Last Updated : 16 December 2012 at 12:00 IST
Silver may retain the most volatile price action among metals in 2013: Barclays
Commodiy Online
The industrially biased precious metals have taken gold’s cue and surrendered some of their recent gains.
Unsurprisingly, the weakest performer was silver. It lost over 3% as prices struggled to find downside support. The fundamental balance remains firmly in surplus, and Barclays expects it to stay bloated next year. Industrial demand for silver has softened throughout 2012, and the picture looks unlikely to firm in the coming months, thus exposing silver’s dependence on investor demand.
Silver ETP flows have turned negative over the past two months, with outflows exceeding 200 tonnes.
“In our view, silver is set to retain the most volatile price action among metals over the coming year.” the Bank said.
Alongside other markets, the precious metals initially rallied following the Fed’s decision to provide further monetary accommodation to support a recovery, and in line with Barclays economists’ expectations, the Fed converted Operation Twist to purchases of long–term Treasury securities at a rate of $45bn per month. This took the balance sheet expansion to a rate of $85bn per month and, in surprise, numerical thresholds were provided for its policy rate guidance.
Balance sheet expansion, concerns over currency debasement, inflationary fears and levels of sovereign debt have supported interest in gold as a hedge, safe haven and a hard asset. Thus, further expansion should maintain that positive backdrop.
However, gold prices only initially rallied above the $1720/oz mark, and thereafter quickly surrendered their gains following Fed Chairman’s Bernanke’s warning that the announced measures would not be sufficient to offset the effects of a potential cliff.
Gold Heads for Third Weekly Drop US Budget Talks EyedSINGAPORE (Dec 14) Gold struggled to rise above $1,700 an ounce on Friday and prices headed for their third consecutive weekly drop, as investors cautiously watched U.S. talks to avoid a looming fiscal calamity that have so far made little progress.
U.S. President Barack Obama and House of Representatives Speaker John Boehner met on Thursday as frustration mounted over the stalemate in negotiations on the " fiscal cliff" - $600 billion worth of tax hikes and spending cuts that kick in early next year and threaten to push the economy into recession.
Spot gold inched up 0.1 percent to $1,698.44 an ounce by Friday morning, after an almost 1 percent drop on Thursday. Prices were headed for a 0.3-percent weekly drop.
U.S. gold futures edged up 0.2 percent to $1,700.30.
The thinning liquidity before the year end contributed to a lack of momentum in the market.
" It is hard to glean a real trend as everyone has closed down for the year," said a Sydney-based trader, adding that the sell-off on Thursday was a result of position liquidation by funds to lock in profit for the year.
Spot gold is on track for a twelfth straight year of gains, boosted by stimulus measures from central banks that have driven investors to the safety of bullion amid worries rampant cash printing will make paper money worthless.
The Fed announced more bond buying earlier this week, but raised concerns about the scope of the measure by linking its monetary policy to unemployment, which fell to a near four-year low of 7.7 percent even though the improving number was the result of a lower number of job-seekers.
Gold was little inspired by encouraging manufacturing data out of China which added to evidence of a pick-up in the world's second-largest economy, sending China's stock soaring and underpinning risk appetite.
In Asia's physical bullion market, there was light buying, but the price decline failed to trigger more interest, dealers said.
" Jewellers are not keen to buy at this level," said a Singapore-based dealer. " They think if we can break below $1,700, there is probably more room on the down side."
In other precious metals, spot palladium rose 0.7 percent to $693.70, headed for a 0.3-percent fall from a week earlier, snapping a six-week winning streak.
Spot silver was up 0.3 percent to $32.62, rebounding from a near one-month low of $32.21 hit in the previous session. The metal was also headed for a third straight weekly fall, its longest stretch of weekly losses in nearly seven months.
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Last Updated : 14 December 2012 at 10:35 IST
China playing a major role in global Silver market: Silver Institute
Source :Commodity Online
NEW YORK (Commodity Online): China’s role in the global silver market has dramatically changed over the past decade. Once a small player in the global market, China today is the world’s leading market for both physical investment and paper trading of silver futures and other similar products, and is the second largest silver fabricator today. Chinese demand for the white metal is expected to achieve further strong growth in the years ahead, according to a report by Thomson Reuters GFMS released by the Silver Institute.
Total silver demand in China has grown by over 100 million ounces (Moz) in the past ten years, to a record 170.7 Moz. The strength of the Chinese economy, assisted by a boom in the manufacturing sector, along with heavy investment in infrastructure, has boosted domestic demand for silver since the liberalization of the Chinese silver market at the start of 2000. This has propelled China into becoming the world’s second largest silver fabricator, with its share of global demand standing at 17 percent at the end of 2011. Overall silver fabrication demand has grown from 67.1 Moz to 159.5 Moz during the period 2002-2011, a rise of 137 percent.
In the same time period, Chinese industrial silver fabrication experienced an almost uninterrupted period of growth, posting an impressive 135 percent increase. The largest slice of industrial demand has come from the electrical and electronics sector, rising from 17.1 Moz in 2002 to 40 Moz last year. Key to this development has been a rapid expansion in the country’s semi-conductor sector. Similar growth across a wide range of applications has also occurred, including a surge in cell phone and computer production to account for 70 percent and 90 percent, respectively, of the global total last year. Additionally, strong advances have been reported in other personal electronic goods, including tablet computers, notebooks and light emitting diode backlit televisions.
Moreover, the Chinese silver jewelry market has grown an impressive 211 percent from 2002-2011, to 54.4 Moz, as it enjoys greater exposure across the country’s interior. Further growth is expected in coming years as ongoing urbanization should lead to the expansion of retail jewelry outlets in larger cities.
Chinese silverware fabrication nearly doubled over the last decade, making China the second largest silverware fabricator globally behind India.
Investment demand from Chinese silver investors has jumped in recent years, making China the world’s biggest market for both physical investment and paper trading of silver futures and other similar contracts. Of note, during the first full year after the liberalization of the Chinese silver investment market in 2009, net demand for silver bars and coins doubled to 9.8 million ounces (Moz). In 2011, the figure soared to 17.0 Moz, accounting for 8 percent of global net purchases of silver bars and coins.
On the supply side, Chinese mine production has almost doubled over the last decade, assisted by the base metals mining sector, leading to a sharp rise in silver produced as a by-product. China’s mine production of silver now accounts for 14 percent of global supply, and it is likely to be recorded as the second largest silver producing country in 2012.
Scrap supply has also risen steadily over the same period, as Chinese industrial fabrication has grown rapidly, lifting supply from this segment to 31.9 Moz last year.
A notable increase in government sales from China was an important feature of the silver market from 1999 to 2003. Thereafter, sales from Chinese official and quasi-official stocks fell markedly, and the country has been essentially absent from the market since 2006.
“This report underscores China’s growing importance to the global silver market,” stated Michael DiRienzo, Executive Director of the Silver Institute. “It is impressive to see the dramatic development in so many sectors of their domestic silver market in the last decade,” he added.
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