Market Nuggets


Market Nuggets: MKS: Gold Could Remain Choppy; Oil Market To Remain Key Focus

08 March 2011, 02:28 p.m.
By Kitco News
http://www.kitco.com/

(Kitco News) --Gold could be choppy and range-bound for the foreseeable future, says a daily research note from MKS Finance. The metal fell early Tuesday on unsubstantiated rumors that Libya’s embattled leader may be trying to seek a deal with rebels for a safe exit from the country, caught up in civil unrest. However, gold found support at times on short covering and bargain hunting. Sell stops were trigged on the descent, yet there also were signs of physical demand at the lows. Meanwhile, recently rising oil prices remain a key focus, with worries about rising global inflation, MKS says. There are expectations the central banks of Thailand and South Korea may raise interest rates by the end of the week and that Malaysia’s steady rates may be nearing an end. “If the unrest in Libya spreads to other oil-producing countries (such as Saudi Arabia), one can only imagine the market has further upside potential, which would be an extreme burden on the global economic recovery by substantially raising transportation and manufacturing costs,” MKS says.

By Allen Sykora of Kitco News; asykora@kitco.com

Market Nuggets: Goldman Sachs Increases Second-Quarter Crude-Oil Forecast

08 March 2011, 11:48 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Goldman Sachs says Saudi Arabia may already be producing more oil than official numbers suggest, thereby reducing spare OPEC capacity. As a result, Goldman raised its second-quarter forecast for Brent crude to $105 a barrel from $100.50, and also upped its West Texas Intermediate forecast to $99 from $94.50. Libyan oil production and crude prices have been a key focus lately for both precious and base metals. Saudi Arabia has said it will cushion the oil-supply losses due to the turmoil in Libya. However, Goldman says it believes Saudi production may already be 500,000 to 1 million barrels a day higher than official numbers suggest, which would imply OPEC spare capacity has already dropped below 2 million barrels a day. “This pushes forward the drawdown of OPEC spare capacity by about six months,” Goldman says. Goldman left its third- and fourth-quarter oil forecasts unchanged, however. Goldman says Libyan oil fields are “of the highest quality and very easy to operate, which suggests that once the current civil unrest settles down, production can be restored quickly with little or no long-term loses.”

By Allen Sykora of Kitco News; asykora@kitco.com

Market Nuggets: Covenant's Young: Short-Term Trading Adds To Volatility In Gold Market

08 March 2011, 10:45 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Gold futures are especially volatile these days as many traders take positions for shorter time frames, says Larry Young, president of Covenant Trading LLC. “We’re seeing clients focus on very short-term trading,” he says. “It’s becoming even more prevalent because things are changing on a minute-by-minute basis. It puts uncertainty into the market. So we’re seeing a lot of clients, on these rallies, trade a larger size but not stay in as long. It makes these moves even more volatile.” As a case in point, he points to a lower gold price as of mid-morning Tuesday after recent strength. Movement by larger funds “can push the market up a lot faster” but also means “the money can come out a lot faster.” Otherwise, Young says, the bias remains to the upside in gold. Some market participants are shifting from other commodities toward the yellow metal for “something tangible,” he says.

By Allen Sykora of Kitco News; asykora@kitco.com

Market Nuggets: Credit Agricole CIB: Silver Continues To Outperform Gold

08 March 2011, 10:37 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Silver has continued to outperform gold, with the gold/silver ratio recently dipping below 40 for the first time since February 1998, says Credit Agricole CIB senior metals analyst Robin Bhar. In a weekly report on fund positioning as shown by CFTC data, he writes: “Investors appear to be favoring silver in relation to gold because it is a precious metal (all the attributes of gold but much cheaper), a supply-constrained commodity (market is in backwardation) and an industrial metal. In short, silver is seen as being in a win-win situation.” Nevertheless, he notes, some profit-taking resulted in a slight dip in the silver speculative net length in the week to March 1, as shown by the most recent weekly CFTC data.

By Allen Sykora of Kitco News; asykora@kitco.com

Market Nuggets: MF Global: Copper Pressured Lately By More Than Crude-Oil Prices

08 March 2011, 10:09 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- The sell-off in LME copper Monday, the largest one-day decline in nearly four months, was surprising in that it paralleled a sharp retreat off of earlier highs in crude oil, says MF Global. This suggests base metals have been hurt by more factors than recently rising energy prices, which have been much of the focus for financial and commodity markets alike. “In copper's case, inventory levels have been increasing for several weeks now, and physical premiums have been quite sluggish as well, not necessarily supporting a scenario calling for even higher prices and acute deficits,” says a research note from analyst Edward Meir. “In addition, participants may be getting wary about Chinese growth prospects after a series of pronouncements in recent weeks by the government saying that their emphasis would be on moderating growth and combating inflation going forward.” Should oil prices retreat, some gains can be expected in base metals, he says. “However, ultimately, metals will not be trading on oil, and have to stand or fall based on their own fundamentals,” he says. “For the moment, the fundamentals look less than inspiring, and make the case for a modest decline from here.”

