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Market Nuggets: BNP Paribas: Aluminum Market Remains In 'Struggle'

Friday October 19, 2012 11:00 AM

Aluminum is lower for the year to date, says BNP Paribas. "We believe it will continue to be a struggle, even though producers are under severe stress," says a report by senior metals strategist Stephen Briggs. He cites Wood Mackenzie data showing the median smelter has been barely cash positive this year basis the LME price, although this has been alleviated by inflated premiums and the higher price in high-cost China. Still, the market remains in an oversupply, and the bank upped its forecast of the physical surplus in 2012 to 750,000 metric tons. The bank does list a 2013 average forecast of $2,350 a metric ton but concedes risks are skewed to the downside. It does list two supportive factors, including the number of unprofitable operations. "This situation will become increasingly unsustainable, and fresh cutbacks are still possible," Briggs says. "Second, much of the excess inventory is tied up in financing deals and the economic/financial environment is likely to continue to support this activity at least through 2013. Despite the growing controversy, we think regulatory action to curb financing deals is unlikely in the short term. Nevertheless, it is hard to see aluminum becoming one of the leading lights in 2013."

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: Deutsche Bank Looks For 'Modest Softness' In Industrial Metals

Friday October 19, 2012 10:29 AM

Deutsche Bank says it expects "some modest softness" in industrial base metals into year-end due to "challenging" economic conditions in Europe the threat that Chinese economic growth fails to gather momentum. "In our view, the short-covering rally in metals is now complete and a catalyst for higher prices is missing at this juncture." European auto demand remains a concern, says the bank, and growth in Chinese gross domestic product has fallen for seven straight quarters, analysts note. "While our base case scenario is a modest pick-up of GDP growth towards the year end, there is a risk that Q4 remains as weak as Q3 given a lack of fiscal stimulus and the central government's growing tolerance for slower economic growth," the bank says. Also worrisome, Deutsche Bank says, is Chinese power consumption has fallen for eight straight months.

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: Deutsche Bank Anticipates Range-Bound Gold In Next Two Months

Friday October 19, 2012 10:19 AM

Deutsche Bank looks for gold to trade in a range in the coming weeks, adding that the metal does not appear to be getting the same boost from the third round of U.S. quantitative easing as it did after the first two rounds. "We expect that gold prices could trade in a range over the next couple of months as we see a vacuum in terms of monetary action due to upcoming transitions/decisions in government in both the U.S. and China," the bank says in a weekly commodities report. "Somewhat supportive economic data (lately) from the U.S. is also weighing on market sentiment for gold as early signs suggest that economic conditions may be normalizing." After QE1 and QE2, gold rallied for up to 50 trading days and by around 15%, the bank says. "If repeated today, this would imply gold prices rising to USD1,900/oz by the end of October," Deutsche Bank says. "However, gold's performance over the past few days would, if sustained, suggest that the impact of this round of QE is fading earlier and more rapidly than previous QE episodes."

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: Platinum Group Metals Ease With Other Markets; Labor Expectations Also Play Role

Friday October 19, 2012 9:48 AM

Platinum Group Metals are on the defensive with other metals and perhaps on indications that the labor picture may be improving in South Africa’s mining sector, analyst say. Overall risk sentiment has swung “back to gloom again” after a disappointing Google earnings report and weakness in Chinese foreign direct investment, says TD Securities. Also, TDS notes that news reports indicate that some South African mining unions have begun moving toward labor agreements, and the South African rand is slightly firmer as a result. Standard Bank cites news of  agreements at gold companies, with ideas this might spill over into PGM mining. “Participants are perhaps concerned that this might pre-empt a resolution of the ongoing strike at Amplats,” Standard adds. As of 9:38 a.m. EDT, spot platinum was $9 softer at $1,629 an ounce, while palladium was down $6.50 to $633.50. “XPT (platinum) looking to have broken uptrend support from Aug. 14 lows and next target $1600/oz, where we see support from 20 Sept. low, 55-day moving average and 38.2% retracement of entire strike-led rally,” TDS says. “XPD (palladium) wedge formation coming to a head too--support currently around $625, warning of a drop under $600 on a break.”

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: Commerzbank: Recent Gold Declines Largely Due To Speculative Liquidation

Friday October 19, 2012 9:40 AM

Commerzbank says the recent weakness in gold appears to be selling largely by shorter-term speculators looking to exit long positions in which they previously bought the metal. The Comex December futures have been as soft as $1,732.40 so far Friday, approaching their one-month low of $1,729.70 hit Monday. “We hold selling by speculative financial investors responsible for the price slide,” Commerzbank says. “In recent weeks, they had strongly built up their positions and may now be seeing themselves forced to take profits given the faltering upswing. The data due to be published by the CFTC after (the) close of trading today will tell us more.” The last weekly report from the Commodity Futures Trading Commission, which was through Oct. 9, showed that the large non-commercial accounts—better known as the funds—had more than doubled their length to 244,295 lots for futures and options combined from 118,223 on Aug. 14. The data scheduled for release late Friday would cover positioning through this Tuesday.

