Gold Fields CEO says bullion could hit $1,000
The gold price could hit $1,000 per ounce over the next few years, partly fuelled by hefty investment demand from oil producers with excess cash, the chief executive of South Africa's Gold Fields said on Wednesday.
Only after several more years of rallying prices would they probably return to equilibrium levels, but these would be double the level of previous down cycles, Ian Cockerill told Reuters.
He was clarifying comments made to a strategy presentation on Tuesday, when he said prices could move down to around $500 per ounce.
"I see the price continuing from these levels and moving higher, and in fact could move significantly higher over the next couple of years. I would not be surprised to see it going up into four figures in dollar terms, that's a very real possibility," he said in an interview.
The spot gold price surged by as much as 45 percent this year, peaking at $730 an ounce on May 12, but has fallen since then to trade at $658 per ounce on Wednesday afternoon.
"A longer term equilibrium price is closer to $500, if one looks at the fundamental level, but I don't see us being in any danger of getting to that level in the short-term, I see that as much longer term. I see the prices going higher from here not lower, and then going back (down)."
If gold eventually touched a base level around $500 per ounce, that would mean that the equilibrium price was twice the level compared to lows set in 1999 at around $250 per ounce.
"No market goes up forever and neither does it go down forever, but when it does ultimately pull back, we don't see it going back below the $500 mark, that's for sure."
PETRO DOLLARS DRIVING PRICE
A main driver of the current gold price, similar to 1980 when prices touched $850 per ounce, was from oil producing nations seeking a home for a windfall in revenues, he said.
"Excess petro dollars sloshing around in the Middle East was one of the principal drivers of the gold price back in the 1980s and over the last 12-18 months we've seen an increase in petro dollars in the Middle East," he said.
Many analysts see a correlation between a rising oil price, which can fuel inflation, and the price of gold, which is often seen as a hedge against inflation.
The price of gold has risen 160 percent since touching lows in 1999 while Brent crude futures have shot up 265 percent.
"Gold, despite having a fairly healthy run since 2001, is still incredibly cheap on the gold-oil ratio and I think there's still lots of upside potential just taking that into account."
Long-term investors such as pension funds were also now investing in gold, which should give the market healthy support if short-term speculators decide to liquidate, he added.
The recent correction in the gold price is healthy and could help revive jewellery demand if prices stabilise, Cockerill said.
"It's price stability, irrespective of price levels, that is important to jewellery demand... it's the volatility that kills jewellery demand, not the actual price itself," he said.
"The recent run-up in the dollar price was very rapid, a little bit quicker than I had anticipated, so I wasn't surprised to see this pull back."
Gold Fields Ltd is the world's fourth biggest gold producer, with operations in South Africa, Ghana, Australia and Venezuela.
Wednesday, May 31, 2006
LONDON, May 31 - Gold traded around New York's closing levels in Europe on Wednesday, consolidating in the near term, but dealers saw fresh moves on May's 26-year peak of $730 an ounce further ahead.
"The corrective phase isn't over yet. I am looking for choppy, sideways action for the next couple of weeks," John Ventre, director at Beresford Gabler Securities, said.
"This correction doesn't put the medium-term bull trend in doubt," he added, noting that his long-term target for gold is $880 to $900 later in the year.
Spot gold (XAU=) was $653.60/$654.40 at 0959 GMT versus $656.80/657.60 in late New York.
Gold has soared this year, along with almost all commodities, on a huge inflow of money from speculative funds and fueled by worries about the global economy.
"Vulnerable longs have exited the precious metals market -- or insulated their longer-term positions from losses via options," investment bank UBS said in a daily report.
"We believe this has greatly reduced the chances of a further down-leg in precious metal prices."
The yen rose against the euro and the dollar after the Chinese central bank reaffirmed its commitment to deepen foreign exchange reform and boost the flexibility of its currency. [ID:nL31398969]
But the euro-dollar rate was little changed at $1.2865 (EUR=).
Spot silver (XAG=) was at $12.97/$13.07, down 10 cents from New York.
"We could see silver at $14 while staying within a broad consolidation pattern and $12.34 should provide some support," Beresford's Ventre said.
Platinum (XPT=) was $1,272/$1,282 an ounce versus $1,283/1,288 and palladium (XPD=) was down $3 at $352/$357.
"Platinum has been supported above $1,265 with consumer interest still waiting below the market for greater pullbacks," Julia Hamblett of Dresdner Kleinwort Wasserstein said in a report.
"However, speculative interest has been unable to drive the metal to the prior highs, and platinum has remained below $1,300. It would seem that further external drivers or news will be needed to prompt wither further buying at current levels or increased profit taking." (Additional reporting by James Regan in Sydney)
"The corrective phase isn't over yet. I am looking for choppy, sideways action for the next couple of weeks," John Ventre, director at Beresford Gabler Securities, said.
"This correction doesn't put the medium-term bull trend in doubt," he added, noting that his long-term target for gold is $880 to $900 later in the year.
Spot gold (XAU=) was $653.60/$654.40 at 0959 GMT versus $656.80/657.60 in late New York.
Gold has soared this year, along with almost all commodities, on a huge inflow of money from speculative funds and fueled by worries about the global economy.
"Vulnerable longs have exited the precious metals market -- or insulated their longer-term positions from losses via options," investment bank UBS said in a daily report.
"We believe this has greatly reduced the chances of a further down-leg in precious metal prices."
The yen rose against the euro and the dollar after the Chinese central bank reaffirmed its commitment to deepen foreign exchange reform and boost the flexibility of its currency. [ID:nL31398969]
But the euro-dollar rate was little changed at $1.2865 (EUR=).
Spot silver (XAG=) was at $12.97/$13.07, down 10 cents from New York.
"We could see silver at $14 while staying within a broad consolidation pattern and $12.34 should provide some support," Beresford's Ventre said.
Platinum (XPT=) was $1,272/$1,282 an ounce versus $1,283/1,288 and palladium (XPD=) was down $3 at $352/$357.
"Platinum has been supported above $1,265 with consumer interest still waiting below the market for greater pullbacks," Julia Hamblett of Dresdner Kleinwort Wasserstein said in a report.
"However, speculative interest has been unable to drive the metal to the prior highs, and platinum has remained below $1,300. It would seem that further external drivers or news will be needed to prompt wither further buying at current levels or increased profit taking." (Additional reporting by James Regan in Sydney)
Tuesday, May 30, 2006
Gold price fall 'healthy' for investors
Tue, 30 May 2006
Despite the recent pullback in the gold price from its 26-year high of $730 an ounce, the upward trend in the metal price was still intact, Gold Fields Chief Executive Officer Ian Cockerill said on Tuesday.
"In some respects the pull back has been quite healthy," Cockerill added during an investor presentation.
"We are still very positive about the gold price and do believe there is upside potential from where it is now," Cockerill stated.
Jewelry 'crucial'
In the medium term, Gold Fields expected the gold price to settle at or around the high $400s/oz to $500/oz, he stated.
On Tuesday gold was quoted at $660.35/oz, up $11.03/oz from its previous close.
The volatile gold price was having an impact on jewelry demand, which was a fundamental driver of the gold price, Cockerill said.
"Any let up in jewelry demand is going to be some what negative for the gold price," he added.
Charting the gold price against the oil price from 1979 to date showed that the gold price was "incredibly cheap", Cockerill said.
Oil will stay high
The spot price of Brent crude oil was last at $71.84 a barrel, up from the previous close of $70.67 a barrel.
The price of gold was likely to be supported by the oil price and Gold Fields was planning for an oil price of $60 a barrel and above. Oil was unlikely to return to $40 a barrel, Cockerill said.
"Certainly one of the key drivers of the increasing gold price in the 1980s was the sloshing around of excess petrodollars and the same thing is happening today," he added.
De-hedging, investment demand and central bank buying, Cockerill said, have supported the latest bull run in gold.
Tue, 30 May 2006
Despite the recent pullback in the gold price from its 26-year high of $730 an ounce, the upward trend in the metal price was still intact, Gold Fields Chief Executive Officer Ian Cockerill said on Tuesday.
"In some respects the pull back has been quite healthy," Cockerill added during an investor presentation.
"We are still very positive about the gold price and do believe there is upside potential from where it is now," Cockerill stated.
Jewelry 'crucial'
In the medium term, Gold Fields expected the gold price to settle at or around the high $400s/oz to $500/oz, he stated.
On Tuesday gold was quoted at $660.35/oz, up $11.03/oz from its previous close.
The volatile gold price was having an impact on jewelry demand, which was a fundamental driver of the gold price, Cockerill said.
"Any let up in jewelry demand is going to be some what negative for the gold price," he added.
Charting the gold price against the oil price from 1979 to date showed that the gold price was "incredibly cheap", Cockerill said.
Oil will stay high
The spot price of Brent crude oil was last at $71.84 a barrel, up from the previous close of $70.67 a barrel.
The price of gold was likely to be supported by the oil price and Gold Fields was planning for an oil price of $60 a barrel and above. Oil was unlikely to return to $40 a barrel, Cockerill said.
"Certainly one of the key drivers of the increasing gold price in the 1980s was the sloshing around of excess petrodollars and the same thing is happening today," he added.
De-hedging, investment demand and central bank buying, Cockerill said, have supported the latest bull run in gold.
South Africa's Gold Fields Ltd might consider exposure to platinum group metals (PGMs) in the future, but has no immediate plans for such an acquisition, it said on Tuesday.
Chief Executive Ian Cockerill told a presentation that he had been asked whether Gold Fields, the world's fourth biggest gold producer, was interested in making a bid for platinum producer Lonmin Plc.
"We have no immediate plans to do something in the PGM field," he said, adding that the firm was nonetheless interested in the sector.
Chief Executive Ian Cockerill told a presentation that he had been asked whether Gold Fields, the world's fourth biggest gold producer, was interested in making a bid for platinum producer Lonmin Plc.
"We have no immediate plans to do something in the PGM field," he said, adding that the firm was nonetheless interested in the sector.
Monday, May 29, 2006
Gold May Resume Its Rally on Concern U.S. Dollar Will Weaken
May 29 -- Gold may rise, ending a two-week slide, on speculation a weaker dollar will prompt investors to resume purchases of bullion as an alternative asset.
Fifteen of 30 traders, investors and analysts from Sydney to Chicago advised buying gold, according to a Bloomberg News survey taken May 25 and May 26. Prices fell 1 percent last week to $651 an ounce in New York. Seven respondents advised selling and eight were neutral.
Investment demand for gold has sent prices up 25 percent this year, reaching a 26-year high of $732 on May 12, as the dollar fell against 13 major currencies including the euro and yen. Buying of exchange-traded funds backed by gold surged 23 percent in the first quarter to 109 metric tons, valued at $1.9 billion, the producer-funded World Gold Council said May 23.
Gold ``will continue to become the go-to currency,'' said Gregory Orrell, who manages $150 million including $110 million of gold stocks as the president of Orrell Capital Management Inc. in Livermore, California. The dollar may drop amid signs of a slowing U.S. economy as the housing market cools, he said.
Gold futures for June delivery fell $6.50 last week to $651 on the Comex division of the New York Mercantile Exchange. The decline was predicted by a majority of analysts surveyed May 18 and May 19. The Bloomberg survey has forecast the direction of prices accurately in 68 of 109 weeks, or 62 percent of the time.
Lockstep With Euro
The precious metal has moved almost in lockstep with the euro's performance against the dollar this year at a correlation coefficient of 0.92. The maximum reading is 1. The coefficient measures to what degree two variables move in unison.
``Gold is likely to continue its upward trend,'' said Alec Kim, manager at Korea Exchange Bank Futures Co.'s international marketing division. ``The dollar is still weak.''
The dollar may drop against the euro and the yen this week on concern U.S. economic expansion will slow, a separate Bloomberg survey of 51 currency traders and strategists showed.
The economy, which grew at an annual rate of 5.3 percent in the first quarter, may slow the rest of this year.
Morgan Stanley economists last week revised their second- quarter growth estimate to 2.8 percent from 2.9 percent, as a government report showed a smaller gain in spending and a bigger inventory gain. The economy will expand at a 3.5 percent rate this quarter and 3 percent in the second half, based on the median estimate of economists surveyed by Bloomberg April 28 to May 8.
Gold Coins
The rally in gold also has increased demand for coins and small bars in the U.S., which rose 41 percent in the first quarter from a year ago, the World Gold Council said.
``With all this activity in the metals, we're seeing increases in both'' bullion coins and rare coins, said Scott Travers, president of Scott Travers Rare Coin Galleries in New York. He expects gold to reach $800 by the end of this year.
Manufacturing growth slowed this month, economists said. The Institute for Supply Management's factory index probably fell to 55.6 in May from 57.3 in April, based on the median of 61 estimates in a Bloomberg survey. Readings above 50 indicate expansion. The institute's report will be released June 1.
Purchases of previously owned homes declined 2 percent in April to an annual rate of 6.76 million, the lowest in three months, the National Association of Realtors reported May 25. Sales were down 5.7 percent from a year earlier as rising mortgage rates put a brake on the housing market.
`No Froth'
The housing market has been integral to U.S. economic growth, and a slowdown will lead to a contraction in consumer spending and may prompt the Federal Reserve to cut interest rates in the first quarter of next year, Orrell said.