By Allen Sykora of Kitco News; asykora@kitco.com

Market Nuggets: Barclays: SPDR Gold Holdings Post Largest Rise In Nearly Two Months

08 March 2011, 09:07 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- The rise of nearly seven metric tons Monday in the world’s largest gold-backed exchange-traded fund, SPDR Gold Shares, is the largest daily net inflow in almost two months, Barclays Capital analysts say. Holdings rose to 1,217.30 metric tons after they had been stuck at 1,210.62 for five business days in a row, according to the SPDR Web site. Meanwhile, Barclays adds, a net inflow of some 103 metric tons into the iShares Silver Trust took total holdings nearly back to the level from the beginning of the year.

By Allen Sykora of Kitco News; asykora@kitco.com

Market Nuggets: Barclays: Copper Weakness Could Trigger Chinese Buying

08 March 2011, 09:05 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Analysts with Barclays Capital say recent weakness in copper prices could result in Chinese buying, with signs this already occurring. Base metals collectively tumbled Monday on another round of risk aversion due to worries about rising oil prices hurting the global economy. “In the short term at least, such concerns over the potential impact of an oil price shock on the macro outlook will continue to dominate market sentiment,” Barclays says. “However, for some metals, such as copper, tin and nickel, we believe further potential downside will be limited by the growing probability that such price declines will help stimulate Chinese domestic buying.” In fact, a slide in LME copper toward $9,400 a metric ton in Asian trading has sparked some Chinese buying, although not enough to reverse the slide in prices so far, Barclays says.

By Allen Sykora of Kitco News; asykora@kitco.com

Market Nuggets: Gartman: Copper Weakness Could Be Harbinger For Economy, But 'Jury Still Out'

08 March 2011, 08:49 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Newsletter writer Dennis Gartman cites concern about copper and its implications for the economy. Comex copper gapped lower Monday and is at risk of breaking below an upward sloping trendline extending back into last year. “Worse, for copper is the fact that the charts of the other industrial metals are beginning to turn bearish,” he says in The Gartman Letter. And, he points out, copper inventories have been rising, with Shanghai Futures Exchange stocks now just over 150,000 metric tons and approaching the highs made nine months ago. “This cannot be bullish news,” he says. He cites a commodity adage that copper, zinc, tin and aluminum collectively have a “Ph.D.” in economics due to their tendency to reflect future economic trends through their price movement. “At the moment, copper is looking manifestly bearish and argues for a slowing of global economic circumstances,” Gartman says. “Tin is turning quietly so; tin and aluminum have not yet, so the economic jury is still out. Nonetheless, copper’s weakness has our interest.” As of 8:19 a.m. EST, Comex May copper was 4.85 cents lower at $4.2785 a pound.

By Allen Sykora of Kitco News; asykora@kitco.com

Market Nuggets: GoldCore: Sovereign-Debt Issues 'Continue To Bubble Away'

08 March 2011, 08:01 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Sovereign-debt concerns remain a supportive influence for gold and silver, say GoldCore analysts. They cite rising yields for Greek and Portuguese 10-year debt. “While most of the focus continues to be on North Africa and the Middle East, the not inconsequential matters of the European sovereign-debt crisis and the U.S.’ dire fiscal situation continue to bubble away beneath the radar,” GoldCore says.  Analysts cite a record monthly deficit for the U.S. in February.  “This does not bode well for the beleaguered dollar and could result in further sharp falls in the value of the dollar,” GoldCore says.

By Allen Sykora of Kitco News; asykora@kitco.com

Market Nuggets: R.J. O'Brien: Any Short-Covering Bounce In Dollar Could Pressure Base Metals

08 March 2011, 07:59 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) -- Base metals, already facing some headwinds lately, could run into some more should a short-covering rally occur in the U.S. dollar, says Janet Mirasola, managing director of R.J. O’Brien & Associates. “Currency and commodity traders should be watching closely the U.S. dollar after it fell yesterday to a four-month low against the euro after CME data revealed that the value of short bets rose by $11.5 billion in the week to March 1st, the largest dollar short recorded by them since 2007,” she says. Weakness in the dollar is generally a supportive factor for commodity prices, although base metals have been held back lately by worries about the economic impact of rising oil prices. “An unraveling of the dollar trade or even just a wave of short covering could cause other dollar-denominated asset like base metals to 'swoon' further,” Mirasola says.

By Allen Sykora of Kitco News; asykora@kitco.com

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