Monday October 15, 2012 4:07 PM

Gold's inability to push above $1,800 an ounce and test old highs is starting to look "costly after all," at least in the short term, say technical analysts with TD Securities. "The strong rejection of $1,800-plus levels—reflected in the bearish key reversal day (new high, lower low and lower close) that formed on Oct. 5th--suggests a firm cap in place for now in gold," TDS says. "Trend strength indictors are flipping over to bearish from a short-term point of view, suggesting that the correction lower may have further to run lower." Retracement support derived from the $1,530-$1,800 rally since mid-year is providing some underpinning for now, with the initial 23.6% Fibonacci retracement converging with a minor congestion area in the $1,730-35 region, TDS says. There is the risk of more weakness if support in the low $1,700s does not hold. "If that is the case, we are perhaps looking at more short-term weakness towards $1,630/60 retracement and moving average support before gold finds a firmer footing," TDS says.

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: Gold Could See Further Weakness – United-ICAP

Monday October 15, 2012 11:22 AM

Gold is falling and further weakness may be ahead, based on technical charts, says Walter Zimmerman Jr., chief technical analyst at United-ICAP. “Gold bulls must be dismayed here. We doubt they expected serious technical weakness to follow from a big, fat QE3 (third quantitative easing). Gold continued to give massive, bearish RSI (relative strength index) divergence from its most bullish extreme since the $1804.40 peak back in November 2011. The $1,796 was our ideal resistance. From here we target a drop to $1,550 minimum, with $1400 the next step down from there,” he says.

By Debbie Carlson of Kitco News dcarlson@kitco.com

 

Market Nuggets: Ironbeam’s Lusk: Comex Gold Slides Largely On Technical Factors

Monday October 15, 2012 10:52 AM

Much of gold’s current weakness appears to be technical in nature, says Sean Lusk, gold and precious metals analyst with Ironbeam. Some traders are exiting positions on disappointment that gold has not able to break above $1,800, particularly after a chart reversal on Oct. 5 when the monthly U.S. jobs report was released, he says. “Last week, we couldn’t find any footing. There’s really no (fresh) news to push us higher,” he says. Meanwhile, other commodities including crude oil are also on the defensive, he notes. “We were weak off the bat last night on the open in the mid $1,740s, then we had some follow-through,” he says. Sell stops exacerbated the decline as Comex December gold fell through the $1,740s, he says. The market could correct to the low $1,700s before fresh buying emerges, Lusk continues. “Long term, nothing has changed. But the fact we didn’t take out $1,800 a week or so ago, there is a lack of conviction to the upside.” As of 10:35 a.m. EDT, December gold was down $27, or 1.5%, to $1,732.70 an ounce. It bottomed at $1,729.70, falling below support at the Sept. 26 low of $1,738.30.

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: Analysts: Chinese Copper Imports Rise During September

Monday October 15, 2012 9:36 AM

Chinese imports of copper rose in September, say Barclays Capital and Commerzbank in analysis of government data released over the weekend. “Metal imports in September were already relatively strong and proved a positive surprise,” Commerzbank says. Copper imports climbed by 11% from the prior month to 394,837 metric tons. “In the first nine months of the year, China thus imported around 3.6 million tons of copper products, 32.6% more than in the same period last year,” Commerzbank adds. Barclays notes that imports rose on higher prices. However, Barclays also suggests demand “lagged,” estimating that inventories in bonded warehouses rose by 100,000 tons to 650,000 by the end of September, with imported copper for financing purposes also increasing. “Copper scrap also continued to recover modestly to 460Kt but remained around the five-year average,” Barclays adds. Meanwhile, China’s iron ore shipments rose 4.1% in September to 65.01 million tons, the highest level since January 2011.

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: R.J. O’Brien: Some Copper Traders Selling Into Rallies Lately

Monday October 15, 2012 9:35 AM

A growing number of copper traders lately appear to be selling into rallies rather than buying on dips, as worries about the macroeconomic picture upset the bulls, says R.J. O’Brien & Associates in a weekly metals report. “This is particularly so as the technical pictures in some of the metals are turning more cautious, as is the case in copper,” R.J. O’Brien says. “Mind you, these traders are not looking for big downside moves. If they can grab $40 or $50 per (metric) ton in a day trade, that is great, although occasionally they can ride a bigger move lower as happened last week when copper fell 2%.” Copper volume has been below average so far in October, R.J. O’Brien notes, with LME Select volume since the start of the month averaging 12,379 lots a day. The average so far for the full year is 17,466. “Turnover may well not pick up until after LME Week is over and the market returns to normal,” the firm adds. The conference is occurring this week in London.

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: Morgan Stanley Constructive On Gold, Favors Copper Among Base Metals

Monday October 15, 2012 9:08 AM

Morgan Stanley continues to look for further gains in gold despite the pullback in recent days, while listing copper as its preferred base metal. Gold has remained above the 200-day moving average since late August, Morgan Stanley says. Holdings by exchange-traded funds continued to rise to a record high that the firm lists as 2,583 metric tons. “We remain convinced gold will continue to return positive yields at least through calendar year 2013, as the asset class remains more than a safe haven amid the great monetary easing cycle,” Morgan Stanley says. Base metals fell last week as risk assets collectively took a “breather” amid global economic-growth concerns, Morgan Stanley says. “The relative outperformance of copper in this environment only highlights why it remains our top pick in the complex, as it continues to possess superior fundamentals, especially on the supply side,” Morgan Stanley says. The firm cites data from the International Copper Study Group showing a seasonally adjusted year-to-date supply deficit of nearly 300,000 metric tons.