Hedge funds and other large speculators may resume buying of gold futures on the Comex, said Paul Yusem, an individual investor in Lombard, Illinois, who has traded gold futures for six years.
Speculative net-long positions, or bets that prices will rise, fell 12 percent to 111,098 gold futures contracts for the week ended May 23, the U.S. Commodity Futures Trading Commission said May 26. Speculators amassed 177,410 contracts in the week ended Oct. 11, the most since at least February 1983.
``Since the large speculator position is nowhere near the extreme reached in October, this is one measure indicating absolutely no froth in the gold market at all,'' said Yusem, who forecast gold will reach $875 this year.
A futures contract is an obligation to sell or buy a commodity at a set price by a specific date.
May 29 -- Gold may rise, ending a two-week slide, on speculation a weaker dollar will prompt investors to resume purchases of bullion as an alternative asset.
Fifteen of 30 traders, investors and analysts from Sydney to Chicago advised buying gold, according to a Bloomberg News survey taken May 25 and May 26. Prices fell 1 percent last week to $651 an ounce in New York. Seven respondents advised selling and eight were neutral.
Investment demand for gold has sent prices up 25 percent this year, reaching a 26-year high of $732 on May 12, as the dollar fell against 13 major currencies including the euro and yen. Buying of exchange-traded funds backed by gold surged 23 percent in the first quarter to 109 metric tons, valued at $1.9 billion, the producer-funded World Gold Council said May 23.
Gold ``will continue to become the go-to currency,'' said Gregory Orrell, who manages $150 million including $110 million of gold stocks as the president of Orrell Capital Management Inc. in Livermore, California. The dollar may drop amid signs of a slowing U.S. economy as the housing market cools, he said.
Gold futures for June delivery fell $6.50 last week to $651 on the Comex division of the New York Mercantile Exchange. The decline was predicted by a majority of analysts surveyed May 18 and May 19. The Bloomberg survey has forecast the direction of prices accurately in 68 of 109 weeks, or 62 percent of the time.
Lockstep With Euro
The precious metal has moved almost in lockstep with the euro's performance against the dollar this year at a correlation coefficient of 0.92. The maximum reading is 1. The coefficient measures to what degree two variables move in unison.
``Gold is likely to continue its upward trend,'' said Alec Kim, manager at Korea Exchange Bank Futures Co.'s international marketing division. ``The dollar is still weak.''
The dollar may drop against the euro and the yen this week on concern U.S. economic expansion will slow, a separate Bloomberg survey of 51 currency traders and strategists showed.
The economy, which grew at an annual rate of 5.3 percent in the first quarter, may slow the rest of this year.
Morgan Stanley economists last week revised their second- quarter growth estimate to 2.8 percent from 2.9 percent, as a government report showed a smaller gain in spending and a bigger inventory gain. The economy will expand at a 3.5 percent rate this quarter and 3 percent in the second half, based on the median estimate of economists surveyed by Bloomberg April 28 to May 8.
Gold Coins
The rally in gold also has increased demand for coins and small bars in the U.S., which rose 41 percent in the first quarter from a year ago, the World Gold Council said.
``With all this activity in the metals, we're seeing increases in both'' bullion coins and rare coins, said Scott Travers, president of Scott Travers Rare Coin Galleries in New York. He expects gold to reach $800 by the end of this year.
Manufacturing growth slowed this month, economists said. The Institute for Supply Management's factory index probably fell to 55.6 in May from 57.3 in April, based on the median of 61 estimates in a Bloomberg survey. Readings above 50 indicate expansion. The institute's report will be released June 1.
Purchases of previously owned homes declined 2 percent in April to an annual rate of 6.76 million, the lowest in three months, the National Association of Realtors reported May 25. Sales were down 5.7 percent from a year earlier as rising mortgage rates put a brake on the housing market.
`No Froth'
The housing market has been integral to U.S. economic growth, and a slowdown will lead to a contraction in consumer spending and may prompt the Federal Reserve to cut interest rates in the first quarter of next year, Orrell said.
Hedge funds and other large speculators may resume buying of gold futures on the Comex, said Paul Yusem, an individual investor in Lombard, Illinois, who has traded gold futures for six years.
Speculative net-long positions, or bets that prices will rise, fell 12 percent to 111,098 gold futures contracts for the week ended May 23, the U.S. Commodity Futures Trading Commission said May 26. Speculators amassed 177,410 contracts in the week ended Oct. 11, the most since at least February 1983.
``Since the large speculator position is nowhere near the extreme reached in October, this is one measure indicating absolutely no froth in the gold market at all,'' said Yusem, who forecast gold will reach $875 this year.
A futures contract is an obligation to sell or buy a commodity at a set price by a specific date.
Sunday, May 28, 2006
Flaws in the dollar are going to move the price of gold higher, said James Turk, the founder of Goldmoney, in an interview in Barron's magazine.
"There are problems with the dollar, and that's being reflected in a higher gold price," Turk said. "I still fear we are going to see a panic in the dollar at some point."
Turk said the rise of protectionism in the United States has unsettled wealthy international investors.
The price of gold is "going much higher," and the $8,000 per ounce forecast he made a couple of years ago is "probably as good a target as any," Turk said. A near-term spike to $2,000 is possible, he added.
The price of gold will never again go below $500 an ounce, Turk said.
The U.S. government is trying to fund the federal budget deficit without destroying the dollar and trying to raise interest rates to save the dollar without destroying the economy, he said.
"I don't think they can do it," he said.
"There are problems with the dollar, and that's being reflected in a higher gold price," Turk said. "I still fear we are going to see a panic in the dollar at some point."
Turk said the rise of protectionism in the United States has unsettled wealthy international investors.
The price of gold is "going much higher," and the $8,000 per ounce forecast he made a couple of years ago is "probably as good a target as any," Turk said. A near-term spike to $2,000 is possible, he added.
The price of gold will never again go below $500 an ounce, Turk said.
The U.S. government is trying to fund the federal budget deficit without destroying the dollar and trying to raise interest rates to save the dollar without destroying the economy, he said.
"I don't think they can do it," he said.
Gold futures climbed Friday in a holiday-shortened trading session as renewed strength in the U.S. dollar lured investors away from the precious-metals market, but prices still ended the week with a loss of more than $6 an ounce.
Gold for June delivery rose $2.50 to close at $651 an ounce on the New York Mercantile Exchange after trading as low as $640.50. Prices climbed $11 Thursday, but that followed Wednesday's drop of $36.20. The contract closed out last Friday at $657.50, so they were down $6.50, or 1%, for the week.
'We cannot expect full-blown participation in the gold-trading pits to show up in terms of commitments to positions either [Friday] or (overseas) on Monday,' said Jon Nadler, an analyst at Kitco.com.
Metals trading on the New York Mercantile Exchange closed early Friday and will remain closed Monday for Memorial Day.
On Thursday, gold rallied $11 after a smaller-than-expected upward revision to first-quarter economic growth estimates weighed on the U.S. dollar, prompting investors to take refuge in the precious metal. .
But prices had dropped more than $36 Wednesday. .
'The current gold-price range may well have $675 as the overhead resistance point that needs to be overcome before traders declare the recent correction as being ready to be archived,' said Nadler.
'In the background, the Iranian situation continues to be on a slow boil as there are doubts that the package of 'carrots' being offered in exchange for cessation of [uranium] enrichment will really be unconditionally accepted by Tehran,' he said.
Nadler expects 'a return of physical buying,' but emphasized that any such inventory build-ups could be light, 'as the summer doldrums would normally be the dominant tempering influence in gold prices.'
'Still , this summer (as last) might keep traders busy if uncertainty keeps the world on edge,' he said.
Meanwhile, in economic data Friday, the U.S. Commerce Department said personal incomes rose 0.5% in April, but those gains were wiped out by a 0.5% gain in consumer prices. Real disposable incomes -- inflation-adjusted and after-tax incomes -- fell 0.1%.
Core inflation, as measured by the personal-consumption-expenditure index, excluding food and energy, rose 0.2% in April after a 0.3% increase in March. That was in line with expectations. For the past 12 months, core inflation rose 2.1%, the fastest gain since March 2005. .
The dollar strengthened against the yen and euro Friday as traders digested the U.S. data, as well as data on Japanese inflation, which came in as expected.
In other metals trading Friday, July copper climbed 10.75 cents to close at $3.815 a pound, ending the week 10% higher.
July silver added 13 cents to finish at $12.73 an ounce, ending 3% above last Friday closing level. June palladium rose $3.10 to close at $355.10 an ounce, up 1.5% from last week's close of $350, while July platinum closed at $1,298.10 an ounce, up $3.10 for the day, but down 0.9% for the week.
On the supply side, inventories of copper fell 471 short tons to 10,065 as of late Thursday, according to Nymex.
Gold inventories were down 32 troy ounces at 7.8 million troy ounces, while silver inventories were at 112.5 million troy ounces, down 1.2 million troy ounces.
Indexes gain
Indexes that track the metals-mining sector climbed following Thursday's losses of around 5%, and the benchmarks ended higher for the week.
The Philadelphia Gold and Silver Index added 0.3% to close at 142.59 points, with shares of Harmony Gold Mining down 1.5% to end at $14.24 after Thursday's 7.6% gain. It was up 1.8% from last Friday's closing level.
The CBOE Gold Index closed at 144.50 points and the Amex Gold Bugs Index closed at 329.17 points, with both benchmarks climbing 0.3% for the session and ending the week 2.4% higher.
Also Friday, the StreetTracks Gold Trust exchange-traded fund rose 40 cents to close at $65.10, while the iShares Silver Trust ETF fell 15 cents to end at $126.70.
The Market Vectors-Gold Miners ETF , the first exchange-traded fund to invest in shares of public gold-mining companies, closed higher by 0.6%, or 23 cents, at $38.55.
Nadler questioned 'how much lighter the correction may have been were the gold ETF products absent from the marketplace.
'There are some opinions out there that these new vehicles have contributed to the rally (certainly, in terms of offtake), but that they also magnify the intensity and swiftness of the corrective phases of the markets,' he said.
Gold for June delivery rose $2.50 to close at $651 an ounce on the New York Mercantile Exchange after trading as low as $640.50. Prices climbed $11 Thursday, but that followed Wednesday's drop of $36.20. The contract closed out last Friday at $657.50, so they were down $6.50, or 1%, for the week.
'We cannot expect full-blown participation in the gold-trading pits to show up in terms of commitments to positions either [Friday] or (overseas) on Monday,' said Jon Nadler, an analyst at Kitco.com.
Metals trading on the New York Mercantile Exchange closed early Friday and will remain closed Monday for Memorial Day.
On Thursday, gold rallied $11 after a smaller-than-expected upward revision to first-quarter economic growth estimates weighed on the U.S. dollar, prompting investors to take refuge in the precious metal. .
But prices had dropped more than $36 Wednesday. .
'The current gold-price range may well have $675 as the overhead resistance point that needs to be overcome before traders declare the recent correction as being ready to be archived,' said Nadler.
'In the background, the Iranian situation continues to be on a slow boil as there are doubts that the package of 'carrots' being offered in exchange for cessation of [uranium] enrichment will really be unconditionally accepted by Tehran,' he said.
Nadler expects 'a return of physical buying,' but emphasized that any such inventory build-ups could be light, 'as the summer doldrums would normally be the dominant tempering influence in gold prices.'
'Still , this summer (as last) might keep traders busy if uncertainty keeps the world on edge,' he said.
Meanwhile, in economic data Friday, the U.S. Commerce Department said personal incomes rose 0.5% in April, but those gains were wiped out by a 0.5% gain in consumer prices. Real disposable incomes -- inflation-adjusted and after-tax incomes -- fell 0.1%.
Core inflation, as measured by the personal-consumption-expenditure index, excluding food and energy, rose 0.2% in April after a 0.3% increase in March. That was in line with expectations. For the past 12 months, core inflation rose 2.1%, the fastest gain since March 2005. .
The dollar strengthened against the yen and euro Friday as traders digested the U.S. data, as well as data on Japanese inflation, which came in as expected.
In other metals trading Friday, July copper climbed 10.75 cents to close at $3.815 a pound, ending the week 10% higher.
July silver added 13 cents to finish at $12.73 an ounce, ending 3% above last Friday closing level. June palladium rose $3.10 to close at $355.10 an ounce, up 1.5% from last week's close of $350, while July platinum closed at $1,298.10 an ounce, up $3.10 for the day, but down 0.9% for the week.
On the supply side, inventories of copper fell 471 short tons to 10,065 as of late Thursday, according to Nymex.
Gold inventories were down 32 troy ounces at 7.8 million troy ounces, while silver inventories were at 112.5 million troy ounces, down 1.2 million troy ounces.
Indexes gain
Indexes that track the metals-mining sector climbed following Thursday's losses of around 5%, and the benchmarks ended higher for the week.
The Philadelphia Gold and Silver Index added 0.3% to close at 142.59 points, with shares of Harmony Gold Mining down 1.5% to end at $14.24 after Thursday's 7.6% gain. It was up 1.8% from last Friday's closing level.
The CBOE Gold Index closed at 144.50 points and the Amex Gold Bugs Index closed at 329.17 points, with both benchmarks climbing 0.3% for the session and ending the week 2.4% higher.
Also Friday, the StreetTracks Gold Trust exchange-traded fund rose 40 cents to close at $65.10, while the iShares Silver Trust ETF fell 15 cents to end at $126.70.
