NEW YORK (MarketWatch) -- Gold futures fell sharply Tuesday, as strength in the U.S. dollar and declining oil prices pressured investment demand for the precious metal. Gold for June delivery dropped $18.70 to end at $876.80 an ounce on the New York Mercantile Exchange.
"Anticipation about the Fed meeting's eventual results turned into apprehension that the massive slide in rates seen since September will not only come to an end shortly, but will likely be partially reversed after a period of no action," said Jon Nadler, senior analyst at Kitco Bullion Dealers.
The Federal Reserve's interest-rate meeting begins Tuesday afternoon. The statement will be released on Wednesday at 2:15 p.m. Est. See The Fed.
Most economists expect a quarter-percentage point cut from the central bank. The rate cut would bring the Fed's target for overnight interest rates to 2%, the lowest level since December 2004.
Many economists said they wouldn't be surprised if the Fed paused at this meeting. Some want the Fed to pause to signal that it is prepared to get tough about inflation.
"I think the main driver today is the pricing in of the next Fed rate cut and the strength in the dollar," said Zachary Oxman, a senior trader at Wisdom Financial.
"It is quite possible that the Fed has cut to the point where credit will be loosening, which would signal a renewal for the U.S. economic growth cycle," Oxman said. "If this is the case, watch for a rotation out of gold and flight-to-quality trades and back to the stock market."
The dollar held onto most of its gains Tuesday. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, gained 0.3% to 72.83
"Gold is again under pressure with the dollar continuing to strengthen and oil continuing to sell off, but caution remains the predominant theme ahead of the Federal Reserve's interest rate decision," said Mark O'Byrne, executive director of Gold and Silver Investments Ltd., in a research note.
Crude-oil futures fell sharply, as strength in the U.S. dollar and news that BP's Forties pipeline will restart operation within days pressured energy prices.
Tuesday, April 29, 2008
Gold, Silver Futures Decline on Dollar, Interest-Rate Outlook
(Bloomberg) -- Gold fell to a four-week low as the dollar climbed against the euro, eroding the appeal of precious metals and commodities as alternative investments. Silver also declined.
The dollar rose as much as 0.7 percent versus the euro on speculation the Federal Reserve will signal that it's close to pausing after six interest-rate reductions. Before today, gold and commodities gained more than 30 percent in the past 12 months, while the dollar slumped 13 percent against the euro.
``If, as we suspect, the Federal Reserve stands pat on rates, or signals that it is done for the time being, we could see the dollar strengthen, and lead to another bout of profit- talking in commodities,'' Edward Meir, an analyst at MF Global Ltd., said in a report.
Gold futures for June delivery fell $14, or 1.6 percent, to $881.50 an ounce at 9:29 a.m. on the Comex division of the New York Mercantile Exchange. The price earlier touched $878.60, the lowest for a most-active contract since April 1.
The Fed reduced borrowing costs by 3 percentage points to 2.25 percent from Sept. 18 to March 18. Gold reached a record $1,033.90 an ounce on March 17.
The U.S. currency headed for its first monthly advance this year against the euro as traders increased bets the Fed will stop lowering borrowing costs after a quarter-percentage point reduction tomorrow.
Silver futures for July delivery declined 46.3 cents, or 2.7 percent, to $16.66 an ounce. Before today, the price gained 26 percent in the past 12 months.
The Reuters/Jefferies CRB Index of 19 commodities dropped as much as 1.3 percent.
The dollar rose as much as 0.7 percent versus the euro on speculation the Federal Reserve will signal that it's close to pausing after six interest-rate reductions. Before today, gold and commodities gained more than 30 percent in the past 12 months, while the dollar slumped 13 percent against the euro.
``If, as we suspect, the Federal Reserve stands pat on rates, or signals that it is done for the time being, we could see the dollar strengthen, and lead to another bout of profit- talking in commodities,'' Edward Meir, an analyst at MF Global Ltd., said in a report.
Gold futures for June delivery fell $14, or 1.6 percent, to $881.50 an ounce at 9:29 a.m. on the Comex division of the New York Mercantile Exchange. The price earlier touched $878.60, the lowest for a most-active contract since April 1.
The Fed reduced borrowing costs by 3 percentage points to 2.25 percent from Sept. 18 to March 18. Gold reached a record $1,033.90 an ounce on March 17.
The U.S. currency headed for its first monthly advance this year against the euro as traders increased bets the Fed will stop lowering borrowing costs after a quarter-percentage point reduction tomorrow.
Silver futures for July delivery declined 46.3 cents, or 2.7 percent, to $16.66 an ounce. Before today, the price gained 26 percent in the past 12 months.
The Reuters/Jefferies CRB Index of 19 commodities dropped as much as 1.3 percent.
US STOCKS-Market wavers as drugs weigh, Fed looms
(Reuters) - U.S. stocks ended little changed on Tuesday as setbacks for two drugs weighed down the pharmaceutical sector, offsetting the relief from a retreat in record high crude oil prices.
Trading volume was scant as investors turned cautious with the Federal Reserve's two-day meeting under way. Policy makers are expected to trim interest rates and signal an end to a series of deep cuts started in September.
The prospect of steady rates helped support the dollar and contributed to a 2.5 percent drop in oil prices from a record high. Crude's decline sparked a rally in airlines, but dragged on energy-related shares.
Merck & Co Inc (MRK.N: Quote, Profile, Research) shares fell more than 10 percent a day after the company said U.S. regulators rejected a new cholesterol drug, prompting brokerages to cut price targets on the stock.
Further dragging on the drug sector, biotechnology companies Genentech Inc (DNA.N: Quote, Profile, Research) and Biogen Idec Inc (BIIB.O: Quote, Profile, Research) said a study of one of its cancer treatments failed to show the drug was also effective for treating lupus. [ID:nWNAS0367]
"Pharmaceuticals used to be the traditional recession play, but it seems they have so many negative stories, they can't get out of their own way," said Mark Schlarbaum, head trader at Global Capital Management in Conshohocken, Pennsylvania.
If the drug companies could overcome that trend, Schlarbaum said they would attract some interest because "they're all cheap. It's hard to say where is the relatively safe trade in this environment."
The Dow Jones industrial average .DJI was down 39.81 points, or 0.31 percent, at 12,831.94. The Standard & Poor's 500 Index .SPX was down 5.43 points, or 0.39 percent, at 1,390.94. The Nasdaq Composite Index .IXIC was up 1.70 points, or 0.07 percent, at 2,426.10.
About 1.23 billion shares changed hands on the NYSE, well below last year's estimated daily average of roughly 1.90 billion, while on Nasdaq, about 1.75 billion shares traded, below last year's daily average of 2.17 billion.
Merck shares slid 10.4 percent to $37.14 on the New York Stock Exchange, while Genentech (DNA.N: Quote, Profile, Research) dropped 7.2 percent to $67.93. On the Nasdaq, Biogen Idec shares declined 5.2 percent to $61.33.
The American Stock Exchange pharmaceutical index .DRG was down 1 percent.
June crude CLM8 dropped $3.12 to settle at $115.63 a barrel -- sharply below Monday's record near $120 a barrel.
Shares of Northwest Airlines (NWA.N: Quote, Profile, Research) surged 22.8 percent to $9.36 and Delta Air Lines jumped 14.6 percent to $8.24. High fuel costs have pummeled airline shares and have even grounded some carriers.
Shares of Schlumberger Ltd (SLB.N: Quote, Profile, Research), an oilfield services firm, slid 3 percent to $99.26. Oil and gas producer Apache Corp (APA.N: Quote, Profile, Research) dropped 3.8 percent to $132.68 on the NYSE.
It wasn't all gloom in the oil patch. Goldman Sachs upgraded the integrated oil sector to "attractive" from "neutral," saying risk/reward was most favorable for the "super majors" such as ConocoPhillips (COP.N: Quote, Profile, Research) and Chevron Corp (CVX.N: Quote, Profile, Research).
Chevron shares rose 2.4 percent to $94.74, supporting both the Dow and the S&P. ConocoPhillips stock gained 1.2 percent to $85.45.
The latest economic data increased investors' fears of recession.
Consumer confidence hit a five-year low in April as Americans faced the worst jobs outlook since late 2004, with expectations that inflation would accelerate to a pace last seen in the early 1980s, according to the Conference Board, a private research group. That outlook worries Wall Street because consumer spending accounts for two-thirds of U.S. economic activity.
