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Market Nuggets: IMF Paper Says Current Commodity Bull Market Not Over; Supportive For Gold –HSBC

Thursday April 11, 2013 4:00 PM

Research by the International Monetary Fund regarding commodity super-cycles suggests that the commodity bull market that started in 2001 is not over, which is positive news for gold prices, says Jim Steel of HSBC. The IMF research paper reviewed commodity super-cycles from the mid-19th century and said super-cycles differ from short-term price changes in three key ways. One, super-cycles are demand-driven and follow global GDP; second, they span a long time, with upswings over 10-35 years and with entire cycles taking 20-70 years to complete; third, they occur over a broad range of commodities, but are usually a function of inputs for industrial production and urban development. Steel says gold is positively correlated with commodities during these super-cycles when bullion could float freely. “According to the study the current commodity cycle shows no sign of exhaustion. This reaffirms our view that while gold prices have eased, they are likely to be supported in part by commodity prices. According to the paper the most recent boom in global economic growth dating from 2001 is unprecedented. Economic growth is also the single most important driver of commodity prices according to the IMF presentation. HSBC macroeconomic forecasts look for strong growth for China and much of the emerging world,” Steel says.

By Allen Sykora of Kitco News asykora@kitco.com


Market Nuggets: SoGen 'Friendly' Toward Platinum Due To South African Supply Issues

Thursday April 11, 2013 1:30 PM

The still-weak European auto industry may keeping platinum under pressure, but the supply issues and hopes that Europe will return to economic growth next year bode well for the metal, says Societe Generale. Europe, with its market for diesel-powered engines, accounted for 44% of gross auto offtake last year, compared to 25% for palladium, says Robin Bhar, head of metals research. “In principle, the weak state of the European auto industry might suggest that platinum prices will remain under pressure,” he says. “We are, however, relatively friendly towards platinum for the rest of this year and beyond as we believe that cost pressures within South Africa, and the rumbling discontent within the platinum mining sector, will continue to support prices; further, that fresh investment, in anticipation of a return to growth in Europe in 2014, will boost platinum prices later this year.”

By Allen Sykora of Kitco News asykora@kitco.com


Market Nuggets: Barclays Looks For FOMC To Maintain QE Through End Of Year

Thursday April 11, 2013 8:26 AM

Analysts with Barclays Capital look for the Federal Open Market Committee to maintain its quantitative easing program through year-end. Minutes from a March meeting, released Wednesday, were seen by some market participants as slightly more hawkish than in the past. Barclays says "we suggest discounting the hawkish tone of the minutes on account of the policy differences between FOMC participants (voters and non-voters) and FOMC members (voters). The distribution of FOMC voting members in 2013 is skewed in the dovish direction while the minutes reflect the wider views of the committee. We continue to believe the Fed will continue its purchases at a rate of $85bn per month through year-end and begin to taper the rate of purchases in Q1 14. " Further, Barclays says, participants may have read too much into the strength of first-quarter economic data, commenting that it expects economic growth to slow to 1.5% in the second quarter. "We also note that the minutes reflected the state of discussion as of March 20 and much of the softness in the data flow occurred after this date, including the weaker-than-expected March payroll report," Barclays says. "The committee's verdict on the strength of the economy, therefore, may be somewhat stale."

By Allen Sykora of Kitco News asykora@kitco.com


Market Nuggets: UBS: Fears Of Central-Bank Gold Selling Abate

Thursday April 11, 2013 8:15 AM

Fears of central-bank selling of gold have eased, says UBS. Gold, which was already on the defensive, extended its losses Wednesday after a news report that Cyprus was willing to sell gold to raise money as part of a financial-rescue plan. However, a representative of the country's central bank has since said selling gold reserves was not on the table. "The spokesperson, Aliki Stylianou, also highlighted that any such decision would have to come 'exclusively' from the central bank," UBS says. "This statement alludes to central bank independence stipulated in EU (European Union) legislation, and is indeed one of the hurdles that need to be overcome before gold can be used to help in the crisis." There has been rhetoric in the past on whether debt-plagued European nations would mobilize their gold reserves, such as using the metal as collateral to reduce borrowing costs, UBS notes. "But there are clearly many legislative and political challenges," UBS says. If the initial news reports do turn out to be true and Cyprus were a seller, the reported amount would be some 10 metric tons, which is not a huge amount for the market to absorb, UBS says. "The concerns would be focused on the potential implications on other European central banks, although the hurdles for selling gold reserves by other Eurozone peripheral central banks would still be very high in any case."

By Allen Sykora of Kitco News asykora@kitco.com


Market Nuggets: Traders: Physical Gold Demand Seen In Asia Following Price Decline

Thursday April 11, 2013 8:13 AM

Asian physical gold buying appears to have emerged after Wednesday's sell-off, traders say. "Precious metal markets probed lower overnight but we noted good Asian-related buying in gold, especially, and we appear to have stabilized for the time being," says TD Securities. Alex Thorndike, senior trader for precious metals and foreign exchange with MKS Capital, reports that the market found its footing around overnight lows on anticipation that the Chinese would be buyers. "This indeed was the case…," he says, later adding: "Indian buying was also evident early European time."

By Allen Sykora of Kitco News asykora@kitco.com


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