The Market Vectors-Gold Miners ETF , the first exchange-traded fund to invest in shares of public gold-mining companies, closed higher by 0.6%, or 23 cents, at $38.55.
Nadler questioned 'how much lighter the correction may have been were the gold ETF products absent from the marketplace.
'There are some opinions out there that these new vehicles have contributed to the rally (certainly, in terms of offtake), but that they also magnify the intensity and swiftness of the corrective phases of the markets,' he said.
Saturday, May 27, 2006
Bargain hunters lift gold
| May 27, 2006
) - Gold rallied above $650 an ounce on Friday, lifted by buyers looking for a bargain, but analysts said the market remained vulnerable after its recent fall from 26-year highs.
Market players were wary about chasing prices much higher ahead of a long holiday weekend in the United States and Britain and much-awaited U.S. inflation data later in the session.
"Today stabilization is the name of the game. Gold seems to be trying to establish itself in a range which is probably $638-$675 an ounce," John Reade, precious metals analyst at UBS Investment Bank, said.
"I doubt people will want to climb into this market and re-establish long positions ahead of the weekend...we might see people coming back onto the long side sometime next week."
Gold rose as high as $655.10 an ounce before moving to $652.40/653.20 by 0948 GMT. The metal closed at $649.80/650.60 late in New York on Thursday, when it added more than one percent after the dollar weakened and fund selling subsided.
In Asia, benchmark gold futures <0#JAU:> on the Tokyo Commodity Exchange, currently April 2007, rose 17 yen per gram to 2,397 yen, reflecting gains in New York.
"Gold's ability to work back above $650 is positive although the lack of clear direction still leaves the metal vulnerable to corrections lower," said James Moore, precious metals analyst at TheBullionDesk.com.
"A period of steady range play would be constructive, however with the scale of volatility and uncertainty across all the markets, that seems unlikely."
Gold surged to $730 on May 12, the highest since January 1980, as funds and investors poured money into the metal on worries about rising oil prices, tensions over the Middle East and uncertainty in the dollar's outlook.
The dollar edged up to hover in a narrow range ahead of U.S. inflation data. The currency tumbled last week to one-year lows against the euro and sterling but won respite this week from investor caution over a global sell-off in other markets.
UPSIDE POTENTIAL
Daniel Sacks, head of resources at Investec Asset Management, said gold was being driven upwards by fears about oil-induced inflation, geopolitical turmoil and a weaker dollar. Despite recent corrections, none of these factors had changed.
"Political and economic upheavals are the meat and drink of gold bull runs. They are difficult to forecast and by their very nature are the stuff of violent volatility.
"But if gold stays in favor as a risk-diversifying asset class, I believe there could be far more upside, as investors look for safe havens and the market discovers that there is so much money and so little gold supply."
Dealers noted light physical buying in Asia. Premiums for gold bars were unchanged at zero in Singapore, center for bullion trading in Southeast Asia.
They also kept a watch on oil, which extended gains above $71 a barrel, buoyed by healthy U.S. economic growth that hinted recent record-high prices may not hit robust demand.
Gold is often seen as a hedge against inflation.
Platinum rose to $1,290/1,298 an ounce from $1,287/1,297 late in New York, while palladium fell to $349/356 an ounce from $350/358.
Silver declined to $12.60/12.70 an ounce from
$12.66/12.76.
| May 27, 2006
) - Gold rallied above $650 an ounce on Friday, lifted by buyers looking for a bargain, but analysts said the market remained vulnerable after its recent fall from 26-year highs.
Market players were wary about chasing prices much higher ahead of a long holiday weekend in the United States and Britain and much-awaited U.S. inflation data later in the session.
"Today stabilization is the name of the game. Gold seems to be trying to establish itself in a range which is probably $638-$675 an ounce," John Reade, precious metals analyst at UBS Investment Bank, said.
"I doubt people will want to climb into this market and re-establish long positions ahead of the weekend...we might see people coming back onto the long side sometime next week."
Gold
In Asia, benchmark gold futures <0#JAU:> on the Tokyo Commodity Exchange, currently April 2007, rose 17 yen per gram to 2,397 yen, reflecting gains in New York.
"Gold's ability to work back above $650 is positive although the lack of clear direction still leaves the metal vulnerable to corrections lower," said James Moore, precious metals analyst at TheBullionDesk.com.
"A period of steady range play would be constructive, however with the scale of volatility and uncertainty across all the markets, that seems unlikely."
Gold surged to $730 on May 12, the highest since January 1980, as funds and investors poured money into the metal on worries about rising oil prices, tensions over the Middle East and uncertainty in the dollar's outlook.
The dollar edged up to hover in a narrow range ahead of U.S. inflation data. The currency tumbled last week to one-year lows against the euro and sterling but won respite this week from investor caution over a global sell-off in other markets.
UPSIDE POTENTIAL
Daniel Sacks, head of resources at Investec Asset Management, said gold was being driven upwards by fears about oil-induced inflation, geopolitical turmoil and a weaker dollar. Despite recent corrections, none of these factors had changed.
"Political and economic upheavals are the meat and drink of gold bull runs. They are difficult to forecast and by their very nature are the stuff of violent volatility.
"But if gold stays in favor as a risk-diversifying asset class, I believe there could be far more upside, as investors look for safe havens and the market discovers that there is so much money and so little gold supply."
Dealers noted light physical buying in Asia. Premiums for gold bars were unchanged at zero in Singapore, center for bullion trading in Southeast Asia
They also kept a watch on oil, which extended gains above $71 a barrel, buoyed by healthy U.S. economic growth that hinted recent record-high prices may not hit robust demand.
Gold is often seen as a hedge against inflation.
Platinum
Silver
$12.66/12.76.
Friday, May 26, 2006
Gold Rises for 2nd Day as Some Investors See Fall as Overdone
May 26 -- Gold rose for a second day in Asia as some investors judged that the metal's fall to a one-month low this week was overdone. Slower-than-forecast growth in the U.S. added to the appeal of the precious metal.
Gold for immediate delivery is down 11 percent since reaching a 26-year high of $730.40 an ounce on May 12, on concern a five-year rally may be over. Last week's decline of 8 percent was the biggest since 1990. The lower price made gold more attractive, traders said.
``The recent fall seems excessive,'' said Ian Hwang, deputy general manager at Korea Exchange Bank Futures Co.'s international business team in Seoul. ``Economic growth in the U.S. missed forecasts, weakening the U.S. dollar. There's still continuous demand for commodities.''
Gold for immediate delivery rose $2.50, or 0.4 percent, to $653.40 at 2:25 p.m. Seoul time, after gaining $10.20, or 1.6 percent, yesterday. Gold for June delivery rose 0.7 percent to $653 an ounce in after-hours electronic trade on the Comex division of the New York Mercantile Exchange.
U.S. economic growth rose at an annual rate of 5.3 percent in the first quarter, the Commerce Department said yesterday. That's slower than the median forecast of 5.8 percent in a Bloomberg News survey, reflecting less momentum in consumer and corporate spending.
Still, last quarter's figure was the biggest since the third quarter of 2003 and compares with a 4.8 percent rate that was reported on April 28.
Spot gold may rise to $660 today as other metals and oil prices gain, Hwang said. The prices ``move as a package.''
Uranium Enrichment
Crude oil rose above $71 a barrel for a second day in New York, partly because talks to convince Iran to abandon uranium enrichment ended inconclusively.
Crude oil for July delivery was at $71.55 a barrel, up 23 cents, in after-hours electronic trading on the New York Mercantile Exchange at 2:21 p.m. Seoul time. Prices today are 40 percent higher than a year ago.
Iranian President Mahmoud Ahmadinejad said May 24 his country has the right to develop atomic energy and any aggressors trying to stop it would get a `` historic slap.'' Iran is the world's fourth- largest oil producer.
The stalemate over Iran prompted investors seeking a haven to buy gold. Gold rose to a record $850 an ounce in January 1980 when the 1979 Iranian revolution cut oil exports.
``We are looking for prices to go up amid concerns about security and oil prices,'' Ali Alwash, a Geneva-based trader at MKS Finance SA, a precious metals-trading and refining company, said yesterday. ``The geopolitical situation could be aggravated.''
In India, the world's biggest consumer, gold prices for June delivery rose 58 rupees, or 0.6 percent, to 9,732 rupees per 10 grams, or 30,266 rupees ($660) per ounce, at 11:32 a.m. on the Multi Commodity Exchange of India Ltd. in Mumbai.
May 26 -- Gold rose for a second day in Asia as some investors judged that the metal's fall to a one-month low this week was overdone. Slower-than-forecast growth in the U.S. added to the appeal of the precious metal.
Gold for immediate delivery is down 11 percent since reaching a 26-year high of $730.40 an ounce on May 12, on concern a five-year rally may be over. Last week's decline of 8 percent was the biggest since 1990. The lower price made gold more attractive, traders said.
``The recent fall seems excessive,'' said Ian Hwang, deputy general manager at Korea Exchange Bank Futures Co.'s international business team in Seoul. ``Economic growth in the U.S. missed forecasts, weakening the U.S. dollar. There's still continuous demand for commodities.''
Gold for immediate delivery rose $2.50, or 0.4 percent, to $653.40 at 2:25 p.m. Seoul time, after gaining $10.20, or 1.6 percent, yesterday. Gold for June delivery rose 0.7 percent to $653 an ounce in after-hours electronic trade on the Comex division of the New York Mercantile Exchange.
U.S. economic growth rose at an annual rate of 5.3 percent in the first quarter, the Commerce Department said yesterday. That's slower than the median forecast of 5.8 percent in a Bloomberg News survey, reflecting less momentum in consumer and corporate spending.
Still, last quarter's figure was the biggest since the third quarter of 2003 and compares with a 4.8 percent rate that was reported on April 28.
Spot gold may rise to $660 today as other metals and oil prices gain, Hwang said. The prices ``move as a package.''
Uranium Enrichment
Crude oil rose above $71 a barrel for a second day in New York, partly because talks to convince Iran to abandon uranium enrichment ended inconclusively.
Crude oil for July delivery was at $71.55 a barrel, up 23 cents, in after-hours electronic trading on the New York Mercantile Exchange at 2:21 p.m. Seoul time. Prices today are 40 percent higher than a year ago.
Iranian President Mahmoud Ahmadinejad said May 24 his country has the right to develop atomic energy and any aggressors trying to stop it would get a `` historic slap.'' Iran is the world's fourth- largest oil producer.
The stalemate over Iran prompted investors seeking a haven to buy gold. Gold rose to a record $850 an ounce in January 1980 when the 1979 Iranian revolution cut oil exports.
``We are looking for prices to go up amid concerns about security and oil prices,'' Ali Alwash, a Geneva-based trader at MKS Finance SA, a precious metals-trading and refining company, said yesterday. ``The geopolitical situation could be aggravated.''
In India, the world's biggest consumer, gold prices for June delivery rose 58 rupees, or 0.6 percent, to 9,732 rupees per 10 grams, or 30,266 rupees ($660) per ounce, at 11:32 a.m. on the Multi Commodity Exchange of India Ltd. in Mumbai.
Gold Falls, Heading for Second Weekly Drop, on Rates Outlook
May 26-- Gold fell, heading for a second headed for a second weekly decline, on speculation higher U.S. interest rates will erode the appeal of the metal as an alternative investment.
Prices are down 12 percent in New York since reaching a 26- year high of $732 an ounce on May 12. Investment so far this month in StreetTracks Gold Trust fell 15.3 tons, or 4 percent, the most since the trading began in November 2004. Each share of the exchange-traded fund represents a 10th of an ounce of gold.
``Gold is like a roller coaster,'' said Christoph Eibl, the head of commodities trading at Tiberius Asset Management AG in Zug, Switzerland. ``Gold is solely driven by investor demand and some investors are taking profit.'' Prices will keep falling next week, he said.
Gold for immediate delivery fell $6.70, or 1 percent, to $644.20 an ounce at 3:34 p.m. in London. On the Comex division of the New York Mercantile Exchange, gold futures for June delivery fell $4.50, or 0.7 percent, to $644 at 10:35 a.m.
Prices are down 2 percent this week in London, after tumbling 8 percent last week, which was biggest drop in more than 15 years. Two straight weeks of declines would be the first since December. Gold is still up more than 24 percent this year.
``In many cases, you have an entire investment community that has never seen this level of volatility in gold,'' said Frank McGhee, the head metals trader at Integrated Brokerage Services LLC in Chicago. ``Probably the best piece of advice in these markets is to pare back your trading. Because of the volatility, you can get the same level of return for a small investment and take a lower level of risk.''
Interest Rates
The U.S. Federal Reserve has raised borrowing costs at every meeting since June 2004, bringing its key rate to 5 percent, the highest in more than four years. Analysts expect the Fed to increase rates again at its meeting on June 29.
Higher interest rates encourage investments in bonds and put pressure on non-interest bearing assets like precious metals.
StreetTracks fund accounts for 343.29 tons of gold, or about 78 percent of total the investments in exchange-traded funds linked to the precious metal. Prices are up 54 percent in the past year partly on investment demand and amid geopolitical tensions created by Iran's nuclear program.
The U.S. says Iran is trying to develop a nuclear bomb. Escalating tensions have led to concern the UN may impose a trade embargo on Iran, the world's fourth-largest oil producer.