Adding to the worry list: U.S. home foreclosure filings surged in the first quarter of the year, real estate data firm RealtyTrac said. And in a separate report, the Standard & Poor's/Case Shiller home price index showed prices of existing U.S. single family homes fell further in February.
Trading volume was scant as investors turned cautious with the Federal Reserve's two-day meeting under way. Policy makers are expected to trim interest rates and signal an end to a series of deep cuts started in September.
The prospect of steady rates helped support the dollar and contributed to a 2.5 percent drop in oil prices from a record high. Crude's decline sparked a rally in airlines, but dragged on energy-related shares.
Merck & Co Inc (MRK.N: Quote, Profile, Research) shares fell more than 10 percent a day after the company said U.S. regulators rejected a new cholesterol drug, prompting brokerages to cut price targets on the stock.
Further dragging on the drug sector, biotechnology companies Genentech Inc (DNA.N: Quote, Profile, Research) and Biogen Idec Inc (BIIB.O: Quote, Profile, Research) said a study of one of its cancer treatments failed to show the drug was also effective for treating lupus. [ID:nWNAS0367]
"Pharmaceuticals used to be the traditional recession play, but it seems they have so many negative stories, they can't get out of their own way," said Mark Schlarbaum, head trader at Global Capital Management in Conshohocken, Pennsylvania.
If the drug companies could overcome that trend, Schlarbaum said they would attract some interest because "they're all cheap. It's hard to say where is the relatively safe trade in this environment."
The Dow Jones industrial average .DJI was down 39.81 points, or 0.31 percent, at 12,831.94. The Standard & Poor's 500 Index .SPX was down 5.43 points, or 0.39 percent, at 1,390.94. The Nasdaq Composite Index .IXIC was up 1.70 points, or 0.07 percent, at 2,426.10.
About 1.23 billion shares changed hands on the NYSE, well below last year's estimated daily average of roughly 1.90 billion, while on Nasdaq, about 1.75 billion shares traded, below last year's daily average of 2.17 billion.
Merck shares slid 10.4 percent to $37.14 on the New York Stock Exchange, while Genentech (DNA.N: Quote, Profile, Research) dropped 7.2 percent to $67.93. On the Nasdaq, Biogen Idec shares declined 5.2 percent to $61.33.
The American Stock Exchange pharmaceutical index .DRG was down 1 percent.
June crude CLM8 dropped $3.12 to settle at $115.63 a barrel -- sharply below Monday's record near $120 a barrel.
Shares of Northwest Airlines (NWA.N: Quote, Profile, Research) surged 22.8 percent to $9.36 and Delta Air Lines jumped 14.6 percent to $8.24. High fuel costs have pummeled airline shares and have even grounded some carriers.
Shares of Schlumberger Ltd (SLB.N: Quote, Profile, Research), an oilfield services firm, slid 3 percent to $99.26. Oil and gas producer Apache Corp (APA.N: Quote, Profile, Research) dropped 3.8 percent to $132.68 on the NYSE.
It wasn't all gloom in the oil patch. Goldman Sachs upgraded the integrated oil sector to "attractive" from "neutral," saying risk/reward was most favorable for the "super majors" such as ConocoPhillips (COP.N: Quote, Profile, Research) and Chevron Corp (CVX.N: Quote, Profile, Research).
Chevron shares rose 2.4 percent to $94.74, supporting both the Dow and the S&P. ConocoPhillips stock gained 1.2 percent to $85.45.
The latest economic data increased investors' fears of recession.
Consumer confidence hit a five-year low in April as Americans faced the worst jobs outlook since late 2004, with expectations that inflation would accelerate to a pace last seen in the early 1980s, according to the Conference Board, a private research group. That outlook worries Wall Street because consumer spending accounts for two-thirds of U.S. economic activity.
Adding to the worry list: U.S. home foreclosure filings surged in the first quarter of the year, real estate data firm RealtyTrac said. And in a separate report, the Standard & Poor's/Case Shiller home price index showed prices of existing U.S. single family homes fell further in February.
Oil Falls More Than $3 as BP Restarts Pipeline, Dollar Rises
Crude oil fell more than $3 a barrel, the biggest decline in four weeks, after BP Plc restarted a North Sea oil pipeline and the dollar strengthened, reducing the appeal of commodities to investors.
``The Forties Pipeline System is back in operation,'' Richard Grant, a BP spokesman in Aberdeen, Scotland, said today. The pipeline closed April 27 during a two-day strike at the Grangemouth refinery, which supplies the network with power. The dollar rose to a three-week high against the euro.
``The reopening of the Forties Pipeline is taking fear out of the market,'' said Rick Mueller, director of oil practice at Energy Security Analysis Inc. in Wakefield, Massachusetts. ``The dollar is rising as well, which is taking some of the financial pressure out of commodity markets.''
Crude oil for June delivery dropped $3.12, or 2.6 percent, to settle at $115.63 a barrel at 2:58 p.m. on the New York Mercantile Exchange, the lowest close since April 17. It was the biggest one-day decline since March 31. Futures surged to a record $119.93 a barrel yesterday. Prices are 74 percent higher than a year ago.
Prices closed above the Bloomberg Trender support line today, as they have since April 7, indicating crude oil will probably extend gains. The Trender is a technical study that signals a price's direction based on the speed and variance of past changes.
Brent crude for June settlement fell $3.31, or 2.8 percent, to settle at $113.43 a barrel on London's ICE Futures Europe exchange. It was also the biggest drop since March 31 and the lowest close since April 17. The contract touched a record $117.56 on April 25.
`Buying-With-Abandon'
``For the first time in weeks we have some bearish factors in the forefront,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. ``We are finally seeing a stop to the buying-with-abandon.''
Shutting the Forties link forced 70 North Sea fields to halt production of oil and gas. Plans are in place to begin increasing offshore production today and the pipeline will return to full capacity in ``several days,'' Joanne McDonald, a spokeswoman for BP, said earlier.
Record oil prices pushed oil-company profits higher. BP, Europe's second-biggest oil company, posted a 63 percent jump in first-quarter net income to $7.62 billion. Royal Dutch Shell Plc, Europe's biggest oil producer, said profit rose 25 percent to $9.08 billion.
Futures contracts on the Chicago Board of Trade show an 82 percent chance the Fed will trim its target for overnight lending between banks by 0.25 percentage point to 2 percent tomorrow. The European Central Bank has not cut rates because of rising inflation, which has led to the dollar falling against the euro.
Commodity Records
Oil has risen 42 percent and the dollar has dropped 12 percent against the euro since the Federal Reserve began lowering interest rates on Sept. 18. Gold, corn, soybeans and rice also rose to records this year as the dollar dropped.
The UBS Bloomberg Constant Maturity Commodity Index, which tracks 26 raw materials, fell 1.8 percent to 1485.937 today, the lowest since April 11. The index is up 33 percent from a year ago.
An Energy Department report tomorrow will probably show that U.S. crude-oil supplies advanced 950,000 barrels in the week ended April 25 from 316.1 million barrels, according to the median of responses from 12 analysts surveyed by Bloomberg News.
``The dollar's strength and news that the Forties pipeline will be up and running in a couple days are moving us lower,'' said Gene McGillian, an analyst at TFS Energy LLC in Stamford, Connecticut. ``There won't be a major retracement in the near term because of supply disruptions, specifically in Nigeria.''
Exxon Strike
A senior Nigerian oil workers' union continued its strike against a unit of Exxon Mobil Corp. for a sixth day, halting 860,000 barrels a day. Olusola George-Olumoroti, chairman of the branch of the Petroleum & Natural Gas Senior Staff Association of Nigeria, or Pengassan, said the union will meet today with Exxon, government officials and the head of the state-owned oil company.
The strike, combined with a one-week spree of militant attacks against four crude-oil pipelines operated by a Royal Dutch Shell Plc venture, has cut Nigerian oil output by about 50 percent, allowing Angola to overtake it as Africa's biggest oil producer. Violence by militants in the Niger River Delta has cut Nigeria's oil output since the start of 2006.
``Exxon's problems will probably be temporary but that's not the case with Shell,'' McGillian said. ``The situation in the delta has been a bullish factor in the market for two years now and there are no signs that it will end any time soon.''
President George W. Bush dismissed calls by Congress to stop oil purchases for the Strategic Petroleum Reserve at a press conference today at the White House. A group of 14 Senate Republicans earlier asked Bush to stop filling the reserve to ease price pressures, matching a similar request previously made by Democrats in the House.
