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Market Nuggets: BNP Paribas: Zinc Still ‘An Uglier Duckling Than Lead’



 BNP Paribas says zinc remains “an uglier duckling than lead.” A report from base-metals strategist Stephen Briggs says both metals have underperformed, although they have fared better than expected in the first quarter due to positive sentiment toward the base-metals complex generally. Otherwise, lead is “better placed” than zinc since exchange and other reported stocks are proportionately far lower. Also, lead demand is expected to grow 5.5% to 6% this year and next, not far behind other base metals, including zinc. “The bullish medium-case for zinc is based largely on the fact that some key mines will reach the end of their working lives in the next few years,” BNP says. “But the lives of two of these have been extended, so the zinc supply shock looks less sudden and immediate than it did. Less has changed for lead because the mines produce relatively little of this metal and are less central to its bull case.” The zinc market may move from a surplus to deficit later than lead, Briggs says.”We believe lead’s premium over zinc could trend even higher over the course of 2011, towards or even beyond USD 300/t,” he says.




Market Nuggets: Credit Agricole Looks For Palladium To Be Top-Performing Metal In 2011



Credit Agricole CIB looks for palladium to be the best performing metal in 2011. Senior metals analyst Robin Bhar cites increased usage in industrial applications and auto-catalyst demand, particularly for the gasoline-based engines that dominate the U.S. and Chinese markets and which rely upon palladium. He also cites exchange-traded fund demand and market uncertainty about the size of Russian state stockpiles. “Finally, an attractive price differential to more expensive platinum should see palladium as the best performer in 2011 of the four precious metals under consideration and indeed, out of all the metals,” Bhar says. He also looks for platinum to “steadily strengthen” in 2011, helped by investment demand and improving economic outlook that means more auto and other industrial demand. “Platinum supply is dominated by South Africa, where increasing power costs will require relatively high marginal-cost production to be developed to meet demand,” Bhar says. “Another bullish factor is the high frequency of labor unrest in the country and the potential for production to be interrupted regularly.”




Market Nuggets: Credit Agricole CIB: Base Metals May Resume Uptrend Soon


The general outlook for base metals remains favorable, says Robin Bhar, senior metals analyst with Credit Agricole CIB. The metals have lately been caught in a tussle between geopolitical risks that are bearish for prices and encouraging macroeconomic news that is bullish, he says. London Metal Exchange inventories are continuing to rise, reflecting slack physical demand currently; prices therefore should remain capped in the near term, with any upside break unlikely to be sustained. “Weakness on the downside should be strictly limited given pent-up demand from consumers and investors buying commodities to hedge against inflation and/or a weakening USD (dollar),” he says. “We believe that the fundamental backdrop remains broadly supportive and expect the uptrend to accelerate soon.”




Market Nuggets: Morgan Stanley: Risk-Reward In Crude-Oil Prices 'Skewed Materially To The Upside'



Analysts with Morgan Stanley say the risk-reward in crude prices is “skewed materially to the upside.”  Moves in oil have affected both the base- and precious-metals complex lately, prompting traders to cast one eye toward crude. Oil has been rising since September, first driven by improving economic fundamentals, and more recently due to a supply disruption in Libya and fears this could occur in other oil-producing nations, Morgan Stanley says. “Though not our base case, incremental disruptions in neighboring countries could see oil prices move materially higher still,” Morgan Stanley says. Elsewhere in the commodity arena, Morgan Stanley describes itself as “very constructive” on corn and soybeans. “Our favorites in the metals space include copper, tin, palladium, gold, silver and nickel.” Morgan Stanley says it remains bearish on natural gas.




Market Nuggets: Morgan Stanley: Investor Interest To Continue In Gold, Silver


Morgan Stanley looks for continued investment interest in gold and silver. Both rose last month on Middle East tensions and fears of growing inflation. “With oil prices likely to remain bid, we expect this renewed interest in precious metals to be sustained,” Morgan Stanley says. “Geopolitical risk aside, we think the Fed’s continued commitment to QE2 (second round of quantitative easing) remains supportive for gold and silver prices, despite increases in U.S. long-bond yields.” Silver continues to outperform gold even though silver’s mine production and scrap supply exceed fabrication demand, Morgan Stanley says. “This paradoxical price outcome reflects the strength in investment demand that has been sufficient to neutralize the large fundamental surplus,” Morgan Stanley says. And, Morgan Stanley adds, fabrication demand is strengthening due to improving economic conditions.




Market Nuggets: Comex Gold Maintaining Gains As Mideast Political Concerns Persist



Comex gold is maintaining gains around mid-morning. “We’re seeing some short covering,” says Stephen Platt, senior account executive with Archer Financial Services. The market continues to be underpinned by general concerns about geopolitical uncertainty in the Middle East, with worries that unrest could still spill from countries like Libya to other nations. “You still a flight to safety,” Platt says. Some stability in the stock market might also be leading to light buying in gold, Platt says. Otherwise a tumble in stocks might be seen as a harbinger of an economic contraction and thus certain types of gold demand, such as fabrication. At the moment, gold appears to be range-bound, although good buying continues to occur on price dips, Platt says. He puts his initial chart resistance for April gold around $1,440-41 an ounce, then around $1,450-55 on the basis of Bollinger bands. Platt lists initial support roughly around $1,424. At 9:54 a.m. EST, Comex April gold was $4.50 higher at $1,431.70 an ounce.