Gold rose to a record $850 an ounce in January 1980 when the 1979 Iranian revolution cut oil exports.
More Weakness
``We will probably see a little bit more weakness'' in gold prices, said David Thurtell, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. ``Iran has been a significant issue in psyching demand into gold the past couple of months. It again depends a lot on what Iran does.''
Gold may fall below $600 if Iran ``backs away'' from its plans, easing concern about a possible confrontation with other countries, he said.
Iranian President Mahmoud Ahmadinejad on May 24 said his country has the right to develop atomic energy and that any aggressors trying to stop it would get ``a lasting and historic slap.''
Integrated Brokerage's McGhee said prices may still go higher, and that $1,000 is possible.
``All the long-term fundamentals that put this market here are still intact,'' he said. ``When gold got over $700 an ounce, you basically had the commercial side of the industry's appetite for the metal start to dry up. With the correction down in the $60, $80 break, we're starting to see commercial interest come back in and start to move physical product again.''
May 26-- Gold fell, heading for a second headed for a second weekly decline, on speculation higher U.S. interest rates will erode the appeal of the metal as an alternative investment.
Prices are down 12 percent in New York since reaching a 26- year high of $732 an ounce on May 12. Investment so far this month in StreetTracks Gold Trust fell 15.3 tons, or 4 percent, the most since the trading began in November 2004. Each share of the exchange-traded fund represents a 10th of an ounce of gold.
``Gold is like a roller coaster,'' said Christoph Eibl, the head of commodities trading at Tiberius Asset Management AG in Zug, Switzerland. ``Gold is solely driven by investor demand and some investors are taking profit.'' Prices will keep falling next week, he said.
Gold for immediate delivery fell $6.70, or 1 percent, to $644.20 an ounce at 3:34 p.m. in London. On the Comex division of the New York Mercantile Exchange, gold futures for June delivery fell $4.50, or 0.7 percent, to $644 at 10:35 a.m.
Prices are down 2 percent this week in London, after tumbling 8 percent last week, which was biggest drop in more than 15 years. Two straight weeks of declines would be the first since December. Gold is still up more than 24 percent this year.
``In many cases, you have an entire investment community that has never seen this level of volatility in gold,'' said Frank McGhee, the head metals trader at Integrated Brokerage Services LLC in Chicago. ``Probably the best piece of advice in these markets is to pare back your trading. Because of the volatility, you can get the same level of return for a small investment and take a lower level of risk.''
Interest Rates
The U.S. Federal Reserve has raised borrowing costs at every meeting since June 2004, bringing its key rate to 5 percent, the highest in more than four years. Analysts expect the Fed to increase rates again at its meeting on June 29.
Higher interest rates encourage investments in bonds and put pressure on non-interest bearing assets like precious metals.
StreetTracks fund accounts for 343.29 tons of gold, or about 78 percent of total the investments in exchange-traded funds linked to the precious metal. Prices are up 54 percent in the past year partly on investment demand and amid geopolitical tensions created by Iran's nuclear program.
The U.S. says Iran is trying to develop a nuclear bomb. Escalating tensions have led to concern the UN may impose a trade embargo on Iran, the world's fourth-largest oil producer.
Gold rose to a record $850 an ounce in January 1980 when the 1979 Iranian revolution cut oil exports.
More Weakness
``We will probably see a little bit more weakness'' in gold prices, said David Thurtell, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. ``Iran has been a significant issue in psyching demand into gold the past couple of months. It again depends a lot on what Iran does.''
Gold may fall below $600 if Iran ``backs away'' from its plans, easing concern about a possible confrontation with other countries, he said.
Iranian President Mahmoud Ahmadinejad on May 24 said his country has the right to develop atomic energy and that any aggressors trying to stop it would get ``a lasting and historic slap.''
Integrated Brokerage's McGhee said prices may still go higher, and that $1,000 is possible.
``All the long-term fundamentals that put this market here are still intact,'' he said. ``When gold got over $700 an ounce, you basically had the commercial side of the industry's appetite for the metal start to dry up. With the correction down in the $60, $80 break, we're starting to see commercial interest come back in and start to move physical product again.''
Thursday, May 25, 2006
Gold price climbs, weak dollar supports
Thu May 25, 2006 4:37 PM ET
LONDON/NEW YORK - Gold rose 1.4 percent on Thursday, with bargain-hunters and physical buyers entering the market on dollar weakness a day after gold tumbled nearly 5 percent, dealers said.
But players remained wary after recent volatile price moves and looked to other markets for direction.
"The correction has been a reality check and the bull market is very much still intact. We may be somewhat more sanguine about the upward price levels," said a precious metals analyst.
Spot gold rose as high as $650.30 an ounce and was at $649.80/650.60 an ounce late in New York, against $639.20/640.00 late on Wednesday.
Gold got some support from the dollar. The greenback slipped against the euro and yen as data showed U.S. economic growth was slightly slower than expected in the first three months of the year.
"The dollar slipping was one piece of it," said Bernard Hunter, a director at ScotiaMocatta in Toronto. "But it also was a relief-rally" after the cross-commodities sell-off over the last week.
"Given the drop that we'd seen over the last few days, it was not really surprising to see a little consolidation and take back some of those losses, really," said Hunter.
The metal on Wednesday fell about 5 percent to $637.40, as fund selling and profit-taking pushed it away from a 26-year high of $730 hit on May 12.
"When the price falls by nearly $100, you have to think it is going to cause some people to question the bullish assumption. The sentiment that it can only go up has been damaged," said Matthew Turner, analyst at Virtual Metals.
But gold had an upward bias in the short term, he added.
"We believe that gold needs to find a range and that volatility must decline before investors and physical customers regain confidence to buy the metal," said John Reade, precious metals analyst at UBS Investment Bank.
Barclays Capital said in a note that U.S.-based streetTRACKS fund attracted 1.86 tonnes of gold on Wednesday, marking the first inflow into the exchange-traded fund since late April.
Over the past month, about 15 tonnes had been withdrawn from the product, which tracks prices of the metal. Such gold funds, traded on stock exchanges, have accumulated about 480 tonnes of gold since their launch about three years ago.
SILVER GAINS
In other precious metals, silver rose to $12.66/12.76 an ounce from $12.45/12.55 a day earlier.
UBS noted a drop of 2.5 million ounces of silver on Wednesday from Barclays' exchange traded fund (ETF) in the U.S.
"We remain positive about the outlook for the silver ETF because we do not believe that metal prices have peaked. That should happen, we believe, sometime in 2007. But for the ETF to attract new inflows, metals need to stop falling," UBS said.
Platinum's fall below $1,300 an ounce sparked buying interest from jewelers in China, which accounts for half of global platinum jewelry demand.
Platinum rose to $1,287/1,297 from $1,280/1,290. Last week it hit a record high of $1,336.
"I think the demand is quite steady in China, but there's also a possibility that some jewelers are using old stocks," said a dealer in Hong Kong.
Platinum, which also is used to clean car exhaust emissions, has risen 37 percent this year as investors diversified into precious metals on tension in the Middle East, worries about rising oil prices and the volatile dollar.
Dealers said sentiment toward the metal remained firm after Johnson Matthey, the world's top platinum distributor, said last week the market was likely to remain in deficit for the eighth year in a row in 2006.
Palladium was at $350/358 an ounce, versus $344/349.
Thu May 25, 2006 4:37 PM ET
LONDON/NEW YORK - Gold rose 1.4 percent on Thursday, with bargain-hunters and physical buyers entering the market on dollar weakness a day after gold tumbled nearly 5 percent, dealers said.
But players remained wary after recent volatile price moves and looked to other markets for direction.
"The correction has been a reality check and the bull market is very much still intact. We may be somewhat more sanguine about the upward price levels," said a precious metals analyst.
Spot gold
Gold got some support from the dollar. The greenback slipped against the euro and yen as data showed U.S. economic growth was slightly slower than expected in the first three months of the year.
"The dollar slipping was one piece of it," said Bernard Hunter, a director at ScotiaMocatta in Toronto. "But it also was a relief-rally" after the cross-commodities sell-off over the last week.
"Given the drop that we'd seen over the last few days, it was not really surprising to see a little consolidation and take back some of those losses, really," said Hunter.
The metal on Wednesday fell about 5 percent to $637.40, as fund selling and profit-taking pushed it away from a 26-year high of $730 hit on May 12.
"When the price falls by nearly $100, you have to think it is going to cause some people to question the bullish assumption. The sentiment that it can only go up has been damaged," said Matthew Turner, analyst at Virtual Metals.
But gold had an upward bias in the short term, he added.
"We believe that gold needs to find a range and that volatility must decline before investors and physical customers regain confidence to buy the metal," said John Reade, precious metals analyst at UBS Investment Bank.
Barclays Capital said in a note that U.S.-based streetTRACKS fund attracted 1.86 tonnes of gold on Wednesday, marking the first inflow into the exchange-traded fund since late April.
Over the past month, about 15 tonnes had been withdrawn from the product, which tracks prices of the metal. Such gold funds, traded on stock exchanges, have accumulated about 480 tonnes of gold since their launch about three years ago.
SILVER GAINS
In other precious metals, silver
UBS noted a drop of 2.5 million ounces of silver on Wednesday from Barclays' exchange traded fund (ETF) in the U.S.
"We remain positive about the outlook for the silver ETF because we do not believe that metal prices have peaked. That should happen, we believe, sometime in 2007. But for the ETF to attract new inflows, metals need to stop falling," UBS said.
Platinum's fall below $1,300 an ounce sparked buying interest from jewelers in China, which accounts for half of global platinum jewelry demand.
Platinum
"I think the demand is quite steady in China, but there's also a possibility that some jewelers are using old stocks," said a dealer in Hong Kong.
Platinum, which also is used to clean car exhaust emissions, has risen 37 percent this year as investors diversified into precious metals on tension in the Middle East, worries about rising oil prices and the volatile dollar.
Dealers said sentiment toward the metal remained firm after Johnson Matthey, the world's top platinum distributor, said last week the market was likely to remain in deficit for the eighth year in a row in 2006.
Palladium
Gold Rises on Speculation Oil Prices May Accelerate Inflation
May 25 -- Gold rose in London after talks to persuade Iran to stop uranium enrichment ended inconclusively, sending oil prices higher and stoking speculation that inflation will accelerate.
Crude rose above $70 a barrel today after Iranian President Mahmoud Ahmadinejad said yesterday his country has the right to develop atomic energy and any aggressors trying to stop it would get ``a lasting and historic slap.'' Iran is the world's fourth- largest oil producer. Gold rose to a record $850 an ounce in January 1980 when the 1979 Iranian revolution cut oil exports.
``We are looking for prices to go up amid concerns about security and oil prices,'' said Ali Alwash, a Geneva-based trader at MKS Finance SA, a precious metals-trading and refining company. ``The geopolitical situation could be aggravated.'' Gold may trade between $635 and $665 during the next 10 days, Alwash said.
Gold for immediate delivery rose as much as $7.04, or 1.1 percent, to $647.74 an ounce in London. The metal was $6.35 higher at $647.05 at 12:18 p.m. London time, taking its gains this year to 24 percent. Gold for June delivery climbed $9.50, or 1.5 percent, to $647 an ounce on the Comex division of the New York Mercantile Exchange.
Iran is under increasing pressure from the U.S. and Europe to abandon its nuclear program. The United Nations Security Council's five permanent members -- France, China, Russia, the U.K. and the U.S. -- plus Germany met in London yesterday to discuss trade and technology incentives offered by the three European nations to encourage Iran to stop enriching uranium.
Silver Investment
Iran may be able to produce a nuclear bomb by 2010, the International Institute of Strategic Studies said yesterday.
Investment in Barclays' iShares Silver Trust yesterday fell for first time since it started trading April 28. Silver held by the fund fell 2.5 million tons to 70.5 million tons, according to data from the company.
UBS AG analyst John Reade says he remains positive about the outlook for the ETF.
Still, ``for the ETF to attract new inflows, metals need to stop falling,'' he said in a report today.
Silver for immediate delivery rose 19 cents, or 0.8 percent, to $12.61 an ounce. Platinum gained $5.50, or 0.4 percent, to $1,289.50 an ounce. Palladium was unchanged at $346.50 an ounce.
May 25 -- Gold rose in London after talks to persuade Iran to stop uranium enrichment ended inconclusively, sending oil prices higher and stoking speculation that inflation will accelerate.
Crude rose above $70 a barrel today after Iranian President Mahmoud Ahmadinejad said yesterday his country has the right to develop atomic energy and any aggressors trying to stop it would get ``a lasting and historic slap.'' Iran is the world's fourth- largest oil producer. Gold rose to a record $850 an ounce in January 1980 when the 1979 Iranian revolution cut oil exports.
``We are looking for prices to go up amid concerns about security and oil prices,'' said Ali Alwash, a Geneva-based trader at MKS Finance SA, a precious metals-trading and refining company. ``The geopolitical situation could be aggravated.'' Gold may trade between $635 and $665 during the next 10 days, Alwash said.
Gold for immediate delivery rose as much as $7.04, or 1.1 percent, to $647.74 an ounce in London. The metal was $6.35 higher at $647.05 at 12:18 p.m. London time, taking its gains this year to 24 percent. Gold for June delivery climbed $9.50, or 1.5 percent, to $647 an ounce on the Comex division of the New York Mercantile Exchange.