``The Forties Pipeline System is back in operation,'' Richard Grant, a BP spokesman in Aberdeen, Scotland, said today. The pipeline closed April 27 during a two-day strike at the Grangemouth refinery, which supplies the network with power. The dollar rose to a three-week high against the euro.
``The reopening of the Forties Pipeline is taking fear out of the market,'' said Rick Mueller, director of oil practice at Energy Security Analysis Inc. in Wakefield, Massachusetts. ``The dollar is rising as well, which is taking some of the financial pressure out of commodity markets.''
Crude oil for June delivery dropped $3.12, or 2.6 percent, to settle at $115.63 a barrel at 2:58 p.m. on the New York Mercantile Exchange, the lowest close since April 17. It was the biggest one-day decline since March 31. Futures surged to a record $119.93 a barrel yesterday. Prices are 74 percent higher than a year ago.
Prices closed above the Bloomberg Trender support line today, as they have since April 7, indicating crude oil will probably extend gains. The Trender is a technical study that signals a price's direction based on the speed and variance of past changes.
Brent crude for June settlement fell $3.31, or 2.8 percent, to settle at $113.43 a barrel on London's ICE Futures Europe exchange. It was also the biggest drop since March 31 and the lowest close since April 17. The contract touched a record $117.56 on April 25.
`Buying-With-Abandon'
``For the first time in weeks we have some bearish factors in the forefront,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. ``We are finally seeing a stop to the buying-with-abandon.''
Shutting the Forties link forced 70 North Sea fields to halt production of oil and gas. Plans are in place to begin increasing offshore production today and the pipeline will return to full capacity in ``several days,'' Joanne McDonald, a spokeswoman for BP, said earlier.
Record oil prices pushed oil-company profits higher. BP, Europe's second-biggest oil company, posted a 63 percent jump in first-quarter net income to $7.62 billion. Royal Dutch Shell Plc, Europe's biggest oil producer, said profit rose 25 percent to $9.08 billion.
Futures contracts on the Chicago Board of Trade show an 82 percent chance the Fed will trim its target for overnight lending between banks by 0.25 percentage point to 2 percent tomorrow. The European Central Bank has not cut rates because of rising inflation, which has led to the dollar falling against the euro.
Commodity Records
Oil has risen 42 percent and the dollar has dropped 12 percent against the euro since the Federal Reserve began lowering interest rates on Sept. 18. Gold, corn, soybeans and rice also rose to records this year as the dollar dropped.
The UBS Bloomberg Constant Maturity Commodity Index, which tracks 26 raw materials, fell 1.8 percent to 1485.937 today, the lowest since April 11. The index is up 33 percent from a year ago.
An Energy Department report tomorrow will probably show that U.S. crude-oil supplies advanced 950,000 barrels in the week ended April 25 from 316.1 million barrels, according to the median of responses from 12 analysts surveyed by Bloomberg News.
``The dollar's strength and news that the Forties pipeline will be up and running in a couple days are moving us lower,'' said Gene McGillian, an analyst at TFS Energy LLC in Stamford, Connecticut. ``There won't be a major retracement in the near term because of supply disruptions, specifically in Nigeria.''
Exxon Strike
A senior Nigerian oil workers' union continued its strike against a unit of Exxon Mobil Corp. for a sixth day, halting 860,000 barrels a day. Olusola George-Olumoroti, chairman of the branch of the Petroleum & Natural Gas Senior Staff Association of Nigeria, or Pengassan, said the union will meet today with Exxon, government officials and the head of the state-owned oil company.
The strike, combined with a one-week spree of militant attacks against four crude-oil pipelines operated by a Royal Dutch Shell Plc venture, has cut Nigerian oil output by about 50 percent, allowing Angola to overtake it as Africa's biggest oil producer. Violence by militants in the Niger River Delta has cut Nigeria's oil output since the start of 2006.
``Exxon's problems will probably be temporary but that's not the case with Shell,'' McGillian said. ``The situation in the delta has been a bullish factor in the market for two years now and there are no signs that it will end any time soon.''
President George W. Bush dismissed calls by Congress to stop oil purchases for the Strategic Petroleum Reserve at a press conference today at the White House. A group of 14 Senate Republicans earlier asked Bush to stop filling the reserve to ease price pressures, matching a similar request previously made by Democrats in the House.
Dollar Rises to Three-Week High on Bets Fed Will Signal Pause
(Bloomberg) -- The dollar strengthened to a three- week high against the euro on speculation the Federal Reserve will signal that it's done lowering interest rates.
The currency is headed for its first monthly advance against the euro this year, and also gained versus the Norwegian krone and pound today, as interest-rate futures show the Fed may reduce borrowing costs tomorrow and then pause. The pound was poised for its biggest monthly drop against the dollar in 2008 as mortgage approvals in the U.K. plunged last month.
``If the Fed is not at the end of the easing cycle, it's near the end,'' said Jeff Gladstein, global head of currency trading at AIG Financial Products in Wilton, Connecticut. ``I don't think the dollar will strengthen aggressively by any stretch, but I do think it's trying to bottom.''
The dollar rose 0.6 percent to $1.5563 per euro at 4:25 p.m. in New York, from $1.5657 yesterday. It touched $1.5541, the strongest level since April 3. The yen increased 0.1 percent to 104.04 against the dollar, from 104.19 yesterday. It advanced 0.7 percent to 161.93 versus the euro, after touching 161.12, the strongest since April 16.
The U.S. currency has risen 4.3 percent against the yen and 1.4 percent versus the euro this month. The dollar fell to $1.6019 against the euro on April 22, the lowest level since the European currency debuted in 1999. The euro is up 2.7 percent versus the yen in April.
Futures on the Chicago Board of Trade show an 82 percent chance the Fed will cut the target rate for overnight lending by a quarter-percentage point to 2 percent tomorrow and odds of 71 percent that the rate will be held at that level in June.
New Zealand Dollar
New Zealand's dollar weakened against most of the major currencies after a government report showed the annual trade deficit unexpectedly widened in March. The kiwi declined 1.4 percent to 77.49 U.S. cents after touching 77.27, the lowest level since Jan. 28.
The yen rose against all of the major currencies on speculation investors reduced carry trades in which they get funds in a country with low borrowing costs and purchase assets where returns are higher.
Higher-yielding assets were less attractive before the Fed's decision on interest rates tomorrow and the release of economic reports on gross domestic product and payrolls later this week, according to Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto.
``There is perhaps still a little more value in the safe havens,'' said Osborne. ``The markets are perhaps worried about equities fading again in May if we get weak GDP and payrolls.''
Yen's Advance
Japan's currency increased 1.5 percent to 80.71 versus the New Zealand dollar and 1.2 percent to 61.01 against Brazil's real. Japan's target lending rate of 0.5 percent compares with 11.75 percent in Brazil and 8.25 percent in New Zealand.
The British pound dropped 1 percent to $1.9694 and was down 0.8 percent for the month as the Bank of England reported that mortgage approvals in the U.K. fell in March to the lowest level in at least nine years.
Australia's dollar dropped 0.5 percent to 93.46 U.S. cents after the New York-based Conference Board's Australian index of leading economic indicators fell in February for a third month.
The euro was under pressure as the Bloomberg purchasing managers index showed today that European retail sales dropped the most in more than four years in April. Another report showed French consumer confidence dropped this month to a record low as accelerating inflation squeezed incomes.
Slowdown `Spreading'
``The slowdown in the U.S. is spreading to other countries,'' said Michael Malpede, a senior currency analyst in Chicago at Man Global Research. ``The dollar, which has been on its knees, is in a short-term bottoming process.''
Investors should sell the euro against the dollar over the next several weeks because two-year German bunds have lost some of their yield advantage over comparable-maturity Treasuries, said Citigroup Inc., one of the 10 biggest currency traders. The yield difference, or spread, between the two securities has decreased to 1.46 percentage points, from 1.85 on March 31, which was the most since the euro was launched.
European Central Bank policy makers have held the main refinancing rate at a six-year high of 4 percent since June to contain inflation. The U.S. central bank has cut its fed funds target 3 percentage points to 2.25 percent since September.
``The weak economic data looks increasingly out of the step with the ECB's hawkish stance,'' said Todd Elmer, currency strategist at Citigroup Global Markets Inc. in New York. ``It's a more benign environment for the U.S. dollar.''