Market Nuggets: Comex Gold Rises As Longer-Term Uptrend Remains In Place



Comex gold is stronger so far Wednesday in a continuation of the “big-picture” move that has been going on for weeks now, says a New York trader. “It’s clearly gotten a boost from what’s going on in North Africa and the Middle East,” he says of political unrest in the region. “And, there is a sense that inflation is worse, or will be one of these days.” He also cites the absence of central-bank selling in recent years. For April gold, he puts support at a short-term trend line around $1,426.50 to $1,427 and the overnight low near $1,423. He pegs resistance at the peak of $1,445.70 from two days ago, then $1,465.





Market Nuggets: Barclays: ETP Gold Investment Interest Continues To Stabilize



 Analysts with Barclays Capital say holdings in gold exchange-traded products, which declined earlier in the year, continue to show signs of stabilizing investor interest. They note gold ETP holdings rose another metric ton yesterday, taking March flows up almost 11 tons. In the case of silver, an inflow of 40 metric tons into global ETPs took the increase for the months so far to 293 tons.




Market Nuggets: Commerzbank Not Anticipating Sharp Rises In Nickel Prices


( Commerzbank does not look for sharp increases in nickel prices even though use of the metal for stainless steel has risen. The bank notes that preliminary figures from the International Stainless Steel Forum (ISSF) indicate that global stainless steel production surged last year by 25% to a record 30.7 million tons. The ISSF attributes this to the economic recovery, strong end-use demand and re-stocking at service centers and fabricators. The ISSF looks more demand growth this year, but also warns this could be dampened by high raw material and energy prices. Commerzbank says nickel “should profit initially from the high level of stainless steel output, as about 70% of its use is in the stainless steel industry.” However, the bank continues, “we do not expect sharp rises in the price of nickel, though, as the fundamental situation on the nickel market is clouding. A lot of new production will enter the market in the next two years and much positive news should be already priced in.”





Market Nuggets: Commerzbank: Euro-Zone Debt Worries Returning To Spotlight, Supportive For Gold



 Commerzbank says any pullback in gold may not last long, particularly as euro-zone debt issues resurface. The metal dipped overnight, and Commerzbank notes that a retreat in oil prices from earlier in the week, as well as friendly equity markets around the globe, are reining in some demand for gold as a hedge against inflation and a safe haven. “This should be temporary, though, as there are still a multitude of problems,” Commerzbank says. “Especially, the debt crisis in the euro-zone periphery appears to be back in the spotlight of market players. S&P rating agency has said, for example, that further downgrading of credit ratings is possible for some euro-zone countries. Moody’s already slashed Greece’s credit rating again two days ago. Furthermore, doubts are growing about the new banking stress test. A convincing and comprehensive solution to the debt crisis is therefore unlikely to be found soon and uncertainty should remain high.” Gold rebounded from its overnight lows and is trading higher for the day.




Market Nuggets: Gartman: Gold's 'Flag' Chart Formation Argues For Higher Prices



Newsletter writer Dennis Gartman is characterizing gold’s most recent pullback, which took it down to around $1,423 in overnight Asian trading, as nothing more than consolidation, or a “flag” formation in the lexicon of chartists. And, he adds, flag formations “almost always resolve themselves in the direction that prevailed before the ‘flag’ was flown, so in this instance it argues for higher prices sooner rather than later.” Comex April gold has in fact turned higher again, trading up $6.10 to $1,433.30 an ounce as of 7:50 a.m. EST. Gartman, who describes himself as most bullish of gold in non-U.S. dollar terms, notes the metal has broken above 118,000 yen, which has been strong resistance. Meanwhile, a consolidation pattern is developing near 1,030 euros and a movement through 1,040 would signal an upside breakout. “We are long enough gold in yen terms, but we shall look to buy more in EUR terms once this hoped-for breakout to the upside evolves,” he says.




Market Nuggets: GoldCore: China Likely To Be Quietly Adding Gold To Reserves



China is likely continuing to increase its gold reserves and the percentage of total reserves that are in gold, says analysts with GoldCore. They cite comments Tuesday from Li Yining, an influential Chinese economic advisor, who says the country should use some of its $2.85 trillion in foreign-exchange reserves to buy more gold as a hedge against risks of foreign currency devaluations. The country does not regularly report its gold reserves. “The Chinese are too shrewd to ‘telegraph’ their intentions to accumulate much larger gold reserves and will announce the ‘news’ when they are ready,” GoldCore says.

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