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Gold & metals

Last Updated : 24 December 2012 at 12:00 IST

US Fiscal Cliff: Why investors should stay away from Commodity markets on Dec 27

Source :Commodity Online Editorial Desk

Author :Rakesh Neelakandan

 

  By Rakesh Neelakandan

The news from the fiscal cliff not being encouraging, one may think that the Mayan Calendar which predicted an end-of-the-world-scenario for December 21 has missed the date by ten days. But optimism still persists.

Chances are less that US would go off the cliff, according to Kunal Shah, Head of Commodity Research at Nirmal Bang Commodities.

“I am optimistic of a resolution to fiscal cliff.” he said as he was hopeful that a meeting slated for 27th December would bring about significant changes.

“And before 31st December a concrete resolution may be arrived at.” he added.

US Congress is now on holiday until December 27.

“And I expect 27 December to be a day of volatility and speculation.” he said. Traders are advised to stay away from the markets for the day.” he cautioned. He also advised traders not to short base metals as US and China data have been positive for the past days.

The Chinese manufacturing has expanded and US GDP has grown by 3.1%. Besides the Bank of Japan has opted for a $110 billion stimulus measure. “Besides, effort continues in Europe to get out of the crisis.”

He explained that the recent sell-off in gold was a result of money-managers world-wide thinking “the worst for financial markets being over.”

The fiscal cliff issue is looming large on the horizon taking sheen off commodity bull trading.

Crude oil prices are trading low on account of a resolution to the cliff issue not being in sight. Thursday had seen the collapse of Republican Speaker John Boehner's proposal to tax the extreme rich as his own peers decided not to support the same not to speak of the opposition from Senate Democrats and President Obama.

Sen. Joe Lieberman said to AP ''it's the first time that I feel it's more likely we'll go over the cliff than not.''

Meanwhile, there are also views coming in that US may go off the cliff but would recover in a span of 2-3 months.

“Gold, silver may come under pressure for a while.” said Manoj Kumar Jain, President, India Nivesh.

If the US budget talks face an absolute collapse and no resolution regarding automated kick-in of spending cuts and tax hikes to the tune of $600 billion is not arrived, the US would slip into a recession derailing the current recovery.

The resulting pile-up would not miss the wider world as well, analysts say. (rakesh@commodityonline.com)

Commodity Technical Analysis: Gold Nears Measured Objective

Daily Bars

Chart  Prepared by Jamie Saettele, CMT

Commodity  Analysis: “Viewed in light of the 3 wave advance from 1672.50, the trend is lower.” Last week’s breakdown confirms the bearish suspicions. Continue to look lower from the current levels towards a Fibonacci confluence, former resistance, and channel support that cluster near 1630.

Commodity Trading Strategy: The most bearish count is valid against 1703. Shorts against that level remain warranted.

LEVELS: 1560 1600 1641 1676 1686 1703

Gold Prices Forecast December 24, 2012, Technical Analysis

Last Updated : 23 December 2012 at 14:00 IST

Continued deregulation set to boost China’s interest in Gold in 2013

 

  Commodity Online

China’s gold demand has grown every single year since 2002 with double-digit growth rates over the past five years however, this year demand has slowed and looks to be flat y/y.

Gold imports from Hong Kong have exceeded 600 tonnes for the year to October (2011 full-year 428 tonnes) but imports slowed to a nine-month low in October, Barclays said in a report. 

While appetite to buy emerged upon price dips last year lending downside support to the gold market, this year the bulk of the consumption has materialised amid a rising price trend, setting a fragile floor for prices, that was prevalent until early December when volume traded on the Shanghai Gold Exchange (SGE) rocketed to levels last seen ahead of the Lunar New Year in January.

Concerns over inflation and the lack of alternative investment options have, in part, supported growth in gold investment demand since the start of de-regulation of China’s gold market. The SGE was established in 2002 and imports/exports can currently be carried out by nine licensed commercial banks and supplied to the local market via the SGE.

The launch of the first Chinese gold futures contract on the SHFE in 2008 provided a channel for hedging although has struggled to gain traction amid thin liquidity.

This month marked the trial launch of over-the-counter interbank gold trading aimed at increasing liquidity at the wholesale level. However, the physical side has been greeted with more enthusiasm, and in particular in products established in mainland China.

The gold accumulation plan launched by Industrial and Commercial Bank of China has attracted five million accounts since its launch in 2010 and accumulated 64 tonnes of gold while the first gold fund, Lion Fund Management, met its initial target of raising $500mn (~10 tonnes) in January 2011 within a
month.

The first gold ETF denominated in yuan, Hang Seng, was launched on the Hong Kong stock exchange in February 2012, but uptake has been lacklustre and currently sits just under 10koz.

However, two funds, Guotai AMC and HuaAn Funds, have submitted proposals to launch gold ETFs to be listed on the Shanghai Stock Exchange. While gold demand is set to rise in the near term ahead of the Lunar New Year (10 February 2013), continued deregulation is set to boost China’s interest in the metal over the course of 2013.

" Silver Bullion Pte, one of Singapore’s largest suppliers of coins and bars to retail investors, says sales tripled since October, part of a global surge in demand that drove holdings to a record.