The Conference Board's index of U.S. consumer confidence dropped to 62.3 this month, the lowest level since March 2003, from a revised 65.9 in March, the New-York-based research group reported today.
The currency is headed for its first monthly advance against the euro this year, and also gained versus the Norwegian krone and pound today, as interest-rate futures show the Fed may reduce borrowing costs tomorrow and then pause. The pound was poised for its biggest monthly drop against the dollar in 2008 as mortgage approvals in the U.K. plunged last month.
``If the Fed is not at the end of the easing cycle, it's near the end,'' said Jeff Gladstein, global head of currency trading at AIG Financial Products in Wilton, Connecticut. ``I don't think the dollar will strengthen aggressively by any stretch, but I do think it's trying to bottom.''
The dollar rose 0.6 percent to $1.5563 per euro at 4:25 p.m. in New York, from $1.5657 yesterday. It touched $1.5541, the strongest level since April 3. The yen increased 0.1 percent to 104.04 against the dollar, from 104.19 yesterday. It advanced 0.7 percent to 161.93 versus the euro, after touching 161.12, the strongest since April 16.
The U.S. currency has risen 4.3 percent against the yen and 1.4 percent versus the euro this month. The dollar fell to $1.6019 against the euro on April 22, the lowest level since the European currency debuted in 1999. The euro is up 2.7 percent versus the yen in April.
Futures on the Chicago Board of Trade show an 82 percent chance the Fed will cut the target rate for overnight lending by a quarter-percentage point to 2 percent tomorrow and odds of 71 percent that the rate will be held at that level in June.
New Zealand Dollar
New Zealand's dollar weakened against most of the major currencies after a government report showed the annual trade deficit unexpectedly widened in March. The kiwi declined 1.4 percent to 77.49 U.S. cents after touching 77.27, the lowest level since Jan. 28.
The yen rose against all of the major currencies on speculation investors reduced carry trades in which they get funds in a country with low borrowing costs and purchase assets where returns are higher.
Higher-yielding assets were less attractive before the Fed's decision on interest rates tomorrow and the release of economic reports on gross domestic product and payrolls later this week, according to Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto.
``There is perhaps still a little more value in the safe havens,'' said Osborne. ``The markets are perhaps worried about equities fading again in May if we get weak GDP and payrolls.''
Yen's Advance
Japan's currency increased 1.5 percent to 80.71 versus the New Zealand dollar and 1.2 percent to 61.01 against Brazil's real. Japan's target lending rate of 0.5 percent compares with 11.75 percent in Brazil and 8.25 percent in New Zealand.
The British pound dropped 1 percent to $1.9694 and was down 0.8 percent for the month as the Bank of England reported that mortgage approvals in the U.K. fell in March to the lowest level in at least nine years.
Australia's dollar dropped 0.5 percent to 93.46 U.S. cents after the New York-based Conference Board's Australian index of leading economic indicators fell in February for a third month.
The euro was under pressure as the Bloomberg purchasing managers index showed today that European retail sales dropped the most in more than four years in April. Another report showed French consumer confidence dropped this month to a record low as accelerating inflation squeezed incomes.
Slowdown `Spreading'
``The slowdown in the U.S. is spreading to other countries,'' said Michael Malpede, a senior currency analyst in Chicago at Man Global Research. ``The dollar, which has been on its knees, is in a short-term bottoming process.''
Investors should sell the euro against the dollar over the next several weeks because two-year German bunds have lost some of their yield advantage over comparable-maturity Treasuries, said Citigroup Inc., one of the 10 biggest currency traders. The yield difference, or spread, between the two securities has decreased to 1.46 percentage points, from 1.85 on March 31, which was the most since the euro was launched.
European Central Bank policy makers have held the main refinancing rate at a six-year high of 4 percent since June to contain inflation. The U.S. central bank has cut its fed funds target 3 percentage points to 2.25 percent since September.
``The weak economic data looks increasingly out of the step with the ECB's hawkish stance,'' said Todd Elmer, currency strategist at Citigroup Global Markets Inc. in New York. ``It's a more benign environment for the U.S. dollar.''
The Conference Board's index of U.S. consumer confidence dropped to 62.3 this month, the lowest level since March 2003, from a revised 65.9 in March, the New-York-based research group reported today.
Gold firm amid record oil but caution reigns
London: Gold drifted higher on Monday as oil roared to a record high near $120 a barrel but investors remained cautious ahead of this week's meeting of the US Federal Reserve on interest rates.
Bullion rose as high as $894.25 an ounce and was quoted at $890.40/$891.10 at 1408 GMT, against $886.90/$888.30 in New York late on Friday.
Gold was supported by strong oil prices, but analysts said bullion's upward movement was not as impressive as it was last month when soaring oil and a record low dollar propelled gold to a lifetime high of $1,030.80 on March 17.
"Sentiment towards gold is not nearly as bullish as it was, not least because the outlook for the dollar is considerably less bearish," said Tom Kendall, metals strategist at Mitsubishi Corporation.
"If we get more positive US data this week that surprises on the upside, or if the tone of the statement following the Fed meeting gives people confidence that it has come to the end of its interest rate easing cycle, then it would not be surprising to see gold pushed lower."
The metal has fallen 13 per cent since then and has been struggling to regain $900. It hit a three-week low of $877.60 on Friday before a surging oil market lifted gold's appeal as a hedge against inflation.
Oil hit a new record near $120 a barrel, boosted by a string of bullish factors that include big disruptions to Nigeria's output and a UK refinery strike.
"I do expect gold to drift around $900 for a little while, until we really see another strong shift in sentiment. Even the spike in oil is failing to really fire up the gold market," said Daniel Hynes, metals strategist at Merrill Lynch.
"After such a good run, a lot of people took the opportunity to liquidate, but the general trend would be for rising prices in the medium- to long-term," he said.
Gold futures for June delivery on the Comex division of the New York Mercantile Exchange rose $3.30 an ounce to $893.00 an ounce.
In other metals, platinum rose to $1,958/$1,968 an ounce from $1,944/$1,964 late on Friday and silver gained to $16.91/$16.97 an ounce from $16.83/16.89. But spot palladium fell $3 to $432.50/$438.50 an ounce.
Bullion rose as high as $894.25 an ounce and was quoted at $890.40/$891.10 at 1408 GMT, against $886.90/$888.30 in New York late on Friday.
Gold was supported by strong oil prices, but analysts said bullion's upward movement was not as impressive as it was last month when soaring oil and a record low dollar propelled gold to a lifetime high of $1,030.80 on March 17.
"Sentiment towards gold is not nearly as bullish as it was, not least because the outlook for the dollar is considerably less bearish," said Tom Kendall, metals strategist at Mitsubishi Corporation.
"If we get more positive US data this week that surprises on the upside, or if the tone of the statement following the Fed meeting gives people confidence that it has come to the end of its interest rate easing cycle, then it would not be surprising to see gold pushed lower."
The metal has fallen 13 per cent since then and has been struggling to regain $900. It hit a three-week low of $877.60 on Friday before a surging oil market lifted gold's appeal as a hedge against inflation.
Oil hit a new record near $120 a barrel, boosted by a string of bullish factors that include big disruptions to Nigeria's output and a UK refinery strike.
"I do expect gold to drift around $900 for a little while, until we really see another strong shift in sentiment. Even the spike in oil is failing to really fire up the gold market," said Daniel Hynes, metals strategist at Merrill Lynch.
"After such a good run, a lot of people took the opportunity to liquidate, but the general trend would be for rising prices in the medium- to long-term," he said.
Gold futures for June delivery on the Comex division of the New York Mercantile Exchange rose $3.30 an ounce to $893.00 an ounce.
In other metals, platinum rose to $1,958/$1,968 an ounce from $1,944/$1,964 late on Friday and silver gained to $16.91/$16.97 an ounce from $16.83/16.89. But spot palladium fell $3 to $432.50/$438.50 an ounce.
Oil hits $120 on supply concerns
London: Oil hit another record near $120 a barrel on Monday, boosted by a string of bullish factors that included big disruptions to Nigeria's output and a UK refinery strike, highlighting anxieties over threats to supply.
Prices retreated from early peaks as the dollar gained versus the euro, reflecting some expectations that the US Federal Reserve may not cut interest rates this week. US light crude for June delivery was up 37 cents at $118.89 a barrel by 1534 GMT, after a record high of $119.93. Prices are up almost 25 per cent since the start of the year.