Iran is under increasing pressure from the U.S. and Europe to abandon its nuclear program. The United Nations Security Council's five permanent members -- France, China, Russia, the U.K. and the U.S. -- plus Germany met in London yesterday to discuss trade and technology incentives offered by the three European nations to encourage Iran to stop enriching uranium.
Silver Investment
Iran may be able to produce a nuclear bomb by 2010, the International Institute of Strategic Studies said yesterday.
Investment in Barclays' iShares Silver Trust yesterday fell for first time since it started trading April 28. Silver held by the fund fell 2.5 million tons to 70.5 million tons, according to data from the company.
UBS AG analyst John Reade says he remains positive about the outlook for the ETF.
Still, ``for the ETF to attract new inflows, metals need to stop falling,'' he said in a report today.
Silver for immediate delivery rose 19 cents, or 0.8 percent, to $12.61 an ounce. Platinum gained $5.50, or 0.4 percent, to $1,289.50 an ounce. Palladium was unchanged at $346.50 an ounce.
Wednesday, May 24, 2006
Interest in silver increased in 2005
Demand for silver rose in 2005 to the highest level in five years as strength in jewelry and industrial products offset softness in photography and coins, the Silver Institute said Wednesday.
The Washington, D.C.-based industry group also said its annual survey indicated that investor demand for silver has been increasing, just as it has been for gold.
"For much of 2005, investment demand in silver tracked moves in the gold prices, as well as expectations," the report said.
The report, which was prepared by London-based GFMS Ltd., a metals research company, said demand for silver for fabrication totaled 864.4 million troy ounces (26,885 metric tons) in 2005, up 3 percent from 839.4 million ounces in 2004 and the highest level since 866.8 million ounces in 2001. A metric ton equals about 2,200 pounds.
Nearly half went for industrial products, especially in electronics and electrical sectors, with jewelry and silverware the next largest category. The report said much of the growth in demand for jewelry and silverware was in China and India.
"Chinese silver jewelry and silverware demand rose by a stunning 20 percent in 2005," the report said. "Indian fabrication for this category rose by 8.5 percent ... while North America experienced its fourth successive year of growth."
Production at mines was a record 641.6 million ounces (19,954 metric tons) in 2005, up 3.4 percent from 620.4 million ounces in 2004. Other sources of silver were government sales and silver scrap.
Philip Klapwijk, executive chairman of GFMS Ltd., said in an interview that he expects the price of silver this year to exceed last year's average of $7.31 per troy ounce. That, in turn, had been up from an average of $6.65 per ounce in 2004.
"Year to date, the price through April was above $10," he said. "I assume May-June will be above $10 as well, so it will be difficult not to see a price average significantly above the $7.31 of last year."
In the futures market on Tuesday, silver for July closed up 74 cents at $13.17 on Comex, a division of the New York Mercantile Exchange.
Demand for silver rose in 2005 to the highest level in five years as strength in jewelry and industrial products offset softness in photography and coins, the Silver Institute said Wednesday.
The Washington, D.C.-based industry group also said its annual survey indicated that investor demand for silver has been increasing, just as it has been for gold.
"For much of 2005, investment demand in silver tracked moves in the gold prices, as well as expectations," the report said.
The report, which was prepared by London-based GFMS Ltd., a metals research company, said demand for silver for fabrication totaled 864.4 million troy ounces (26,885 metric tons) in 2005, up 3 percent from 839.4 million ounces in 2004 and the highest level since 866.8 million ounces in 2001. A metric ton equals about 2,200 pounds.
Nearly half went for industrial products, especially in electronics and electrical sectors, with jewelry and silverware the next largest category. The report said much of the growth in demand for jewelry and silverware was in China and India.
"Chinese silver jewelry and silverware demand rose by a stunning 20 percent in 2005," the report said. "Indian fabrication for this category rose by 8.5 percent ... while North America experienced its fourth successive year of growth."
Production at mines was a record 641.6 million ounces (19,954 metric tons) in 2005, up 3.4 percent from 620.4 million ounces in 2004. Other sources of silver were government sales and silver scrap.
Philip Klapwijk, executive chairman of GFMS Ltd., said in an interview that he expects the price of silver this year to exceed last year's average of $7.31 per troy ounce. That, in turn, had been up from an average of $6.65 per ounce in 2004.
"Year to date, the price through April was above $10," he said. "I assume May-June will be above $10 as well, so it will be difficult not to see a price average significantly above the $7.31 of last year."
In the futures market on Tuesday, silver for July closed up 74 cents at $13.17 on Comex, a division of the New York Mercantile Exchange.
Gold drops almost $34 to trade near 1-month low
Copper prices sink as much as 9% to lead a broad decline in metals
Last Update: 12:07 PM ET May 24, 2006
SAN FRANCISCO -- Gold futures tumbled almost $34 an ounce, or 5%, Wednesday to touch a nearly one-month low as stronger-than-expected new-home sales fueled a rise in the U.S. dollar and damped investment demand for precious metals.
Gold, which is widely viewed as a hedge against inflation as well as an alternative investment, was also weighed down by concern about valuation and declining retail demand.
"The gold market once again caved in," said Jon Nadler, an investment products analyst at bullion dealers Kitco.com.
"Investors (mostly of the smaller, retail variety) appear to prefer loading up on more [gold] only if they perceive that the correction has run its full course or if prices are at truly bargain-basement levels (say from $580 to $620)," he said.
So for now, "we still cannot rule out the possibility (now becoming more of a probability) of executing a full (or very close to full) 50% retracement of the $300 move achieved by gold during the past year," he said. And that would bring gold "very near the high 500s or low 600s."
At last check, gold for June delivery plunged $31.70, or 4.7%, to $642 an ounce on the New York Mercantile Exchange. It had been down as much as $33.70 earlier in the session to touch a $640 low -- an intraday level not seen since April 28. The almost $34 decline marked the June contract's biggest one-day drop, according to data from Thomson Financial.
Ned Schmidt, editor of the Value View Gold Report, viewed the steep drop in gold as a buying opportunity.
"When funds meet an illiquid market like gold, prices decline," he said. "That equals opportunity for real investors."
So "investors should be using this period through early next week to be buying gold."
Copper prices sink as much as 9% to lead a broad decline in metals
Last Update: 12:07 PM ET May 24, 2006
SAN FRANCISCO -- Gold futures tumbled almost $34 an ounce, or 5%, Wednesday to touch a nearly one-month low as stronger-than-expected new-home sales fueled a rise in the U.S. dollar and damped investment demand for precious metals.
Gold, which is widely viewed as a hedge against inflation as well as an alternative investment, was also weighed down by concern about valuation and declining retail demand.
"The gold market once again caved in," said Jon Nadler, an investment products analyst at bullion dealers Kitco.com.
"Investors (mostly of the smaller, retail variety) appear to prefer loading up on more [gold] only if they perceive that the correction has run its full course or if prices are at truly bargain-basement levels (say from $580 to $620)," he said.
So for now, "we still cannot rule out the possibility (now becoming more of a probability) of executing a full (or very close to full) 50% retracement of the $300 move achieved by gold during the past year," he said. And that would bring gold "very near the high 500s or low 600s."
At last check, gold for June delivery plunged $31.70, or 4.7%, to $642 an ounce on the New York Mercantile Exchange. It had been down as much as $33.70 earlier in the session to touch a $640 low -- an intraday level not seen since April 28. The almost $34 decline marked the June contract's biggest one-day drop, according to data from Thomson Financial.
Ned Schmidt, editor of the Value View Gold Report, viewed the steep drop in gold as a buying opportunity.
"When funds meet an illiquid market like gold, prices decline," he said. "That equals opportunity for real investors."
So "investors should be using this period through early next week to be buying gold."
Tuesday, May 23, 2006
Oil, copper and gold bounce back
| May 23, 2006
LONDON - Gold, oil and copper prices rose on Tuesday, with copper recording its biggest ever one-day gain and nickel touching a record high as investors returned after last week's sell-off.
"We've had a complete reversal of the last week's trading and we've seen oil heavily bought and gold has recovered," a London Metal Exchange trader said.
"Momentum is so strong you cannot step in the way," he said.
Gold rose by 2.4 percent to a session high of $671.20 an ounce, buoyed by strong oil prices.
By 1615 GMT copper had touched $8,515 a tonne, up 12 percent since Monday and nickel hit a new record high of $22,250 a tonne, up 6.6 percent against Monday's close.
U.S. crude oil futures traded above $71.30 in an extension of Monday's rebound from six-week lows.
"It's important we look at the whole commodities story. For example, if oil gets above $75 and gold through $700 then copper is likely to make new highs," a fund source said.
Coffee futures were also picked up by the wave of speculative money returning to commodities and the benchmark July contract ended at $1,124 a tonne, up $12.
"It's not really coffee, in the same way that (the sugar price) it's not really sugar -- it's nearly all about what the commodities funds are doing," another trader said earlier in the day.
HURRICANE, VENEZUELA LIFT OIL
Crude oil prices were strengthened by a U.S. government forecast that an active hurricane season could threaten rigs and refineries again this year and by talk in Venezuela of the need for an OPEC output cut.
The Reuters/Jefferies CRB Index <.CRB>, a basket of 19 commodity futures, had edged up by 1.5 percent to 349.42 on Monday after its weakest performance in decades last week. It hit a life high of 365.45 on May 11.
Many commodities had retreated from multi-year peaks earlier this month as investment funds moved to reduce their positions in commodities.
Established markets like London's FTSE 100 <.FTSE> turned higher on Tuesday, rising 2.64 percent as the appetite for riskier investments diminished and investors switched money back to traditional assets.
Mining shares have been the big winners from the boom in commodity prices. BHP Billiton, along with other mining shares, including Rio Tinto, Antofagasta and Anglo American were up by between 7 and 9 percent from Monday.
| May 23, 2006
LONDON - Gold, oil and copper prices rose on Tuesday, with copper recording its biggest ever one-day gain and nickel touching a record high as investors returned after last week's sell-off.
"We've had a complete reversal of the last week's trading and we've seen oil heavily bought and gold has recovered," a London Metal Exchange trader said.
"Momentum is so strong you cannot step in the way," he said.
Gold
By 1615 GMT copper
U.S. crude oil futures
"It's important we look at the whole commodities story. For example, if oil gets above $75 and gold through $700 then copper is likely to make new highs," a fund source said.
Coffee futures were also picked up by the wave of speculative money returning to commodities and the benchmark July contract
"It's not really coffee, in the same way that (the sugar price) it's not really sugar -- it's nearly all about what the commodities funds are doing," another trader said earlier in the day.
HURRICANE, VENEZUELA LIFT OIL
Crude oil prices were strengthened by a U.S. government forecast that an active hurricane season could threaten rigs and refineries again this year and by talk in Venezuela of the need for an OPEC output cut.
The Reuters/Jefferies CRB Index <.CRB>, a basket of 19 commodity futures, had edged up by 1.5 percent to 349.42 on Monday after its weakest performance in decades last week. It hit a life high of 365.45 on May 11.
Many commodities had retreated from multi-year peaks earlier this month as investment funds moved to reduce their positions in commodities.
Established markets like London's FTSE 100 <.FTSE> turned higher on Tuesday, rising 2.64 percent as the appetite for riskier investments diminished and investors switched money back to traditional assets.
Mining shares have been the big winners from the boom in commodity prices. BHP Billiton, along with other mining shares, including Rio Tinto
Monday, May 22, 2006
Gold Falls for 4th Straight Session on Speculation Rally Ends
May 22 (Bloomberg) -- Gold prices fell for the fourth straight session on speculation that a five-year rally in precious metals may be over.
Spot gold last week dropped 8 percent, the most since 1983, after surging 32 percent in the previous nine weeks. The metal reached a 26-year high of $730.40 an ounce on May 12. Gold may decline further over the next few months before resuming the long- term rally, some analysts said.
``The sell-off hasn't finished yet,'' said Alan Mandel, head trader at Alan M Trading Co. in New York. ``I wouldn't be surprised to see it go under $600, and then stay there a while before there's a resumption of another dramatic move higher.''
Gold for immediate delivery declined $6.10, or 0.9 percent, to $651.50 an ounce at 11:52 a.m. New York time. Prices earlier tumbled more than $20 to $637.55. Before today, the metal had gained 56 percent in the past year.
Futures for June delivery on the Comex division of the New York Mercantile Exchange fell $6, or 0.9 percent, to $651.50. A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.
Gold may drop to $575, said Tom O'Brien, editor of the Gold Report. ``Gold wants to build another floor like the floor we had for two and half years, but then it will go higher,'' O'Brien said.
The metal may lose its appeal as a hedge against inflation as the U.S. Federal Reserve signals it will continue to raise interest rates and oil trades below $70 a barrel.
``Gold traders see the Fed acting more aggressively to contain the price pressures,'' said John Person, an analyst at NationalFutures.com in Palm Beach, Florida. ``Higher rates may help contain inflation. Gold would certainly lose its attractiveness as a hedge against the perception of higher inflationary pressures.''
Stronger Dollar
A stronger dollar helped pushed metal prices lower. Gold traditionally moves in the opposite direction of the U.S. currency. During gold's nine-week climb, the dollar traded at a one-year low against the euro.