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: BBH: U.S. Dollar Stronger In Reaction To European Summit

Friday October 19, 2012 8:52 AM

The U.S. dollar is stronger in the absence of any meaningful data or progress at a European Union summit, says Brown Brothers Harriman. “Risk appetite remains feeble as the euro retreated back to the $1.3050 level,” BBH says.  Analysts cite three signals from the EU Summit, starting with “moral support” for Greece as officials recognized the “determination” of the Greek government to deliver on its commitments. “By acknowledging that good progress has been made to bring the adjustment program back on track, it will be difficult to deny Greece a tranche of aid so it can service its debt that remains largely in the Troika’s hands,” BBH says. “Second, German and non-euro area governments succeeded in slowing down the dash to establish the ECB as the sole bank supervisory at the start of 2013. Instead, European officials agreed in principle to work out the details over the course of next year.” Third, the summit drives home the point that the relationship between France and Germany has “changed profoundly,” BBH says. As of 8:50 a.m. EDT, the euro was down to $1.3046 from $1.3067 late Thursday. Metals traders tend to closely monitor foreign-exchange moves since dollar fluctuations can affect base and precious metals alike.

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: Sharps Pixley: Economic Data, Lack Of Spain Aid Request Tug Gold Lower So Far This Week

Friday October 19, 2012 8:39 AM

Gold prices are down for the week in reaction to U.S. economic data and Spain not yet formally seeking financial aid, says Sharps Pixley. As of 8:18 a.m. EDT, spot gold was at $1,733.25, compared to last Friday’s close of $1,753.50. “The enthusiasm for gold has waned a bit given stronger data from the U.S. and China, which may mean policy-makers do not need to stimulate the economy as much,” Sharps Pixley says. In particular, the bullion firm cites rises in U.S. housing starts and Leading Economic Indicators reported so far this week. “Still it is highly unlikely for the Fed to change its QE3 decision in the October FOMC meeting,” the firm adds. After slowing for seven quarters, China's economy appears to be bottoming out, the firm continues, citing as-expected gross domestic product this week plus stronger-than-forecast industrial production and retail sales. Events at a European Union summit also were “unnerving” for gold investors, with Spain still not requesting any aid, Sharps Pixley adds. Key events next week, the firm adds, are another U.S. presidential debate, Federal Open Market Committee meeting, October eurozone manufacturing Purchasing Managers Index, Chinese “flash” PMI and U.S. gross domestic product.  

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: HSBC: Silver Demand May Be Curbed As China Reports Oversupply Of Solar Panels

Friday October 19, 2012 8:19 AM

Silver demand may be curbed by a reduction in demand from the solar panel industry, says HSBC. Analysts cite a report in the Financial Times suggesting there is a global oversupply of solar panel production capacity, with an official with China’s National Development and Reform Commission suggesting much of the world’s global solar-panel manufacturing capacity may cease operations due to slower demand growth. The official listed the credit-fueled expansion in Chinese solar capacity as a reason for China’s overcapacity of solar panel production, with bailouts of solar companies by local governments intensifying the overcapacity. “Silver is an important component used in photovoltaic technology to generate solar power, HSBC says. This demand could be as much as 50 million ounces, which would be some 10% of industrial demand, the bank says. "We have stated in previous reports that silver demand for photovoltaic panels is declining in two other major solar panel-producing countries, the U.S. and Germany, due partly to cutbacks in government funding. More than half of silver’s demand comes from the industrial and decorative segments.”

By Allen Sykora of Kitco News asykora@kitco.com

 

Market Nuggets: R.J. O'Brien: Gold, Copper Pulled Down By Softer Euro

Friday October 19, 2012 8:08 AM

Weakness in the euro has dragged metals lower, says Janet Mirasola, managing director of R.J. O’Brien & Associates. European stock markets eased in response to the late-Thursday trend in the U.S. and looked to a summit of European leaders, she says. “Investors were cautious as they greeted a deal towards a banking union and waited to see if there would be any progress on insulating Spain from more of a crisis,” she continues. “A weaker euro as compared to the U.S. dollar is weighing on commodity values this morning keeping the Black One (oil) in check close to $92, the Red One (copper) falling back below $8,150 and the Shiny One (gold) looking down towards its recent low of $1,728 and the danger of fresh liquidation and stop-loss selling if it were to break support at $1,725.” As of 7:50 a.m. EDT, the euro was down to $1.3047 from $1.3067 late Thursday. Nymex November crude was up 24 cents to $92.34 after earlier hitting a low of $91.82, LME copper was down $97 to $8,123 a metric ton and spot gold was down $6.85 to $1,734.10 an ounce.

By Allen Sykora of Kitco News asykora@kitco.com