London Brent crude was up 43 cents at $116.77.
"Continued attacks in Nigeria and refinery closures in Scotland ... may see the US target $121-$122 this week, with longer-term charts all pointing to $130 or higher," said Ben Coleman, senior commodities trader at TradIndex.
Crude prices have surged more than five-fold since 2002 as global supplies struggle to keep pace with rising demand in emerging economies, such as China.
Years of underinvestment in new oil production means the market could struggle to keep pace with booming China demand. The finely-balanced supply-demand outlook has made prices sensitive to any supply disruptions.
ExxonMobil has had to shut nearly all of its Nigerian oil production, totalling around 770,000 barrels per day, due to a strike.
Prices retreated from early peaks as the dollar gained versus the euro, reflecting some expectations that the US Federal Reserve may not cut interest rates this week. US light crude for June delivery was up 37 cents at $118.89 a barrel by 1534 GMT, after a record high of $119.93. Prices are up almost 25 per cent since the start of the year.
London Brent crude was up 43 cents at $116.77.
"Continued attacks in Nigeria and refinery closures in Scotland ... may see the US target $121-$122 this week, with longer-term charts all pointing to $130 or higher," said Ben Coleman, senior commodities trader at TradIndex.
Crude prices have surged more than five-fold since 2002 as global supplies struggle to keep pace with rising demand in emerging economies, such as China.
Years of underinvestment in new oil production means the market could struggle to keep pace with booming China demand. The finely-balanced supply-demand outlook has made prices sensitive to any supply disruptions.
ExxonMobil has had to shut nearly all of its Nigerian oil production, totalling around 770,000 barrels per day, due to a strike.
Spot gold rises; futures, global markets dull
MUMBAI: Gold prices rose by Rs 15 to Rs 11,780 per 10 grams on the bullion market due to demand created during marriage season. But global markets remained weak. Gold fell by $6.11 to $887.14 an ounce in London.
Futures for June delivery dropped $6.40 to $889.10 an ounce on the Comex division of the New York Mercantile Exchange and silver fell 15.5 cents to 16.875.
In local market, standard gold and ornaments remained in demand and gained Rs 15 each at Rs 11,780 and Rs 11,630 per 10 grams respectively. Sovereign, however, hovered around previous level at Rs 9,850 per piece of eight gram in limited deals.
Gold futures in India also showed a weak trend. Gold for June 5 delivery at Multi-Commodity Exchange of India opened at 11650, went to a high of 11655 before closing at 11588, a drop of 0.64 percent over previous close.
Futures for June delivery dropped $6.40 to $889.10 an ounce on the Comex division of the New York Mercantile Exchange and silver fell 15.5 cents to 16.875.
In local market, standard gold and ornaments remained in demand and gained Rs 15 each at Rs 11,780 and Rs 11,630 per 10 grams respectively. Sovereign, however, hovered around previous level at Rs 9,850 per piece of eight gram in limited deals.
Gold futures in India also showed a weak trend. Gold for June 5 delivery at Multi-Commodity Exchange of India opened at 11650, went to a high of 11655 before closing at 11588, a drop of 0.64 percent over previous close.
Gold declines as dollar rebounds against Euro
SINGAPORE: Gold declined in Asia on speculation that the Federal Reserve may signal at a policy meeting this week that it might put an end to interest rate cuts, and crude oil's rally to a record stalled.
Analysts said that interest in gold as an alternative asset waned as the dollar rebounded in the past week from its record low against the euro, and oil's climb to as high as $119.93 a barrel yesterday failed to trigger interest in bullion as a hedge against inflation.
Bullion for immediate delivery fell as much as $3.64, or 0.4 percent, to $889.61 an ounce and traded at $890.70 at 1:41 p.m. in Singapore. Silver was 0.5 percent down at $16.945 an ounce, while platinum was little changed at $1,969.
The U.S. currency headed for its first monthly advance versus the yen and euro since December as traders pared bets the Fed will keep reducing interest rates at a time of record oil prices and accelerating inflation.
The dollar was little changed at $1.5634 against the euro in Singapore. It was at 104.28 yen at the same time, compared with an intraday high of 104.82 yen yesterday, the highest level since February 29.
Analysts said that interest in gold as an alternative asset waned as the dollar rebounded in the past week from its record low against the euro, and oil's climb to as high as $119.93 a barrel yesterday failed to trigger interest in bullion as a hedge against inflation.
Bullion for immediate delivery fell as much as $3.64, or 0.4 percent, to $889.61 an ounce and traded at $890.70 at 1:41 p.m. in Singapore. Silver was 0.5 percent down at $16.945 an ounce, while platinum was little changed at $1,969.
The U.S. currency headed for its first monthly advance versus the yen and euro since December as traders pared bets the Fed will keep reducing interest rates at a time of record oil prices and accelerating inflation.
The dollar was little changed at $1.5634 against the euro in Singapore. It was at 104.28 yen at the same time, compared with an intraday high of 104.82 yen yesterday, the highest level since February 29.
Gold, platinum rise on oil, firm dollar
Gold rose to $890.40/891.40 an ounce from $886.90/888.30 an ounce early in Asian trade as surging oil prices boosted the metal's appeal as a hedge against inflation and helped it defy a firming dollar.
Gold has lost more than 13% in value since spiking to a lifetime high of $1030.80 an ounce on March 17. It was been struggling to regain $900 and hit a three-week low of $877.60 on Friday before rebounding after oil hit an all-time peak high.
Gold has gained on speculative buying spurred by record high oil prices and expectations of more rate cuts in the United States, which reduces the dollar's appeal and makes gold more appealing for investors seeking an alternative investment.
Oil struck a record high at $119.93 a barrel on Monday, extending the previous session's rally, as a strike closed a major British oil pipeline and as new violence in Nigeria reignited supply fears.
Gold futures for June delivery on the COMEX division of the New York Mercantile Exchange added $5.3 an ounce to $895.0 an ounce.
Spot platinum rose to $1,961.50/1,961.50 an ounce from $1,944/1,964 late in New York. It had fallen to $1,907 an ounce on Friday, its lowest since early April.
The new benchmark contract in Tokyo platinum futures April 2009, rose 165 yen per gram to 6450 yen, driven by a weaker Japanese currency.
Silver edged up to $16.93/16.99 an ounce from $16.83/16.89 an ounce. Spot palladium fell to $440/445 an ounce from $435.50/443.50 an ounce.
Gold has lost more than 13% in value since spiking to a lifetime high of $1030.80 an ounce on March 17. It was been struggling to regain $900 and hit a three-week low of $877.60 on Friday before rebounding after oil hit an all-time peak high.
Gold has gained on speculative buying spurred by record high oil prices and expectations of more rate cuts in the United States, which reduces the dollar's appeal and makes gold more appealing for investors seeking an alternative investment.
Oil struck a record high at $119.93 a barrel on Monday, extending the previous session's rally, as a strike closed a major British oil pipeline and as new violence in Nigeria reignited supply fears.
Gold futures for June delivery on the COMEX division of the New York Mercantile Exchange added $5.3 an ounce to $895.0 an ounce.
Spot platinum rose to $1,961.50/1,961.50 an ounce from $1,944/1,964 late in New York. It had fallen to $1,907 an ounce on Friday, its lowest since early April.
The new benchmark contract in Tokyo platinum futures April 2009, rose 165 yen per gram to 6450 yen, driven by a weaker Japanese currency.
Silver edged up to $16.93/16.99 an ounce from $16.83/16.89 an ounce. Spot palladium fell to $440/445 an ounce from $435.50/443.50 an ounce.
Gold Meltdown: Mining industry got too greedy
Why is it that amongst companies active in minerals, it is primarily and almost only precious metals shares that are under severe selling pressure?
Why is it that companies active in other mined products or co-products as below have their shares in major demand?
Did gold not rise from $248 to a high of $1033, yet even then the hammer was being applied to gold shares, especially those that hold the potential and promise of new production, as production declines?
Is there not a glaring example of a mined product in the form of potash this week? Did not an IPO in a mining company specializing in potash used as a fertilizer open up above its issue price by 58%?
Chemically, potash consists of potassium carbonate, but also might contain potassium oxide or potassium chloride, depending on how pure you consider the mixture. Usually, potash takes the form of powdery salts. Modern methods of extraction almost all rely upon deposits mined from ores, like sylvanite.