“Our clients are worried that a major currency crisis or mass bankruptcies would occur,” said Gregor Gregersen, the 36- year-old founder of Silver Bullion, whose sales now average about S$6 million ($4.9 million) a month. “It all has to do with falling confidence in the heavily indebted Western governments and financial institutions.”

Global investment through silver-backed exchange-traded products reached a record 18,854 metric tons in November, or more than nine months of mine output, data compiled by Bloomberg show. Holdings are now valued at about $19.2 billion. Prices will rise as much as 34 percent to $40.25 an ounce next year, based on the median of 49 analyst, trader and investor estimates compiled by Bloomberg.

Silver almost tripled since the end of 2008, lagging behind only platinum in gains for precious metals this year as policy makers from the U.S. to China to Europe pledged more action to boost economies. That’s attracting investors betting that stimulus will stoke inflation and debase currencies."

Article from:   http://silverreport.blogspot.sg/2012/12/silver-vaults-stuffed-means-price.html

Last Updated : 22 December 2012 at 12:30 IST

Gold has the greatest potential to regain upward momentum in Q1 2013: Barclays

 

LONDON(Commodity Online): In Q1 2013 Barclays expects the risks to industrial demand to persist and believes gold has the greatest potential across the complex to regain its upward momentum, given the number of macro catalysts that still exist, as well as the firming physical demand.

The markets view Democrats and Republicans as coming closer to an agreement that would  avert going over the fiscal cliff this week, leading equity markets to rally and Treasuries to sell off the move in Treasuries has increased the downward pressure on gold, sending prices to levels last reached in late August as QE3 expectations were increased.

The entire precious metal complex has endured profit-taking and remains under pressure into year-end. The precious metal with the weakest fundamentals suffered the largest pullback: silver prices have lost 5% over the past week and tested levels below $30/oz. Palladium has suffered the least and, in our view, still retains the most constructive fundamental backdrop into 2013.

A risk-on environment has proved positive for gold this year as prices have benefited from increased liquidity thus, gold’s stronger correlation with the equity markets has been supportive this year. But its struggle to establish its status as a safe haven asset has made the metal’s response to macro events this year increasing fickle and temporary, and gold has now not only not responded in line with risky assets but also sidelined the dollar weakness. The dollar has weakened to levels last reached in April, but lack of conviction amid uncertainty, technical selling and year-end profit-taking in gold has outweighed this as well.

In terms of demand, central bank activity remains on the buy side and the IMF statistics for November show Brazil continued to add to its reserves last month, taking its holdings to 67.2 tonnes, up 14.7 tonnes. This takes its purchases since August to 33.6tonnes and its share of gold or total reserves to 1%. Russia added 2.9 tonnes in November taking its purchases to 54.4 tonnes this year and making up 10% of its total reserves. However, the highlight from the data was Iraq reporting it had increased its gold reserves between August and October by 25.2 tonnes, taking its holdings to 31.07 tonnes. Iraq added to its reserves mostly in August, followed by a small addition in September and reduction in October (Reuters). According the IMF Statistics, Iraq had previously held 5.87tonnes, which was unchanged since the reported data were made available in 2004.

Physical demand has responded to the weaker price environment. Gold bar premiums have risen across Asia and in Singapore are now at their highest since the start of the year at $1.10/oz and their highest since mid-January in Hong Kong, while the discount in Tokyo has narrowed to 30cents/oz, the lowest since July. In China, volume traded on the Shanghai Gold Exchange remains elevated: since the start of the month, it has matched levels last reached ahead of the Lunar New Year, which fell in January, and buying picked up from mid-December (when prices corrected last year) through to the holiday.

The Lunar New Year falls on 10 February in 2013 thus, the current lower price environment would appear to have supported early interest. As the seasonally strong period for consumption draws to  a close in India, demand remains price elastic, and buying continues to respond to lower prices, particularly as prices have fallen below the 31,000 INR/10g mark. Although the response has been strong, it has not been sufficient to offset the liquidation from the investor side. ETP holdings remain robust: even though inflows have slowed considerably, they remain positive and total metal held in trust is at record highs. A graver concern for the price performance over the coming months, in our view, would be hefty net outflws across ETP exposure. Barclays believe $1500-1550/oz would be a key trigger point to watch. Should Spain request a formal programme and market focus shift back towards balance sheet expansion, gold would likely find itself with better support amid firming physical demand and continued central bank buying.

In terms of PGMs, there has been some positive news. China’s auto sales rose 8.2% y/y in November and year-to-date are up just over 3% US auto sales rose 13% y/y in November and 5% m/m. Our auto equity analysts remain comfortable with their forecast for 14.5mn units for  2012 and 15.5mn for 2013, supported by improved consumer confidence and pent-up demand.

But in Europe they maintain their below-consensus forecast of a decline of 17% in Q4 12 and have cut 2013 by 200 units and believe it to bottoming. Thus, there is a relatively favourable picture for palladium going into 2013, given the improvement in China and the US, which are markets biased towards the gasoline sector. Furthermore, the latest Swiss customs data for November continued to paint a picture of subdued palladium shipments from Russia to Switzerland. December will be a key month to watch, given the late shipments at the end of the year that have materialised in the past, but a release in line with the slowdown in November bodes well for palladium remaining firmly in deficit in 2013.