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Market Nuggets: ETF Securities Looks For Recent Weakness In Gold To Be Temporary

Monday December 10, 2012 9:55 AM

ETF Securities looks for the recent weakness in gold to be temporary as physical demand remains strong, including that of exchange-traded products that use metal to back shares that trade like a stock but track the price of the commodity. Global ETP holdings hit a record high of 84.5 million ounces last week, says ETF Securities, which operates a number of precious-metals ETFs. “Given strong physical demand, we expect the gold price weakness to remain temporary,” the firm says. “Investor demand for gold ETPs is likely to remain high as strategic investors use gold as a hedge against worst-case outcomes from the fiscal cliff negotiations and European fiscal and debt problems.”  Italian Prime Minister Mario Monti's plans to resign “substantially adds to Europe's sovereign debt risk profile,” ETF Securities says. The firm also cites continued central-bank buying, including news last week that South Korea bought around 14 metric tons of gold in November. “With the U.S. manufacturing ISM slipping back below 50 and U.S. fiscal policy likely to tighten in 2013, the FOMC is likely to further ease monetary policy to ensure its target of lower unemployment is met,” ETF Securities says. “Therefore while a recovery in U.S. growth in 2013 may cause real interest rates to rise and add headwinds to gold price performance, there are enough supporting factors to indicate relatively limited gold price downside. Meanwhile, there are many potential upside tail risks.”

By Allen Sykora of Kitco News [email protected]

 

Market Nuggets: Standard: Precious Metals Tick Higher Ahead Of FOMC Meeting

Monday December 10, 2012 9:05 AM

Precious metals are starting the week on stronger footing as traders look ahead to a Tuesday-Wednesday meeting of the U.S. Federal Open Market Committee, says Standard Bank. "As a start to the week, precious metals have managed to shake off the negativity of the fiscal cliff," the bank says. "This is not due to any significant progress in the U.S. government's negotiations but rather because this week's FOMC meeting provides for a needed, and more hopeful, distraction. Participants are speculating that the Fed might announce an expansion of quantitative easing, i.e. using the $45bn a month Operation Twist (which ends this year) funds to engage in outright bond purchases. However, the market's appears to be not particularly confident, so it will most likely be a bumpy ride to Wednesday's FOMC announcement." As of 9:01 p.m. EST, Comex December gold was up $11.10 to $1,716.60 an ounce, March silver was up 27.4 cents to $33.405, January platinum climbed $18 to $1,625 and March palladium gained $2.65 to $700.65.

By Allen Sykora of Kitco News [email protected]

 

Market Nuggets: Morgan Stanley: Recent Gold Liquidation May Not Be Over, But More Gains Expected In 2013

Monday December 10, 2012 9:00 AM

Morgan Stanley blames much of the recent pullback in gold on long liquidation and says there could be more, but also for the commodity to have better days ahead. "Gold suffered a sharp, mid-week decline, although showed signs of recovery by Friday," the firm says in a weekly commodities report. "There is sufficient evidence to suggest the downward pressure is coming from hedge-fund redemption and year-end book squaring. While it is possible this trend could continue as the year draws to a close, we believe that gold will resume upward momentum in 2013, as the underlying fundamentals that helped deliver a record annual average price in 2012 remain in place." Morgan Stanley's average 2013 forecast is $1,853 an ounce.

By Allen Sykora of Kitco News [email protected]

 

Market Nuggets: CME Clearing Europe Offers Two New Iron Ore Contracts

Monday December 10, 2012 9:00 AM

CME Clearing Europe, CME Group's European clearing house, says it has added two new over-the-counter iron ore contracts: Iron Ore 62% CFR China Calendar Swaps and Iron Ore 62% CFR China Average Price Options, beginning Monday, subject to regulatory approval. “This expansion of products is in line with CME Clearing Europe's commitment to helping customers manage their risk associated with China's construction industry,” CME Group says. Full details of an advisory notice on the new products can be seen as this link: http://www.cmeclearingeurope.com/clearing/files/cmece-advisory-notice-12-84.pdf.

By Allen Sykora of Kitco News [email protected]

 

Market Nuggets: Chinese Nov. Copper Imports Rise From Oct. But Fall Year-On-Year.; Inventories Rising

Monday December 10, 2012 8:41 AM

Chinese copper imports rose month-on-month in November but fell year-on-year, and some of the metal still appears to be ending up in warehouses rather than outright consumption, analysts report. "Real demand for copper…is still relatively muted," Commerzbank says. "In the week to 6 December, copper stocks on the SHFE (Shanghai Futures Exchange) were increased to 198,000 (metric) tons. The import figures released by the Chinese customs authority also paint a positive picture only at first glance: true, copper imports climbed in November by 13.5% month-on-month to 365,300 tons--this still left them a good 19% below the year-on-year level, however. What is more, figures for October were downwardly distorted due to the Golden Week holiday, which further puts the increase in imports now reported into context." Barclays Capital says a low number in October also may have been exacerbated by a temporary disruption in Chilean exports. "Since then, a more favorable import price ratio has boosted import flows," Barclays says. "As we have noted, however, imports continue to pile up in bonded warehouses, as physical demand has yet to pick up strongly."

By Allen Sykora of Kitco News [email protected]

 

Market Nuggets: Barclays Capital Cites Divergence In Investor Interest In Gold

Monday December 10, 2012 8:41 AM

Barclays Capital says there has been a divergence in gold interest lately. Exchange-traded product demand keeps rising and retail demand is strong, the bank says. Analysts report that metal held by ETPs rose 6.2 metric tons during the first week of December, with year-to-date inflows now reaching 268 tons. U.S. Mint data shows gold-coin sales of 26,500 ounces in the first week of the month, Barclays continues. However, Commodity Futures Trading Commission positioning data show tactical participants slashing their net-long exposure to gold in the most recent reporting week. "On a positive note, physical demand has responded to prices at one-month lows, central bank buying continues, and in our view, a number of price triggers are stacked in gold's favor over the forthcoming months, given our economists' view for further expansion of the U.S. balance sheet at the December FOMC meeting, uncertainty about the U.S. debt ceiling after fiscal cliff discussions, and our expectation that the Spanish government will eventually request a precautionary program," Barclays says.

By Allen Sykora of Kitco News [email protected]

 

Market Nuggets: R.J. O'Brien: Commodities Rise On Chinese Data, Shake Off Euro Weakness

Monday December 10, 2012 8:10 AM

Commodities have a firmer tone after stronger Chinese economic data enabled markets to shake off weakness in the euro, says Janet Mirasola, managing director of R.J. O'Brien & Associates. Italian Prime Minister Mario Monti has said he will resign once parliament passes a budget bill, prompting renewed worries about the European debt crisis. "The euro has weakened on this news, putting financial markets back on the defensive, sending euro bourses lower off the opening," Mirasola says. "Base commodities are cheering the early China data while at the moment ignoring a weakness in the euro that would normally drag them down. The Black One (oil) is trading comfortably above $86 with the Shiny One (gold) regaining some of its luster at $1,710 and the Red One (copper) take(s) a look back above $8,100 for the first time in seven weeks." Weekend Chinese economic data included a 10.1% year-on-year rise in November industrial production and 14.9% gain in retail sales. Another report released Monday was more worrisome, however, as China's November exports grew at a slower 2.9% rate, prompting worries about sluggish demand from the West. As of 8:01 a.m. EST, Nymex January crude oil was 72 cents higher at $86.65 a barrel, LME copper was up $105 to $8,140 and Comex February gold was $9.60 stronger at $1,715.10.

By Allen Sykora of Kitco News [email protected]