Nowadays our potash comes from mining and goes toward inorganic fertilizer rich in potassium.
Why are other mining entities acting so well, especially those with the following significant products:
Antimony
Beryllium
Cadmium
Chromium
Cobalt
Manganese
PGMs
Rhodium
Tungsten
Vanadium
How about simple iron ore and all those involved in all the criteria of exploration and development of crude oil? That is an extractive industry as is precious metals mining.
Your answer may be that gold is different but it is not. You might say others think that gold has topped, but it hasn’t.
The stimulants economically are the same for potash, iron ore and the other items listed above as it is for gold. It is the growth in Asia, the consequences of the effort to maintain the social order as the financial order implodes, and the condition of the US dollar.
Nothing happens by chance but for argument sake lets call it an opportunity to be seized. Many junior gold companies are so depressed that they are worth more dead than alive.
Gold and other metals shares are depressed so that they are selling well below their “Asset Vale.”
Asset Value is something that 3.7 generations have not taken into consideration where price is concerned. You may recall that I suggested to you that one major company would consolidate the industry. Keep that concept in mind. Major gold producers are in need of new production. This is FACT.
South African companies are in need of major projects OUTSIDE of the RSA. For the RSA gold producer there is no expansion of reserves in RSA because, even if they have it, they cannot produce it as the energy situation is already stressed beyond demand. This is a long-term problem unfortunately.
The major consolidator of the Gold mining industry may have gotten too greedy in waiting for future reserve properties to become ever cheaper and cheaper for acquisition or joint venture.
The game being played by design or serendipity is to depress the juniors or to take advantage of the decline in the juniors as a result of the poor share price action through starving the junior or explorer of financing.
Depressing the price of the shares of most junior situations results in starving precious metals juniors of financing and their shareholders would be ripe for a bid for the company at a price much lower then their highs when gold was at $600. It may also make the smaller company eager to make deals at less than advantageous conditions for their investors.
The key here is that the gold producing industry is in need of new resources as present resources are depleting. That is fact about which there is no question whatsoever.
It is much cheaper to pick up a property or entire company in a financially stressed condition because it cannot publicly finance for continued operation.
Let’s call the situation the taking advantage of a serendipitous development. To others it looks like the consolidators are holding a smoking gun. The weakness in this strategy is the advent of new competition for minerals internationally, primarily from Asia and the Middle East.
The Saudis and the Chinese are actively looking for mineral prospects from industrial to precious metals, from strategic metals and material to rare earths and beach sands, having publicly said so at top executive levels.
The major industry consolidators now have competition from companies with more liquidity and NO need for debt to take any property to production.
The advent of this new competition may well trump the western companies some feel are holding the smoking guns.
This competition from Asia and the Middle East may accelerate the consolidator, whose timing is a greed driven desire to get properties so cheap they might be considered free, to move sooner than later.
To call attention to the factual nature of this analysis please read the following article posted here April 11th this year regarding the stated interest of a major Chinese company given publicly at a recent professional mining conference and quoted therein.
Please note the all-important statement given by a top executive of the Chinese company:
"Small and medium-sized miners and juniors who are still in the exploration stage, are the easiest targets for bigger companies, but the acquisitions wave won't likely stop there."
Why is it that companies active in other mined products or co-products as below have their shares in major demand?
Did gold not rise from $248 to a high of $1033, yet even then the hammer was being applied to gold shares, especially those that hold the potential and promise of new production, as production declines?
Is there not a glaring example of a mined product in the form of potash this week? Did not an IPO in a mining company specializing in potash used as a fertilizer open up above its issue price by 58%?
Chemically, potash consists of potassium carbonate, but also might contain potassium oxide or potassium chloride, depending on how pure you consider the mixture. Usually, potash takes the form of powdery salts. Modern methods of extraction almost all rely upon deposits mined from ores, like sylvanite.
Nowadays our potash comes from mining and goes toward inorganic fertilizer rich in potassium.
Why are other mining entities acting so well, especially those with the following significant products:
Antimony
Beryllium
Cadmium
Chromium
Cobalt
Manganese
PGMs
Rhodium
Tungsten
Vanadium
How about simple iron ore and all those involved in all the criteria of exploration and development of crude oil? That is an extractive industry as is precious metals mining.
Your answer may be that gold is different but it is not. You might say others think that gold has topped, but it hasn’t.
The stimulants economically are the same for potash, iron ore and the other items listed above as it is for gold. It is the growth in Asia, the consequences of the effort to maintain the social order as the financial order implodes, and the condition of the US dollar.
Nothing happens by chance but for argument sake lets call it an opportunity to be seized. Many junior gold companies are so depressed that they are worth more dead than alive.
Gold and other metals shares are depressed so that they are selling well below their “Asset Vale.”
Asset Value is something that 3.7 generations have not taken into consideration where price is concerned. You may recall that I suggested to you that one major company would consolidate the industry. Keep that concept in mind. Major gold producers are in need of new production. This is FACT.
South African companies are in need of major projects OUTSIDE of the RSA. For the RSA gold producer there is no expansion of reserves in RSA because, even if they have it, they cannot produce it as the energy situation is already stressed beyond demand. This is a long-term problem unfortunately.
The major consolidator of the Gold mining industry may have gotten too greedy in waiting for future reserve properties to become ever cheaper and cheaper for acquisition or joint venture.
The game being played by design or serendipity is to depress the juniors or to take advantage of the decline in the juniors as a result of the poor share price action through starving the junior or explorer of financing.
Depressing the price of the shares of most junior situations results in starving precious metals juniors of financing and their shareholders would be ripe for a bid for the company at a price much lower then their highs when gold was at $600. It may also make the smaller company eager to make deals at less than advantageous conditions for their investors.
The key here is that the gold producing industry is in need of new resources as present resources are depleting. That is fact about which there is no question whatsoever.
It is much cheaper to pick up a property or entire company in a financially stressed condition because it cannot publicly finance for continued operation.
Let’s call the situation the taking advantage of a serendipitous development. To others it looks like the consolidators are holding a smoking gun. The weakness in this strategy is the advent of new competition for minerals internationally, primarily from Asia and the Middle East.
The Saudis and the Chinese are actively looking for mineral prospects from industrial to precious metals, from strategic metals and material to rare earths and beach sands, having publicly said so at top executive levels.
The major industry consolidators now have competition from companies with more liquidity and NO need for debt to take any property to production.
The advent of this new competition may well trump the western companies some feel are holding the smoking guns.
This competition from Asia and the Middle East may accelerate the consolidator, whose timing is a greed driven desire to get properties so cheap they might be considered free, to move sooner than later.
To call attention to the factual nature of this analysis please read the following article posted here April 11th this year regarding the stated interest of a major Chinese company given publicly at a recent professional mining conference and quoted therein.
Please note the all-important statement given by a top executive of the Chinese company:
"Small and medium-sized miners and juniors who are still in the exploration stage, are the easiest targets for bigger companies, but the acquisitions wave won't likely stop there."
Gold has been blogged and bandied to death
(Futures Magazine) -- Boris Schmitz-Thiersen’s family has been selling jewellery in the same location in Cologne, Germany, for more than 100 years, with a brief sabbatical during World War II. Only in the past year, however, has he begun offering bracelets made of a peculiar white metal mined in South Africa. “It’s pure palladium,” he explained. “Pretty, isn’t it?”
Yes – and relatively cheap, trading around $450 per troy ounce at press time, compared to just under $2,000 for the same amount of platinum, and about $1,000 for gold. Silver, by contrast, is trading at between $17 and $18 per ounce.
Schmitz-Thiersen’s decision to peddle palladium instead of platinum is one of those quirky little flips of the mind that, if multiplied by all the jewellery stores in the planet, could have major ramifications for the price of these two most precious of metals, and a quick perusal of Cologne’s jewellery shops indicates the minds are, in fact, turning over.
Samantha Trickey, precious metals consultant at the Commodities Research Unit (CRU) in London, points out that jewellery currently accounts for about 20% of total platinum demand, but that, unlike gold, platinum and palladium are primarily industrial metals and not stores of value.
“If prices of platinum get too high, you could see a substitution on the industrial side to palladium,” she said (see “Precious industrials”). “This is why I’m more bullish on palladium than I am on platinum.” Yet it is platinum’s secondary function as a precious metal that is driving prices to the stratosphere, along with a rickety South African electricity grid.