``The dollar's resurgence is certainly a contributing factor'' to gold's decline, said Jim Pogoda, an investor in Summit, New Jersey, and a former precious-metals trader for Mitsubishi International Corp. ``I'll stay bearish.''
Half of the 36 traders, investors and analysts surveyed by Bloomberg News from Sydney to Chicago on May 18 and May 19 advised selling gold. Fourteen recommended buying, and four were neutral.
Spot silver declined 14 cents, or 1.1 percent, to $12.43 an ounce after touching $11.97. The metal plunged 13 percent last week. Futures for July delivery were unchanged at $12.36 on the Comex.
May 22 (Bloomberg) -- Gold prices fell for the fourth straight session on speculation that a five-year rally in precious metals may be over.
Spot gold last week dropped 8 percent, the most since 1983, after surging 32 percent in the previous nine weeks. The metal reached a 26-year high of $730.40 an ounce on May 12. Gold may decline further over the next few months before resuming the long- term rally, some analysts said.
``The sell-off hasn't finished yet,'' said Alan Mandel, head trader at Alan M Trading Co. in New York. ``I wouldn't be surprised to see it go under $600, and then stay there a while before there's a resumption of another dramatic move higher.''
Gold for immediate delivery declined $6.10, or 0.9 percent, to $651.50 an ounce at 11:52 a.m. New York time. Prices earlier tumbled more than $20 to $637.55. Before today, the metal had gained 56 percent in the past year.
Futures for June delivery on the Comex division of the New York Mercantile Exchange fell $6, or 0.9 percent, to $651.50. A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.
Gold may drop to $575, said Tom O'Brien, editor of the Gold Report. ``Gold wants to build another floor like the floor we had for two and half years, but then it will go higher,'' O'Brien said.
The metal may lose its appeal as a hedge against inflation as the U.S. Federal Reserve signals it will continue to raise interest rates and oil trades below $70 a barrel.
``Gold traders see the Fed acting more aggressively to contain the price pressures,'' said John Person, an analyst at NationalFutures.com in Palm Beach, Florida. ``Higher rates may help contain inflation. Gold would certainly lose its attractiveness as a hedge against the perception of higher inflationary pressures.''
Stronger Dollar
A stronger dollar helped pushed metal prices lower. Gold traditionally moves in the opposite direction of the U.S. currency. During gold's nine-week climb, the dollar traded at a one-year low against the euro.
``The dollar's resurgence is certainly a contributing factor'' to gold's decline, said Jim Pogoda, an investor in Summit, New Jersey, and a former precious-metals trader for Mitsubishi International Corp. ``I'll stay bearish.''
Half of the 36 traders, investors and analysts surveyed by Bloomberg News from Sydney to Chicago on May 18 and May 19 advised selling gold. Fourteen recommended buying, and four were neutral.
Spot silver declined 14 cents, or 1.1 percent, to $12.43 an ounce after touching $11.97. The metal plunged 13 percent last week. Futures for July delivery were unchanged at $12.36 on the Comex.
Sunday, May 21, 2006
Gold Oversold?
Gold declines after rally
Gold had its biggest weekly drop in 23 years and silver fell as the dollar rallied, damping demand for precious metals as an alternative investment. The slump led a plunge in commodities and shares of mining companies.
Gold, after reaching a 26-year high of $730.40 an ounce on May 12, has since dropped 7.7 percent in London, the first drop since the week ending March 10. The decline may signal an end to a rally in metals that included a doubling of copper prices in the past year to a record $8,800 a metric ton this month.
''You're just running out of new buyers,'' said Michael Guido, director of hedge fund marketing and commodity strategy at Societe Generale in New York. ``They're not getting long on gold at $700. Copper at $8,200 in London just seems a little too rich. Everyone wants to see a pullback because they want to get back into the market.''
Gold for immediate delivery dropped $22.30, or 3.3 percent, to $659.60 an ounce in London. On the Comex division of the New York Mercantile Exchange, gold futures for delivery in June fell $23.20, or 3.4 percent, to $657.50.
Gold declines after rally
Gold had its biggest weekly drop in 23 years and silver fell as the dollar rallied, damping demand for precious metals as an alternative investment. The slump led a plunge in commodities and shares of mining companies.
Gold, after reaching a 26-year high of $730.40 an ounce on May 12, has since dropped 7.7 percent in London, the first drop since the week ending March 10. The decline may signal an end to a rally in metals that included a doubling of copper prices in the past year to a record $8,800 a metric ton this month.
''You're just running out of new buyers,'' said Michael Guido, director of hedge fund marketing and commodity strategy at Societe Generale in New York. ``They're not getting long on gold at $700. Copper at $8,200 in London just seems a little too rich. Everyone wants to see a pullback because they want to get back into the market.''
Gold for immediate delivery dropped $22.30, or 3.3 percent, to $659.60 an ounce in London. On the Comex division of the New York Mercantile Exchange, gold futures for delivery in June fell $23.20, or 3.4 percent, to $657.50.
SAN FRANCISCO (XFN-ASIA) - Gold futures closed Friday at their lowest level since late April, marking the fifth loss in six sessions and finishing the week with a loss of more than $54 an ounce as a jump in the US dollar and hopes for an early end to interest-rate rises gave traders less incentive to buy the precious metal.
'After more than three months of a marathon run, the gold market took this week to finally begin a decent correction and reconsider its place in the hierarchy of chart values,' said Jon Nadler, an analyst at Kitco.com, adding that 'gold has almost wiped off $100 from its recent high price.'
Prices rose to a nearly 26-year, intraday high of $728 late last week.
Gold for June delivery traded as low as $651 an ounce on the New York Mercantile Exchange, its weakest intraday level since April 28. The contract closed at $657.50, down $23.40, or 3.4% for the session. It was $54.30, or 7.6%, below last Friday's close of $711.80.
Widely viewed as a hedge against inflation, gold has now tumbled $64, or 8.9%, since closing at a 26-year high of $721.50 on May 11. The quick drop raises the question of whether this is a full-blown retreat or just a setback within a longer-term uptrend.
'With the dollar returning to the vicinity of the recent highs, we suspect that a negative currency market psychology is going to continue hanging over the gold market,' Nell Sloane, an analyst at NSFutures.com said in daily commentary.
The US dollar ran up to a 1 1/2-week high against the yen after Bank of Japan Governor Toshihiko Fukui damped hopes for a June interest-rate rise by saying overnight that ending the country's zero-interest-rate policy was not specifically discussed at its latest meeting.
'We have no preset idea on the specific timing for exiting zero interest rates,' Fukui said.
'While the Japanese have come out with economic information...that points to expanding growth, the promise of higher global interest rates seems to countervail some of the hope for improving physical demand,' said Sloane.
'Both physical and investment demand remains off balance, especially with the US dollar rising and the US equity market generally hinting at a slowing of the U.S. economy,' said Sloane.
But 'Asian traders this morning suggested that the decline in gold prices this week, has attracted jeweler, fabricator and investor demand,' she said.
Elsewhere, bond guru Bill Gross, the chief investment officer of Pacific Investment Management Co, said in an interview on CNBC that he believes the Federal Reserve is likely to pause in its rate-increase program, leaving its federal-funds rate target at 5%.
In addition, US Treasury Secretary John Snow said on CNBC that inflation is 'well contained, and will be, and inflationary expectations are well contained.'
Drop and bounce
From here, 'gold remains vulnerable to revisit the $630 (or lower) levels,' said Nadler, but there 'appears to be no mad rush for the escape hatches' and even if it revisits that level, it won't likely sustain any permanent long-term damage.
'We do expect gold to once again become an attractive buy at the low end of the scale, as investors in the yellow metal are typically focused on the far horizon,' he said.
Indeed, 'the bulk of the correction in the metals market is now behind us,' with the exception of copper, which 'has a ways to go to the downside,' said Peter Grandich, editor of the Grandich Letter.
He expects gold and silver to 'bounce strongly early next week.'
Copper sinks
The outlook for copper, however, is a bearish one.
Copper is going to 'end up' between $2-$2.50 before the year's end, Grandich said.
July copper took a 24.2-cent, or 6.5%, dive to close at $3.469 a pound -- its weakest settlement price since May 3. The metal has now lost 14.1% from its intraday record of $4.04, set May 11. For the week, it lost 10.2%.
'The key negative pricing driver, other than the growing realization that a large chunk of last Friday's peak was speculative froth, has been the emergence of increasingly bearish supply-demand data' for copper,' said Matthew Parry, an economist at Moody's Economy.com.
The International Copper Study Group released its latest Copper Bulletin Thursday, he said, pointing out that the report depicted a 0.5% year-on-year decline in global refined copper consumption in the first two months of 2006, with particularly weak demand seen in January, which was down 2.5% year-on-year.
Adding to copper's price pressure, key producer, Grupo Mexico announced earlier in the week that it has cancelled plans to mothball its San Martin mine, as workers agreed to return to work, according to Parry.
'Although prices for the red metal will post occasional short-term rallies (inevitable in a declining market), Moody's Economy.com remains essentially bearish on copper prices going forward, as the market will tend towards being oversupplied,' he said.
July silver also closed down 16 cents, or 1.3%, at $12.36 an ounce Friday, after tapping a low of $12.08 -- levels not seen since April 24. It finished the week 13.2% below last Friday's close of $14.235.
June palladium dropped $22.50, or 6%, to close at $350 an ounce. It was down more than 12% for the week. July platinum tacked on $12.20 to close at $1,310 an ounce to finish the week down 0.6%.
On the supply side, inventories of copper fell 392 short tons to 11,531 as of late Thursday, according to Nymex.
Gold inventories were unchanged at 7.80 million troy ounces, while silver inventories were at 121.6 million troy ounces, up 581,453 troy ounces.
Indexes fall again
Indexes that track the metals-mining sector lost more ground Friday to log their seventh losing session in a row. They closed at their lowest levels since March and ended the week lower by more than 12%.
The Philadelphia Gold and Silver Index closed down 0.6% at 140.04 to lose 12.2% for the week.
Shares of Gold Fields Ltd were among the biggest decliners, closing down 5.1% at $21.33 after dropping to a low of $19.90. The Johannesburg-based miner said it has acquired an additional 18.27 million Western Areas Ltd. shares, bringing its total stake in the company to 23.27 million shares.
The company also said Friday that it held talks with Canada's Barrick Gold on South African gold deposit South Deep.
The CBOE Gold Index shed 0.4% to end at 141.18. It was down 12.9% from last Friday's closing level. The Amex Gold Bugs Index finished at 321.62, falling 0.9% for the session to mark a loss of 12.7% for the week.
The StreetTracks Gold Trust exchange-traded fund fell by $1.88, or 2.8%, to close at $65.58 and the iShares Silver Trust ETF closed 2 cents lower at $126.
'After more than three months of a marathon run, the gold market took this week to finally begin a decent correction and reconsider its place in the hierarchy of chart values,' said Jon Nadler, an analyst at Kitco.com, adding that 'gold has almost wiped off $100 from its recent high price.'
Prices rose to a nearly 26-year, intraday high of $728 late last week.
Gold for June delivery traded as low as $651 an ounce on the New York Mercantile Exchange, its weakest intraday level since April 28. The contract closed at $657.50, down $23.40, or 3.4% for the session. It was $54.30, or 7.6%, below last Friday's close of $711.80.
Widely viewed as a hedge against inflation, gold has now tumbled $64, or 8.9%, since closing at a 26-year high of $721.50 on May 11. The quick drop raises the question of whether this is a full-blown retreat or just a setback within a longer-term uptrend.
'With the dollar returning to the vicinity of the recent highs, we suspect that a negative currency market psychology is going to continue hanging over the gold market,' Nell Sloane, an analyst at NSFutures.com said in daily commentary.
The US dollar ran up to a 1 1/2-week high against the yen after Bank of Japan Governor Toshihiko Fukui damped hopes for a June interest-rate rise by saying overnight that ending the country's zero-interest-rate policy was not specifically discussed at its latest meeting.
'We have no preset idea on the specific timing for exiting zero interest rates,' Fukui said.
'While the Japanese have come out with economic information...that points to expanding growth, the promise of higher global interest rates seems to countervail some of the hope for improving physical demand,' said Sloane.
'Both physical and investment demand remains off balance, especially with the US dollar rising and the US equity market generally hinting at a slowing of the U.S. economy,' said Sloane.
But 'Asian traders this morning suggested that the decline in gold prices this week, has attracted jeweler, fabricator and investor demand,' she said.
Elsewhere, bond guru Bill Gross, the chief investment officer of Pacific Investment Management Co, said in an interview on CNBC that he believes the Federal Reserve is likely to pause in its rate-increase program, leaving its federal-funds rate target at 5%.
In addition, US Treasury Secretary John Snow said on CNBC that inflation is 'well contained, and will be, and inflationary expectations are well contained.'
Drop and bounce
From here, 'gold remains vulnerable to revisit the $630 (or lower) levels,' said Nadler, but there 'appears to be no mad rush for the escape hatches' and even if it revisits that level, it won't likely sustain any permanent long-term damage.
'We do expect gold to once again become an attractive buy at the low end of the scale, as investors in the yellow metal are typically focused on the far horizon,' he said.
Indeed, 'the bulk of the correction in the metals market is now behind us,' with the exception of copper, which 'has a ways to go to the downside,' said Peter Grandich, editor of the Grandich Letter.