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: Analysts: Gold ETP Holdings Rise So Far In October But PGM Holdings Decline

Monday October 15, 2012 8:44 AM

Holdings of gold by exchange-traded products are higher so far in October but these are lower for platinum and palladium, analysts report. “Gold ETP holdings continue to flourish with inflows of 10.1 (metric) tons over the past week, taking flows for the month to date to over 30 tons,” says Barclays Capital. “Our final estimates for September now show an increase of 76 tons, making it the strongest month since November last year. Inflows for the year to date have now reached 224 tons, surpassing the full year last year (175 tons) but still below y/y flows for 2010 (361 tons).” Halfway through October, UBS lists exchange-traded-fund gold buying of 1.33 million ounces so far, which is says is about 52% of the September inflows. However, platinum ETF flows have reversed so far in October, UBS reports. “After two months of decent inflows, platinum ETFs are down 13.35koz so far in October, already exceeding redemptions last July by over 4koz,” UBS says. “But relative to palladium, platinum retains the upper hand, with the former posting larger outflows of 23.80koz. This reflects 84% of the previous month’s decline in palladium ETFs, and should the pace continue, October would be the worst month since December 2011.”

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: BNP Paribas: ECB Willingness To Act In Bond Markets Is Key Factor For Euro

Monday October 15, 2012 8:32 AM

BNP Paribas says the willingness of the European Central Bank to buy bonds of troubled nations is the key for the euro more-so than whenever Spain opts to seek financial aid. “The focus for the EUR this week remains on this week's EU Summit (Thursday, Friday), but our economists believe that Spain will not request aid this week, preferring to wait for after the regional elections in Galicia next weekend (Oct. 21),” BNP says. “Expectations are already in the process of being revised down, with a Reuters report suggesting that a Spain aid request may not come until early November. We suggest that the timing per se of a Spain aid request may not be as important, instead the ECB's signal to put a floor under bond prices is.” BNP says it would view any euro correction as “limited even without an imminent Spain aid request” and looks for the euro to rise to $1.3500 by year end. Metals traders tend to monitor foreign-exchange moves since they can impact base and precious metals alike.

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets:Commerzbank: Base-Metals Markets' Worries About Chinese Growth 'Exaggerated'

Monday October 15, 2012 8:20 AM

Commerzbank says fears in the base-metals arena about Chinese economic growth may be “exaggerated.” The country is a key consumer of industrial commodities as it develops its infrastructure. “Even if the GDP figures due to be published later this week turn out to be poor--and third-quarter GDP growth is generally expected to slow year-on-year to 7.4%, its lowest level since the first quarter of 2009--this is already what the market expected,” Commerzbank says. “If anything, the figures are likely to come as a positive surprise, as did the economic data at the weekend. For one thing, September exports climbed much more sharply than anticipated, namely by 9.9% year-on-year, as a result of which the country’s trade surplus and FX reserves were higher. For another thing, the monetary aggregates M1 and M2 rose more sharply, which is likely to give the economy an important boost. Since inflation dropped year-on-year to just 1.9% at the same time, reaching its second-lowest figure since January 2010, the government and central bank have more scope to launch new stimulus measures.”

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: UBS: Gold Prices Slip Amid 'Investor Fatigue'

Monday October 15, 2012 8:04 AM

Gold is on the defensive amid some “investor fatigue” after the market could not break to new highs last week, yet Asian buying has emerged on the pullback, says UBS. Spot gold hit a low of $1,741.50 an ounce overnight that was its weakest level in more than two weeks. “Right now, we note growing investor fatigue following gold's failure to break $1,790 last week, and some frustrated longs are getting out,” UBS says. “But while the current mood suggests a further retracement is most likely, Asian buying is stepping in to meet some of the liquidation, and it’s equally important to point out that volumes exiting are not overwhelming, the liquidation action is patchy rather than consistent, while outright shorts are in limited numbers.” A potential catalyst occurs later this week when leaders gather for a European Union summit, UBS says. Technically, major support lies at the Sept. 26 low of $1,736.95, which is the “last significant low” of the bull trend, the bank adds. As of 7:56 a.m. EDT, spot gold was $6.80 lower at $1,746.70. The Comex December futures were down $11.20 to $1,748.50.

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: Barclays Remains Upbeat On Gold, Views Pause As 'Healthy' Within Uptrend

Monday October 15, 2012 7:41 AM

Barclays Capital analysts say they view gold’s recent pullback as a “healthy” pause from the run-up that began in late summer and say they remain constructive. “Gold prices have retreated from the $1800/oz mark but gold ETP holdings are still at record highs and speculative positions at their highest since August 2011,” Barclays says. “Gold has found some support from a pick-up in buying in India in the weeks preceding the key festival of Diwali; however, demand remains sensitive to local prices. We remain positive on gold’s outlook but expect gains to be moderated in comparison to the run-up in prices ahead of the QE3 announcement, which was boosted by the sharp acceleration in both short-term and long-term investment demand.” Barclays describes the macro environment, investment flows and technicals as bullish but fundamentals as neutral. As for the technicals, Barclays says divergence signals on a daily chart “signal a near-term pause in the uptrend for gold, but do not change the greater bullish trend. Indeed we would view the current pause as a healthy development for gold that ultimately helps to maintain a sustainable move higher. Support near 1725/1735 is expected to provide near-term buying interest on any move lower.”

By Allen Sykora of Kitco News asykora@kitco.com