Most coverage of gold’s rise focuses on two factors: the plunge in the U.S. dollar and a general fear of exposure to paper assets. Less attention has focused on the supply side of gold and silver, but more of platinum, palladium and plain old copper.
“In South Africa, the main power supplier, Eskom, has run out of reserve capacity, and this has caused rolling power cuts,” Trickey said. “Many platinum and palladium mines had to close temporarily at the end of January, since power could not be guaranteed, and this posed a safety risk, especially for the underground mines.”
As a result, mines are operating at just 95% capacity, at a time when industrial demand, primarily in China, remains at full throttle. “They’re able to operate on that, but companies are looking at ways to find individual power sources of their own,” she said.
Palladium, thanks to these and other factors, rose from less than $200 per ounce in March 2003, to nearly $580 in February this year (after a one-month surge of about 40%), before settling down to its current mid-$400 range.
Supply concerns also are dominating the copper market. “The supply side seems to perennially shoot itself in the foot, and so far in 2008 it seems to have shot itself in both feet,” said Trickey’s colleague, Allan Trench, who is CRU’s research manager for copper. He said many of the bullets hitting those feet left their chambers in the 1990s.
“You had a lack of investment then due to low prices. But when that changed, you had all the usual quick fixes being implemented, like expanding leach tanks and debottlenecking the crushing circuit, or putting an extra shovel in the pit in cases where an operation was pit-constrained,” Trench said. What didn’t happen was significant re-tooling.
“As a result, everyone is doing the same thing at the same time, meaning maj or expansions and new projects and suppliers are swamped.” He cites a litany of statistics: tires that could have been delivered in four months three years ago now sometimes need almost two years to arrive. Trucks that would show up in three months now need two years. “You know how they’re dealing with this?” he asked. “They’re driving slower to maintain tire life.”
Analysts seem at odds over the short-term prognosis for platinum, which recently traded up to $2,276 per ounce before settling down to its current range just below $2,000.
The consensus on its poor cousin, palladium, however, is strong — largely because of the paradox that, as with platinum, most of the factors that can make demand for the metal go down actually make it go up. In other words, the factors that hurt demand for palladium as an industrial metal actually help it as a precious metal, and vice versa — at least, that’s the perception. A global deflationary trend would, in reality, drag down the price of both precious and industrial metals.
But in reality, South Africa’s electricity problems and strong industrial demand are only half of the palladium story. The other half is gold and platinum. “Economic news from the U.S.A. seems to be pushing gold around, and that’s also having an effect on platinum on a day-to-day basis,” Trickey said. “Given platinum’s stellar performance so far this year and the risk to the supply side, this should continue to be supportive for palladium.”
This quarter, she sees platinum averaging between $2,000 and $1,900, with palladium remaining in the mid-$400s. In the second half of the year, she sees prices dipping for both.
“I’m expecting platinum to be around $1,800 in the second half of the year, and for palladium to be below $450,” she said. “This is actually higher than we previously projected, because our earlier figures included a number of uncommitted South African mining projects that were scheduled to come online towards the end of this year and in 2009. Now many of these projects are rethinking their strategy based on the energy situation.”
Gold has, of course, been the headline-grabber over these past few months, and what can you say about the yellow metal that hasn’t already been blogged and bandied to death? It’s risen 55% over the past year, topping out above $1,000 per troy ounce before settling back to $900 at press time.
Gold bugs — those ‘end-of-the-worlders’ who seem to materialize by the thousands whenever the global economy shudders — are justifiably happy. But are their doomsday scenarios justified?
Bob McKee, chief economist at Independent Strategy, doesn’t think so. He started getting long gold between $330 and $350 in 2003 (see “Golden opportunity”), citing three drivers that, in hindsight, are clear to all: the current account deficit’s pressure on the dollar, growing political uncertainty and an impending reversal of the liquidity boom.
All three remain in effect today, and the same counter-arguments are being offered now as then, at least as far as the dollar is concerned. “Some people argued then that money flowing into Asian economies would be recycled into dollars,” McKee said. “There’s some truth to this, but there is also a growing pressure to diversify.”
One counter-argument petered out three years back: namely, that the world’s central banks would dump tonnes of the yellow metal on the market if it ever began to overheat. “Up until three or four years ago, that was a real concern because the central banks still saw gold as a dead thing,” he said. “But they have done their dumping, and have no more left to sell.”
The other drivers have only gotten stronger, and the question now is whether they have become so strong that the market has already discounted them. McKee doesn’t think so.
“We still have some room to go in all three drivers,” he said. “Assuming that the U.S. economy went into recession this last quarter, and knowing that recessions tend to last nine to 12 months, we can expect dollar weakness to continue for at least the next two quarters.”
Then, he said, just when the United States begins to pick up steam, the other OECD countries could be slipping into recession with low interest rates sparking fears of inflation. His recommendation: hold your gold for now, but don’t expect the vertical trend of the last year to continue.
HSBC analyst James Steel is also gingerly bullish but warns the end could be near.
The bullish argument comes from the safe haven argument. “There are no reliable estimates of how much “toxic debt” remains in the (mortgage) market and how that debt is distributed,” he wrote in a mid-March newsletter.
“Regarding precious metals prices, there is also the separate but related question of whether a commodities bubble is in the process of bursting,” he added. “Although the commodity rally is in part related to the credit crisis, in that the crisis has undoubtedly encouraged substantial purchase of hard assets, commodity prices, including precious metals prices, are also subject to a slew of other factors.”
Specifically, he warns of a divergence between commodity prices and economic growth: prices can’t keep going up if the economies of the world are slowing down. “We believe the slump in commodity prices is evidence that investors are reassessing likely commodity demand levels, and therefore also prices, after the recent run-up,” he said.
With copper hovering above $8,000 per tonne ($4 per pound) and metals like gold and nickel breaking long-respected milestones, the question on copper traders’ minds is whether the metal can breach the once unheard-of price of $10,000 per tonne. In the most recent edition of his “Copper Monitor,” titled “High Prices: Market Flavour or Fundamentals?,” CRU’s Trench identified 10 events that would have to happen for that level to be breached.
The five that are necessary (condensed to four for brevity) to stay above $8,000 are: Chinese consumption maintains double-digit growth, U.S. consumption holds steady, Chilean and Central African supply remains clogged and ‘non-fundamentals’ like market sentiment remain strong.
Five events that are necessary to get above $10,000 (also condensed here) are: some sort of nationwide supply catastrophe like the one that has impacted South Africa, a flurry of ‘micro’ supply disruptions, developing world demand growth outpacing developed world contraction and hedge fund lemmings going bonkers over the stuff and buying it like mad.
“The first five are already over the line, which is why we’re at these levels,” Trench said. “It’s like we’ve completed the pentathlon and now want to see if they can do the decathlon.”
Of the questionable five, he said number six, a nationwide catastrophe like the one that has befallen South Africa’s mining industry, is the least likely to take place. “That’s something you get once every few decades,” he said. “The others have a fair chance of coming through.”
And, he might add, “once every few decades” isn’t as much of a long shot as it may seem.
Yes – and relatively cheap, trading around $450 per troy ounce at press time, compared to just under $2,000 for the same amount of platinum, and about $1,000 for gold. Silver, by contrast, is trading at between $17 and $18 per ounce.
Schmitz-Thiersen’s decision to peddle palladium instead of platinum is one of those quirky little flips of the mind that, if multiplied by all the jewellery stores in the planet, could have major ramifications for the price of these two most precious of metals, and a quick perusal of Cologne’s jewellery shops indicates the minds are, in fact, turning over.
Samantha Trickey, precious metals consultant at the Commodities Research Unit (CRU) in London, points out that jewellery currently accounts for about 20% of total platinum demand, but that, unlike gold, platinum and palladium are primarily industrial metals and not stores of value.
“If prices of platinum get too high, you could see a substitution on the industrial side to palladium,” she said (see “Precious industrials”). “This is why I’m more bullish on palladium than I am on platinum.” Yet it is platinum’s secondary function as a precious metal that is driving prices to the stratosphere, along with a rickety South African electricity grid.
Most coverage of gold’s rise focuses on two factors: the plunge in the U.S. dollar and a general fear of exposure to paper assets. Less attention has focused on the supply side of gold and silver, but more of platinum, palladium and plain old copper.