He expects gold and silver to 'bounce strongly early next week.'
Copper sinks
The outlook for copper, however, is a bearish one.
Copper is going to 'end up' between $2-$2.50 before the year's end, Grandich said.
July copper took a 24.2-cent, or 6.5%, dive to close at $3.469 a pound -- its weakest settlement price since May 3. The metal has now lost 14.1% from its intraday record of $4.04, set May 11. For the week, it lost 10.2%.
'The key negative pricing driver, other than the growing realization that a large chunk of last Friday's peak was speculative froth, has been the emergence of increasingly bearish supply-demand data' for copper,' said Matthew Parry, an economist at Moody's Economy.com.
The International Copper Study Group released its latest Copper Bulletin Thursday, he said, pointing out that the report depicted a 0.5% year-on-year decline in global refined copper consumption in the first two months of 2006, with particularly weak demand seen in January, which was down 2.5% year-on-year.
Adding to copper's price pressure, key producer, Grupo Mexico announced earlier in the week that it has cancelled plans to mothball its San Martin mine, as workers agreed to return to work, according to Parry.
'Although prices for the red metal will post occasional short-term rallies (inevitable in a declining market), Moody's Economy.com remains essentially bearish on copper prices going forward, as the market will tend towards being oversupplied,' he said.
July silver also closed down 16 cents, or 1.3%, at $12.36 an ounce Friday, after tapping a low of $12.08 -- levels not seen since April 24. It finished the week 13.2% below last Friday's close of $14.235.
June palladium dropped $22.50, or 6%, to close at $350 an ounce. It was down more than 12% for the week. July platinum tacked on $12.20 to close at $1,310 an ounce to finish the week down 0.6%.
On the supply side, inventories of copper fell 392 short tons to 11,531 as of late Thursday, according to Nymex.
Gold inventories were unchanged at 7.80 million troy ounces, while silver inventories were at 121.6 million troy ounces, up 581,453 troy ounces.
Indexes fall again
Indexes that track the metals-mining sector lost more ground Friday to log their seventh losing session in a row. They closed at their lowest levels since March and ended the week lower by more than 12%.
The Philadelphia Gold and Silver Index closed down 0.6% at 140.04 to lose 12.2% for the week.
Shares of Gold Fields Ltd were among the biggest decliners, closing down 5.1% at $21.33 after dropping to a low of $19.90. The Johannesburg-based miner said it has acquired an additional 18.27 million Western Areas Ltd. shares, bringing its total stake in the company to 23.27 million shares.
The company also said Friday that it held talks with Canada's Barrick Gold on South African gold deposit South Deep.
The CBOE Gold Index shed 0.4% to end at 141.18. It was down 12.9% from last Friday's closing level. The Amex Gold Bugs Index finished at 321.62, falling 0.9% for the session to mark a loss of 12.7% for the week.
The StreetTracks Gold Trust exchange-traded fund fell by $1.88, or 2.8%, to close at $65.58 and the iShares Silver Trust ETF closed 2 cents lower at $126.
Saturday, May 20, 2006
Benchmark files for gold exchange traded fund
MUMBAI, MAY 20: Benchmark Mutual has filed papers for India’s first gold exchange traded fund with the Securities and Exchange Board of India (Sebi), as per information on the regulator’s web site on Friday. Gold Benchmark Exchange Traded Scheme (Gold BeES), an open-ended scheme that will list on the National Stock Exchange (NSE), will invest in physical gold.
The scheme seeks to generate returns, which closely correspond to the returns provided by the domestic price of gold. At least 90% of the corpus will be held in physical gold, while the rest can be deployed in bonds and money market securities.
Each unit of Gold BeES will have a face value of Rs 100. Minimum investment is Rs 10,000 and in multiples of Rs 1,000 thereafter. The scheme will levy 4% entry load and 3% exit load. The scheme will offer systematic investment plan during and after the new fund offer. Investors can also buy and sell units of the scheme on NSE at the price at which it trades, which will be close to the NAV value. (NAV) of the scheme.
MUMBAI, MAY 20: Benchmark Mutual has filed papers for India’s first gold exchange traded fund with the Securities and Exchange Board of India (Sebi), as per information on the regulator’s web site on Friday. Gold Benchmark Exchange Traded Scheme (Gold BeES), an open-ended scheme that will list on the National Stock Exchange (NSE), will invest in physical gold.
The scheme seeks to generate returns, which closely correspond to the returns provided by the domestic price of gold. At least 90% of the corpus will be held in physical gold, while the rest can be deployed in bonds and money market securities.
Each unit of Gold BeES will have a face value of Rs 100. Minimum investment is Rs 10,000 and in multiples of Rs 1,000 thereafter. The scheme will levy 4% entry load and 3% exit load. The scheme will offer systematic investment plan during and after the new fund offer. Investors can also buy and sell units of the scheme on NSE at the price at which it trades, which will be close to the NAV value. (NAV) of the scheme.
Friday, May 19, 2006
Gold Heads for Biggest Weekly Decline Since 1983; Silver Drops
May 19 (Bloomberg) -- Gold headed for its biggest weekly decline in 23 years and silver plunged as the dollar rallied, damping demand for precious metals as an alternative investment. Palladium fell as much as 9.9 percent.
Gold, after reaching a 26-year high of $730.40 an ounce on May 12, has since dropped 7.8 percent in London, the first drop since the week ended March 10. The decline may signal an end to a rally in metals that included a doubling of copper prices ion the past year to a record $8,800 a metric ton this month.
``You're just running out of new buyers,'' said Michael Guido, director of hedge fund marketing and commodity strategy at Societe Generale in New York. ``They're not getting long on gold at $700. Copper at $8,200 in London just seems a little too rich. Everyone wants to see a pullback because they want to get back into the market.''
Gold for immediate delivery dropped $23.30, or 3.4 percent, to $659 an ounce at 5:49 p.m. in London. A close at that price would mark the biggest weekly drop since the last week of March 1983, when gold lost 11 percent. Gold futures for delivery in June fell $22.20, or 3.3 percent, to $658.70 at 12:49 p.m. on the Comex division of the New York Mercantile Exchange.
The Reuters-Jefferies CRB Index of 19 commodities was down 4.8 percent for the week to 344.54. A close at that level would be the biggest weekly drop since July 1988.
Dollar's Gains
The slump today was sparked by a gain in the dollar against the euro and yen on speculation the Federal Reserve may raise interest rates to rein in inflation, said Daniel Vaught, a commodities analyst at A.G. Edwards & Son Inc. in St. Louis.
The dollar gained to $1.2745 versus the euro and 111.71 against the yen. U.S. central bankers are less likely to pause their rate increases as previously planned because a report this week that showed consumer prices rose more than forecast, Richmond Fed President Jeffrey Lacker said yesterday.
Inflation is off to the worst start to a year since 1990, a government report showed, rising at an annual rate of 5.1 percent in the first four months.
The Fed has raised borrowing costs at every meeting since June 2004, bringing the key rate to 5 percent, the highest in more than four years. Analysts expect the Fed to increase rates again at its meeting on June 29.
``Such a move would make investments in bonds more attractive, putting in turn pressure on non-interest bearing assets like precious metals,'' said Wolfgang Wrzesniok-Rossbach, head of marketing and sales at Heraeus Metallhandels GmbH in Hanau, Germany.
Investor Demand
Gold futures in New York are up 27 percent this year and reached a 26-year high of $732 last week as investors bought the metal as a haven amid tensions between the U.S. and Iran over the latter's nuclear program and as funds diversify.
A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.
Commodity prices are about 50 percent higher than they would be if they were based on the fundamentals of supply and demand, as a surge of investment sent prices for metals and energy to record highs, Merrill Lynch & Co. said yesterday.
Silver for immediate delivery fell 31 cents, or 2.4 percent, to $12.36 an ounce in London. A close at that price would be the lowest since April 24.
Risk of Declines
Silver ``remains the most at risk of the complex for further downside price movement,'' James Moore, a Kettering, U.K.-based analyst, at TheBullionDesk.com said in a report.
Barclays iShares Silver Trust, which is linked to the price of the metal, started trading on April 28, initially boosting demand for silver. Silver rose 8.5 percent on that first day of trading in the iShares trust, and since has dropped 9 percent.
``Silver lost a bit of momentum now and has a bit of impact on gold,'' said Stephen Briggs, an analyst at Societe Generale in London. ``The same piece of news can't be recycled forever.''
Palladium for immediate delivery fell $27, or 7.3 percent, to $342.50 an ounce in London. Palladium is up 33 percent this year, just ahead of the 32 percent rise for platinum.
Palladium production will exceed demand this year for a sixth year on expanding mine output in South Africa, Johnson Matthey said on March 15.
Prices are being driven higher by buying from hedge funds rather than supply and demand rather supply and demand, Johnson Matthey, the world's largest distributor of platinum group metals said. Hedge funds influencing the market hold ``several million ounces,'' Johnson Matthey said.
In contrast, platinum is expected to be in shortage for the eighth straight year.
``Palladium, which has been piggy-backing on gains in platinum, is not as fundamentally bullish,'' Vaught said.
May 19 (Bloomberg) -- Gold headed for its biggest weekly decline in 23 years and silver plunged as the dollar rallied, damping demand for precious metals as an alternative investment. Palladium fell as much as 9.9 percent.
Gold, after reaching a 26-year high of $730.40 an ounce on May 12, has since dropped 7.8 percent in London, the first drop since the week ended March 10. The decline may signal an end to a rally in metals that included a doubling of copper prices ion the past year to a record $8,800 a metric ton this month.
``You're just running out of new buyers,'' said Michael Guido, director of hedge fund marketing and commodity strategy at Societe Generale in New York. ``They're not getting long on gold at $700. Copper at $8,200 in London just seems a little too rich. Everyone wants to see a pullback because they want to get back into the market.''
Gold for immediate delivery dropped $23.30, or 3.4 percent, to $659 an ounce at 5:49 p.m. in London. A close at that price would mark the biggest weekly drop since the last week of March 1983, when gold lost 11 percent. Gold futures for delivery in June fell $22.20, or 3.3 percent, to $658.70 at 12:49 p.m. on the Comex division of the New York Mercantile Exchange.
The Reuters-Jefferies CRB Index of 19 commodities was down 4.8 percent for the week to 344.54. A close at that level would be the biggest weekly drop since July 1988.
Dollar's Gains
The slump today was sparked by a gain in the dollar against the euro and yen on speculation the Federal Reserve may raise interest rates to rein in inflation, said Daniel Vaught, a commodities analyst at A.G. Edwards & Son Inc. in St. Louis.
The dollar gained to $1.2745 versus the euro and 111.71 against the yen. U.S. central bankers are less likely to pause their rate increases as previously planned because a report this week that showed consumer prices rose more than forecast, Richmond Fed President Jeffrey Lacker said yesterday.
Inflation is off to the worst start to a year since 1990, a government report showed, rising at an annual rate of 5.1 percent in the first four months.
The Fed has raised borrowing costs at every meeting since June 2004, bringing the key rate to 5 percent, the highest in more than four years. Analysts expect the Fed to increase rates again at its meeting on June 29.
``Such a move would make investments in bonds more attractive, putting in turn pressure on non-interest bearing assets like precious metals,'' said Wolfgang Wrzesniok-Rossbach, head of marketing and sales at Heraeus Metallhandels GmbH in Hanau, Germany.
Investor Demand
Gold futures in New York are up 27 percent this year and reached a 26-year high of $732 last week as investors bought the metal as a haven amid tensions between the U.S. and Iran over the latter's nuclear program and as funds diversify.
A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.
Commodity prices are about 50 percent higher than they would be if they were based on the fundamentals of supply and demand, as a surge of investment sent prices for metals and energy to record highs, Merrill Lynch & Co. said yesterday.
Silver for immediate delivery fell 31 cents, or 2.4 percent, to $12.36 an ounce in London. A close at that price would be the lowest since April 24.
Risk of Declines
Silver ``remains the most at risk of the complex for further downside price movement,'' James Moore, a Kettering, U.K.-based analyst, at TheBullionDesk.com said in a report.
Barclays iShares Silver Trust, which is linked to the price of the metal, started trading on April 28, initially boosting demand for silver. Silver rose 8.5 percent on that first day of trading in the iShares trust, and since has dropped 9 percent.
``Silver lost a bit of momentum now and has a bit of impact on gold,'' said Stephen Briggs, an analyst at Societe Generale in London. ``The same piece of news can't be recycled forever.''
Palladium for immediate delivery fell $27, or 7.3 percent, to $342.50 an ounce in London. Palladium is up 33 percent this year, just ahead of the 32 percent rise for platinum.
Palladium production will exceed demand this year for a sixth year on expanding mine output in South Africa, Johnson Matthey said on March 15.
Prices are being driven higher by buying from hedge funds rather than supply and demand rather supply and demand, Johnson Matthey, the world's largest distributor of platinum group metals said. Hedge funds influencing the market hold ``several million ounces,'' Johnson Matthey said.
In contrast, platinum is expected to be in shortage for the eighth straight year.
``Palladium, which has been piggy-backing on gains in platinum, is not as fundamentally bullish,'' Vaught said.
