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Market Nuggets: BNP Paribas: Copper No Longer Best In Base-Metals Class

Thursday February 14, 2013 1:18 PM

BNP Paribas looks for copper to underperform other base metals through 2013-14, suggesting prices may decline back toward $7,000 a metric ton. Back in November, the bank looked for the metal to firm in the first quarter but then ease. “Our contention was that despite a likely acceleration of copper demand growth in 2013, faster production growth would start to move the market into surplus,” said senior metals strategist Stephen Briggs. “That is still our view.” He emphasizes that the bank’s “mildly negative view” is not based on the demand side of the equation. While ore grades have fallen, output at some major mines is expected to pick up and new mines and expansions are coming on line, leading BNP to forecast mine production will rise by 13%-14% over 2013-14. BNP Paribas forecast a 100,000-metric-ton supply surplus for 2013, although noting this is small for a 20-million-ton-per-year market, but with a “more material surplus” probable for next year.

By Allen Sykora of Kitco News asykora@kitco.com


Market Nuggets: OptionsXpress: Copper Faces Resistance; Offsetting Factors Cited

Thursday February 14, 2013 12:35 PM

Copper appears to remain under the control of the bulls although chart resistance may test their resolve, says optionsXpress. In the meantime, there are a number of conflicting cross-currents, the firm says. Weak U.S. and European economic data this week could exert some pressure, says optionsXpress, citing the disappointing 0.1% rise in U.S. retail sales reported Wednesday and weak European gross-domestic-product data reported Thursday. However, this has been counterbalanced by news that Rio Tinto says its Oyu Tolgoi mine in Mongolia will not start until the company resolves issues with the Mongolian government, optionsXpress says. This could mean tighter global supplies if the stoppage lasts. "Prices have recently pulled back after failing to test the $3.80 mark," optionsXpress says. "There is resistance just north of the $3.80 level at $3.8250. If prices are able to cross through resistance here, the market may test the $4 mark for the first time in a year." As of 11:54 a.m. EST, Comex March copper was nearly flat for the day at $3.7320 a pound.

By Allen Sykora of Kitco News asykora@kitco.com


Market Nuggets: UBS Trims One-Month Gold Forecast To $1,725/Oz

Thursday February 14, 2013 7:33 AM

UBS trimmed its one-month gold forecast to $1,725 an ounce from $1,850 previously, but kept its three-month forecast of $1,850. “One of the key risks to a bullish gold view right now is the pick-up in global economic growth, which takes the shine off defensive assets like gold,” UBS says. “And as the outlook continues to improve, the environment becomes increasingly challenging for the yellow metal….An optimistic view of the world is prompting investors to scale back interest in gold in favor of alternative assets, like equities.” However, UBS says there are risks to the upbeat growth story, include the potential failure of U.S. politicians to reach a compromise on fiscal spending cuts and the debt ceiling. “We continue to see upside for gold this year, and the outlook remains fundamentally bullish given that the monetary policy backdrop remains supportive for now,” the bank says. “But we acknowledge that risks have certainly increased, warranting some scaling back in our bullish expectations.” Silver is likely to take its cues from gold, UBS says. “Accordingly, we downgrade our one-month silver forecast to $33, while keeping the three-month target at $37.”

By Allen Sykora of Kitco News asykora@kitco.com


Market Nuggets: BMO Research: Copper Among Preferred Metals For Equity Exposure

Thursday February 14, 2013 7:32 AM

BMO Research lists copper as one of its preferred metals for equity exposure. The firm cites strong prices – around $3.72 a pound – due to a tight market and leverage to improving industrial activity in both developed and developing nations. The greatest risk is to the upside due to supply challenges, BMO says. “With earnings season under way, as BMO Research incorporates 2012 production and 2013 guidance figures, the copper market appears to be heading for a deficit position again this year,” BMO says. At an estimated 36,000 tons, BMO’s deficit forecast is no more than a “rounding error” in a 20.7 million-ton market, but nevertheless suggests copper prices should continue to be well supported. BMO says it is conservative in its forecast for mine-supply growth, looking for 5% compared to market expectations of 6% to 8%. “Despite this, the miners are coming in with guidance even below our forecasts on average,” BMO says. The firm’s 2013 average price forecast is $3.60 a pound. Longer term, however, BMO Research does look for the copper to move into a “meaningful” surplus in 2015 as inventory levels normalize, eventually putting downward pressure on prices.

By Allen Sykora of Kitco News asykora@kitco.com


Market Nuggets: WGC Official Sees Continued Gold Investment Even As Equities Rise

Thursday February 14, 2013 7:32 AM

The managing director of investment for the World Gold Council looks for continued investment into gold in despite recent reports of some shift by investors toward rising equities. Stocks have outperformed gold in recent weeks, says Marcus Grubb. Still, he says, “there are still many tail risks out there in the U.S.,” such as uncertainty about spending cuts and the debt ceiling. Meanwhile, the eurozone still faces challenges and Japanese officials appear to be trying to reflate their economy, which is pressuring the yen and raises the threat of currency wars. “We look at the macroeconomic picture and the policy picture for 2013 and think even if is a bit more positive for equities…it’s still positive for gold,” Grubb says. “You still are seeing enormous quantitative easing, zero interest rates, and now given Japan is joining that type of economic policy…we see that as a bullish scenario for investment demand for gold.” Investors may seek gold as a hedge against further debasement of currencies. Also, Grubb adds, as economies pick up in Western nations, gold-jewelry demand may rise as wel. He points out that U.S. mutual-fund inflows for January showed increases into both equities and Treasury bonds, suggesting there is not yet a full-scale rotation out of so-called safe-haven assets.

By Allen Sykora of Kitco News asykora@kitco.com


Market Nuggets: INTL FCStone: Main Drag On Gold Currently Is Investment Flows Into Other Markets

Thursday February 13, 2013 7:32 AM

Gold could face some more pressure in the near term due to investment flows going into other markets and the near-term technical picture, but platinum group metals may hold up as long as car sales do likewise, says INTL FCStone. “In terms of our outlook…the main drag on gold prices at this particular juncture is the fact that we are seeing money move into industrial metals, corporate bonds, sovereign paper and equities, leav­ing much less of the investment pie available for gold and silver,” says commodities consultant Edward Meir. “More­over, the increasingly poor looking charts are also a negative, and when combined with the uninspiring invest­ment backdrop, the two variables continue to make the case for lower prices over the short term. Silver will likely follow gold’s lead, although platinum and palladium should escape the pressure and maintain recent gains--as long as car sales continue running at their strong rate, particularly out of the U.S. and China.”

By Allen Sykora of Kitco News asykora@kitco.com


Market Nuggets: HSBC: Gold Poised To Benefit From Tensions In Ongoing 'Currency War'

Thuirsday February 14, 2013 7:31 AM

Gold is likely to benefit from tensions stemming from an apparent ongoing “currency war,” says HSBC. The bank’s foreign-exchange strategy team issued a report saying the number of participants engaging in forex activism is rising. This includes Japan and Switzerland, as well as some Latin American nations. Swiss officials in September 2011 moved to prevent additional strength in their currency. Japanese authorities are weakening the yen through rhetoric, a higher inflation target and promises of further monetary easing, HSBC says. The forex team said the Federal Reserve’s quantitative easing programs have contributed indirectly to a weaker U.S. dollar. “Historically, assets that are regarded as safe havens include the JPY, the CHF, the USD and gold,” says the HSBC precious-metals team. “Bullion, being the currency that you cannot print, may benefit should the currency war escalate, in our view.”

By Allen Sykora of Kitco News asykora@kitco.com


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