“In South Africa, the main power supplier, Eskom, has run out of reserve capacity, and this has caused rolling power cuts,” Trickey said. “Many platinum and palladium mines had to close temporarily at the end of January, since power could not be guaranteed, and this posed a safety risk, especially for the underground mines.”
As a result, mines are operating at just 95% capacity, at a time when industrial demand, primarily in China, remains at full throttle. “They’re able to operate on that, but companies are looking at ways to find individual power sources of their own,” she said.
Palladium, thanks to these and other factors, rose from less than $200 per ounce in March 2003, to nearly $580 in February this year (after a one-month surge of about 40%), before settling down to its current mid-$400 range.
Supply concerns also are dominating the copper market. “The supply side seems to perennially shoot itself in the foot, and so far in 2008 it seems to have shot itself in both feet,” said Trickey’s colleague, Allan Trench, who is CRU’s research manager for copper. He said many of the bullets hitting those feet left their chambers in the 1990s.
“You had a lack of investment then due to low prices. But when that changed, you had all the usual quick fixes being implemented, like expanding leach tanks and debottlenecking the crushing circuit, or putting an extra shovel in the pit in cases where an operation was pit-constrained,” Trench said. What didn’t happen was significant re-tooling.
“As a result, everyone is doing the same thing at the same time, meaning maj or expansions and new projects and suppliers are swamped.” He cites a litany of statistics: tires that could have been delivered in four months three years ago now sometimes need almost two years to arrive. Trucks that would show up in three months now need two years. “You know how they’re dealing with this?” he asked. “They’re driving slower to maintain tire life.”
Analysts seem at odds over the short-term prognosis for platinum, which recently traded up to $2,276 per ounce before settling down to its current range just below $2,000.
The consensus on its poor cousin, palladium, however, is strong — largely because of the paradox that, as with platinum, most of the factors that can make demand for the metal go down actually make it go up. In other words, the factors that hurt demand for palladium as an industrial metal actually help it as a precious metal, and vice versa — at least, that’s the perception. A global deflationary trend would, in reality, drag down the price of both precious and industrial metals.
But in reality, South Africa’s electricity problems and strong industrial demand are only half of the palladium story. The other half is gold and platinum. “Economic news from the U.S.A. seems to be pushing gold around, and that’s also having an effect on platinum on a day-to-day basis,” Trickey said. “Given platinum’s stellar performance so far this year and the risk to the supply side, this should continue to be supportive for palladium.”
This quarter, she sees platinum averaging between $2,000 and $1,900, with palladium remaining in the mid-$400s. In the second half of the year, she sees prices dipping for both.
“I’m expecting platinum to be around $1,800 in the second half of the year, and for palladium to be below $450,” she said. “This is actually higher than we previously projected, because our earlier figures included a number of uncommitted South African mining projects that were scheduled to come online towards the end of this year and in 2009. Now many of these projects are rethinking their strategy based on the energy situation.”
Gold has, of course, been the headline-grabber over these past few months, and what can you say about the yellow metal that hasn’t already been blogged and bandied to death? It’s risen 55% over the past year, topping out above $1,000 per troy ounce before settling back to $900 at press time.
Gold bugs — those ‘end-of-the-worlders’ who seem to materialize by the thousands whenever the global economy shudders — are justifiably happy. But are their doomsday scenarios justified?
Bob McKee, chief economist at Independent Strategy, doesn’t think so. He started getting long gold between $330 and $350 in 2003 (see “Golden opportunity”), citing three drivers that, in hindsight, are clear to all: the current account deficit’s pressure on the dollar, growing political uncertainty and an impending reversal of the liquidity boom.
All three remain in effect today, and the same counter-arguments are being offered now as then, at least as far as the dollar is concerned. “Some people argued then that money flowing into Asian economies would be recycled into dollars,” McKee said. “There’s some truth to this, but there is also a growing pressure to diversify.”
One counter-argument petered out three years back: namely, that the world’s central banks would dump tonnes of the yellow metal on the market if it ever began to overheat. “Up until three or four years ago, that was a real concern because the central banks still saw gold as a dead thing,” he said. “But they have done their dumping, and have no more left to sell.”
The other drivers have only gotten stronger, and the question now is whether they have become so strong that the market has already discounted them. McKee doesn’t think so.
“We still have some room to go in all three drivers,” he said. “Assuming that the U.S. economy went into recession this last quarter, and knowing that recessions tend to last nine to 12 months, we can expect dollar weakness to continue for at least the next two quarters.”
Then, he said, just when the United States begins to pick up steam, the other OECD countries could be slipping into recession with low interest rates sparking fears of inflation. His recommendation: hold your gold for now, but don’t expect the vertical trend of the last year to continue.
HSBC analyst James Steel is also gingerly bullish but warns the end could be near.
The bullish argument comes from the safe haven argument. “There are no reliable estimates of how much “toxic debt” remains in the (mortgage) market and how that debt is distributed,” he wrote in a mid-March newsletter.
“Regarding precious metals prices, there is also the separate but related question of whether a commodities bubble is in the process of bursting,” he added. “Although the commodity rally is in part related to the credit crisis, in that the crisis has undoubtedly encouraged substantial purchase of hard assets, commodity prices, including precious metals prices, are also subject to a slew of other factors.”
Specifically, he warns of a divergence between commodity prices and economic growth: prices can’t keep going up if the economies of the world are slowing down. “We believe the slump in commodity prices is evidence that investors are reassessing likely commodity demand levels, and therefore also prices, after the recent run-up,” he said.
With copper hovering above $8,000 per tonne ($4 per pound) and metals like gold and nickel breaking long-respected milestones, the question on copper traders’ minds is whether the metal can breach the once unheard-of price of $10,000 per tonne. In the most recent edition of his “Copper Monitor,” titled “High Prices: Market Flavour or Fundamentals?,” CRU’s Trench identified 10 events that would have to happen for that level to be breached.
The five that are necessary (condensed to four for brevity) to stay above $8,000 are: Chinese consumption maintains double-digit growth, U.S. consumption holds steady, Chilean and Central African supply remains clogged and ‘non-fundamentals’ like market sentiment remain strong.
Five events that are necessary to get above $10,000 (also condensed here) are: some sort of nationwide supply catastrophe like the one that has impacted South Africa, a flurry of ‘micro’ supply disruptions, developing world demand growth outpacing developed world contraction and hedge fund lemmings going bonkers over the stuff and buying it like mad.
“The first five are already over the line, which is why we’re at these levels,” Trench said. “It’s like we’ve completed the pentathlon and now want to see if they can do the decathlon.”
Of the questionable five, he said number six, a nationwide catastrophe like the one that has befallen South Africa’s mining industry, is the least likely to take place. “That’s something you get once every few decades,” he said. “The others have a fair chance of coming through.”
And, he might add, “once every few decades” isn’t as much of a long shot as it may seem.
Visit a Gold Mickey Mouse in Japan!
A gold statute of Disney icon Mickey Mouse has been unveiled in Tokyo ahead of an online "treasure hunt" that will give players a chance to win it as a prize.
According to a NDTV.com report, the 120-milimetre high statute - which shows Mickey holding a movie clapperboard - was made by Japanese jewellery house Ginza Tanaka using one kilogram of pure gold.
A total of ten of the company's craftsmen were involved in the design and creation of the statue, which took three months to complete. The piece would be worth around $30,000 (?15,190) at current market values.
It will now be offered a prize through the "treasure hunt" game in partnership with Walt Disney.
A two-foot tall, 24ct gold statue of the character was previously created in 2001 to celebrate Disney's 100th anniversary.
Created for Disney in 1928 by animator Ub Iwerks, Mickey Mouse has become one of the most recognisable symbols on earth - although Walt Disney himself originally preferred the name Mortimer Mouse.
According to a NDTV.com report, the 120-milimetre high statute - which shows Mickey holding a movie clapperboard - was made by Japanese jewellery house Ginza Tanaka using one kilogram of pure gold.
A total of ten of the company's craftsmen were involved in the design and creation of the statue, which took three months to complete. The piece would be worth around $30,000 (?15,190) at current market values.
It will now be offered a prize through the "treasure hunt" game in partnership with Walt Disney.
A two-foot tall, 24ct gold statue of the character was previously created in 2001 to celebrate Disney's 100th anniversary.
Created for Disney in 1928 by animator Ub Iwerks, Mickey Mouse has become one of the most recognisable symbols on earth - although Walt Disney himself originally preferred the name Mortimer Mouse.
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