocks. The tide subsided in June and July, which are the latest available data, meaning that recent imports are less inflated by financing and more reflective of real demand, the bank says. “The jump in bonded-area net inflows in spring 2012 led directly to a warehouse stock build, whereas the recent moderation helped a gradual destocking and stabilization process,” Barclays says. In August, the share of bonded-area imports likely declined again, Barclays says. Since, reports of fresh financing deals have surfaced in September, with developers said to be leaning on copper imports for bridge loans.  “The reported stock build in bonded warehouses shows that the destocking process will take time,” Barclays says.

By Allen Sykora of Kitco News


Market Nuggets: HSBC: Global Monetary Accommodation Remains Supportive For Gold

Friday September 28, 2012 8:03 AM

Monetary accommodation remains a supportive influence for gold prices, says HSBC. The bank cites news reports that China injected some $58 billion into money markets in recent days, the largest weekly amount in history. There are expectations for more market-boosting measures from Chinese authorities. “Bullion prices were buoyed earlier in the month from monetary stimulus announcements by central banks including the Federal Reserve, European Central Bank and Bank of Japan,” HSBC says. Chinese gold demand itself could abate after it got a one-time boost from “Year of the Dragon” buying that may wear off, as well as lower growth in China’s money supply compared to 2010-11, HSBC says. Still, the bank concludes, “we see the current backdrop of easier global monetary policies as supportive of higher prices later this year.”

By Allen Sykora of Kitco News


Market Nuggets: Barclays Sees Euro Rising To $1.35 In Three Months

Friday September 28, 2012 7:54 AM

Barclays Capital looks for the euro to rise to $1.35 in three months, calling recent decisions by the European Central Bank and Federal Reserve “positive” for the single European currency versus the dollar. The ECB has unveiled an Outright Monetary Transactions plan to buy sovereign bonds to help indebted nations, while the Fed has announced further quantitative easing. The decisions should improve global risk appetite and reduce eurozone-specific risks, Barclays says. “The recent EUR weakness, as perceived risks in Spain have increased, will probably prove a messy prelude to Spain requesting a formal program, probably in the first half of October, in our view,” Barclays says. “The OMT purchases can then begin and risk appetite receive another boost. We have therefore raised our EUR/USD forecasts sharply, now looking for appreciation to 1.35 in 3m.” Further out, however, Barclays looks for the euro to come under pressure again due to “sclerotic” economic growth in the eruzone. The euro was trading at $1.2927 as of 7:45 a.m. EDT Friday, compared to $1.2914 in North America late Thursday. Metals traders closely monitor foreign-exchange moves since precious and base metals alike often move inversely to the dollar.

By Allen Sykora of Kitco News


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