Gold drops, ready for a nearly 8% loss for the week
Jump in dollar and hope for end to rate rises are cited; copper sinks
Last Update: 1:05 PM ET May 19, 2006
SAN FRANCISCO -- Gold futures slumped Friday to their lowest level since late April, headed for the fifth loss in six sessions and trading more than $50 an ounce lower for the week as a jump in the U.S. dollar and hopes for an early end to interest-rate rises gave traders less incentive to buy the precious metal.
"After more than three months of a marathon run, the gold market took this week to finally begin a decent correction and reconsider its place in the hierarchy of chart values," said Jon Nadler, an analyst at Kitco.com, adding that "gold has almost wiped off $100 from its recent high price." Prices rose to a nearly 26-year, intraday high of $728 late last week.
Gold for June delivery traded as low as $651 an ounce on the New York Mercantile Exchange, its weakest intraday level since April 28. The contract was last down $22.90, or 3.4%, to $658. It closed out last Friday at $711.80.
Widely viewed as a hedge against inflation, gold has now tumbled $63.50, or 8.8%, since closing at a 26-year high of $721.50 on May 11. The quick drop raises the question of whether this is a full-blown retreat or just a setback within a longer-term uptrend.
With the dollar returning to the vicinity of the recent highs, we suspect that a negative currency market psychology is going to continue hanging over the gold market," Nell Sloane, an analyst at NSFutures.com said in daily commentary.
The U.S. dollar ran up to a 1 1/2-week high against the yen after Bank of Japan Governor Toshihiko Fukui damped hopes for a June interest-rate rise by saying overnight that ending the country's zero-interest-rate policy was not specifically discussed at its latest meeting.
"We have no preset idea on the specific timing for exiting zero interest rates," Fukui said.
"While the Japanese have come out with economic information ... that points to expanding growth, the promise of higher global interest rates seems to countervail some of the hope for improving physical demand," said Sloane.
"Both physical and investment demand remains off balance, especially with the U.S. dollar rising and the U.S. equity market generally hinting at a slowing of the U.S. economy," said Sloane.
But "Asian traders this morning suggested that the decline in gold prices this week, has attracted jeweler, fabricator and investor demand," she said.
Elsewhere, bond guru Bill Gross, the chief investment officer of Pacific Investment Management Co., said in an interview on CNBC that he believes the Federal Reserve is likely to pause in its rate-increase program, leaving its federal-funds rate target at 5%.
In addition, U.S. Treasury Secretary John Snow said on CNBC that inflation is "well contained, and will be, and inflationary expectations are well contained."
Drop and bounce
From here, "gold remains vulnerable to revisit the $630 (or lower) levels," said Nadler, but there "appears to be no mad rush for the escape hatches" and even if it revisits that level, it won't likely sustain any permanent long-term damage.
"We do expect gold to once again become an attractive buy at the low end of the scale, as investors in the yellow metal are typically focused on the far horizon," he said.
Indeed, "the bulk of the correction in the metals market is now behind us," with the exception of copper, which "has a ways to go to the downside," said Peter Grandich, editor of the Grandich Letter.
He expects gold and silver to "bounce strongly early next week."
Copper sinks
The outlook for copper, however, is a bearish one.
Copper is going to "end up" between $2-$2.50 before the year's end, Grandich said.
July copper took a 24.1-cent, or 6.5%, dive to $3.47 a pound after touching a low of $3.43 earlier, its weakest level since May 8. The metal has now lost 14.1% from its intraday record of $4.04, set May 11.
"The key negative pricing driver, other than the growing realization that a large chunk of last Friday's peak was speculative froth, has been the emergence of increasingly bearish supply-demand data" for copper," said Matthew Parry, an economist at Moody's Economy.com.
The International Copper Study Group released its latest Copper Bulletin Thursday, he said, pointing out that the report depicted a 0.5% year-on-year decline in global refined copper consumption in the first two months of 2006, with particularly weak demand seen in January, which was down 2.5% year-on-year.
Adding to copper's price pressure, key producer, Grupo Mexico announced earlier in the week that it has cancelled plans to mothball its San Martin mine, as workers agreed to return to work, according to Parry.
"Although prices for the red metal will post occasional short-term rallies (inevitable in a declining market), Moody's Economy.com remains essentially bearish on copper prices going forward, as the market will tend towards being oversupplied," he said.
July silver was also down 19 cents, or 1.5%, at $12.33 an ounce Friday, after tapping a six-week low of $12.08. It's trading around 13% below the week-ago close of $14.235.
June palladium dropped $28.50, or 7.7%, to $344 an ounce; and July platinum lost $15.30 to $1,282.50 an ounce. Last Friday, palladium closed at $398.50 and platinum finished at $1,318.50.
On the supply side, inventories of copper fell 392 short tons to 11,531 as of late Thursday, according to Nymex.
Gold inventories were unchanged at 7.80 million troy ounces, while silver inventories were at 121.6 million troy ounces, up 581,453 troy ounces.
Jump in dollar and hope for end to rate rises are cited; copper sinks
Last Update: 1:05 PM ET May 19, 2006
SAN FRANCISCO -- Gold futures slumped Friday to their lowest level since late April, headed for the fifth loss in six sessions and trading more than $50 an ounce lower for the week as a jump in the U.S. dollar and hopes for an early end to interest-rate rises gave traders less incentive to buy the precious metal.
"After more than three months of a marathon run, the gold market took this week to finally begin a decent correction and reconsider its place in the hierarchy of chart values," said Jon Nadler, an analyst at Kitco.com, adding that "gold has almost wiped off $100 from its recent high price." Prices rose to a nearly 26-year, intraday high of $728 late last week.
Gold for June delivery traded as low as $651 an ounce on the New York Mercantile Exchange, its weakest intraday level since April 28. The contract was last down $22.90, or 3.4%, to $658. It closed out last Friday at $711.80.
Widely viewed as a hedge against inflation, gold has now tumbled $63.50, or 8.8%, since closing at a 26-year high of $721.50 on May 11. The quick drop raises the question of whether this is a full-blown retreat or just a setback within a longer-term uptrend.
With the dollar returning to the vicinity of the recent highs, we suspect that a negative currency market psychology is going to continue hanging over the gold market," Nell Sloane, an analyst at NSFutures.com said in daily commentary.
The U.S. dollar ran up to a 1 1/2-week high against the yen after Bank of Japan Governor Toshihiko Fukui damped hopes for a June interest-rate rise by saying overnight that ending the country's zero-interest-rate policy was not specifically discussed at its latest meeting.
"We have no preset idea on the specific timing for exiting zero interest rates," Fukui said.
"While the Japanese have come out with economic information ... that points to expanding growth, the promise of higher global interest rates seems to countervail some of the hope for improving physical demand," said Sloane.
"Both physical and investment demand remains off balance, especially with the U.S. dollar rising and the U.S. equity market generally hinting at a slowing of the U.S. economy," said Sloane.
But "Asian traders this morning suggested that the decline in gold prices this week, has attracted jeweler, fabricator and investor demand," she said.
Elsewhere, bond guru Bill Gross, the chief investment officer of Pacific Investment Management Co., said in an interview on CNBC that he believes the Federal Reserve is likely to pause in its rate-increase program, leaving its federal-funds rate target at 5%.
In addition, U.S. Treasury Secretary John Snow said on CNBC that inflation is "well contained, and will be, and inflationary expectations are well contained."
Drop and bounce
From here, "gold remains vulnerable to revisit the $630 (or lower) levels," said Nadler, but there "appears to be no mad rush for the escape hatches" and even if it revisits that level, it won't likely sustain any permanent long-term damage.
"We do expect gold to once again become an attractive buy at the low end of the scale, as investors in the yellow metal are typically focused on the far horizon," he said.
Indeed, "the bulk of the correction in the metals market is now behind us," with the exception of copper, which "has a ways to go to the downside," said Peter Grandich, editor of the Grandich Letter.
He expects gold and silver to "bounce strongly early next week."
Copper sinks
The outlook for copper, however, is a bearish one.
Copper is going to "end up" between $2-$2.50 before the year's end, Grandich said.
July copper took a 24.1-cent, or 6.5%, dive to $3.47 a pound after touching a low of $3.43 earlier, its weakest level since May 8. The metal has now lost 14.1% from its intraday record of $4.04, set May 11.
"The key negative pricing driver, other than the growing realization that a large chunk of last Friday's peak was speculative froth, has been the emergence of increasingly bearish supply-demand data" for copper," said Matthew Parry, an economist at Moody's Economy.com.
The International Copper Study Group released its latest Copper Bulletin Thursday, he said, pointing out that the report depicted a 0.5% year-on-year decline in global refined copper consumption in the first two months of 2006, with particularly weak demand seen in January, which was down 2.5% year-on-year.
Adding to copper's price pressure, key producer, Grupo Mexico announced earlier in the week that it has cancelled plans to mothball its San Martin mine, as workers agreed to return to work, according to Parry.
"Although prices for the red metal will post occasional short-term rallies (inevitable in a declining market), Moody's Economy.com remains essentially bearish on copper prices going forward, as the market will tend towards being oversupplied," he said.
July silver was also down 19 cents, or 1.5%, at $12.33 an ounce Friday, after tapping a six-week low of $12.08. It's trading around 13% below the week-ago close of $14.235.
June palladium dropped $28.50, or 7.7%, to $344 an ounce; and July platinum lost $15.30 to $1,282.50 an ounce. Last Friday, palladium closed at $398.50 and platinum finished at $1,318.50.
On the supply side, inventories of copper fell 392 short tons to 11,531 as of late Thursday, according to Nymex.
Gold inventories were unchanged at 7.80 million troy ounces, while silver inventories were at 121.6 million troy ounces, up 581,453 troy ounces.
Gold Rises in London on Concern Oil Gains Will Spark Inflation
May 19 (Bloomberg) -- Gold rose in London for the first day in three as investors bought bullion as a hedge against rising energy prices.
Crude oil rose for a second day in New York before the peak driving season in the U.S. that starts at the end of this month. Oil has gained 14 percent this year, stoking inflation. The U.S. Labor Department reported on May 17 consumer prices are rising at an annual rate of 5.1 percent in January through April, compared with a 4.6 percent pace in the same four months last year.
``There is continuing strong demand for the metal, particularly in Asia,'' said John Meyer, an analyst at Numis Securities in London. ``There are inflation fears, and gold is seen as a hedge against inflation.''
Gold for immediate delivery rose $2.10, or 0.3 percent, to $684.40 an ounce at 9:29 a.m. in London. The metal has dropped 4.3 percent this week, heading for its first weekly drop in ten.
Lower prices spurred consumers to buy the metal.
``There's Asian demand for gold whenever there's a dip in prices,'' said Jonathan Barratt, head of foreign exchange and precious metals at Tricom Futures Pty., in Sydney.
Platinum rose $9.50, or 0.7 percent, to $1,312 an ounce. Silver gained 11 cents, or 0.9 percent, to $12.78 an ounce.
May 19 (Bloomberg) -- Gold rose in London for the first day in three as investors bought bullion as a hedge against rising energy prices.
Crude oil rose for a second day in New York before the peak driving season in the U.S. that starts at the end of this month. Oil has gained 14 percent this year, stoking inflation. The U.S. Labor Department reported on May 17 consumer prices are rising at an annual rate of 5.1 percent in January through April, compared with a 4.6 percent pace in the same four months last year.
``There is continuing strong demand for the metal, particularly in Asia,'' said John Meyer, an analyst at Numis Securities in London. ``There are inflation fears, and gold is seen as a hedge against inflation.''
Gold for immediate delivery rose $2.10, or 0.3 percent, to $684.40 an ounce at 9:29 a.m. in London. The metal has dropped 4.3 percent this week, heading for its first weekly drop in ten.
Lower prices spurred consumers to buy the metal.
``There's Asian demand for gold whenever there's a dip in prices,'' said Jonathan Barratt, head of foreign exchange and precious metals at Tricom Futures Pty., in Sydney.
Platinum rose $9.50, or 0.7 percent, to $1,312 an ounce. Silver gained 11 cents, or 0.9 percent, to $12.78 an ounce.
Gold Rises in London on Concern Oil Gains Will Spark Inflation
May 19 (Bloomberg) -- Gold rose in London for the first day in three as investors bought bullion as a hedge against rising energy prices.
Crude oil rose for a second day in New York before the peak driving season in the U.S. that starts at the end of this month. Oil has gained 14 percent this year, stoking inflation. The U.S. Labor Department reported on May 17 consumer prices are rising at an annual rate of 5.1 percent in January through April, compared with a 4.6 percent pace in the same four months last year.
``There is continuing strong demand for the metal, particularly in Asia,'' said John Meyer, an analyst at Numis Securities in London. ``There are inflation fears, and gold is seen as a hedge against inflation.''
Gold for immediate delivery rose $2.10, or 0.3 percent, to $684.40 an ounce at 9:29 a.m. in London. The metal has dropped 4.3 percent this week, heading for its first weekly drop in ten.
Lower prices spurred consumers to buy the metal.
``There's Asian demand for gold whenever there's a dip in prices,'' said Jonathan Barratt, head of foreign exchange and precious metals at Tricom Futures Pty., in Sydney.
Platinum rose $9.50, or 0.7 percent, to $1,312 an ounce. Silver gained 11 cents, or 0.9 percent, to $12.78 an ounce.
May 19 (Bloomberg) -- Gold rose in London for the first day in three as investors bought bullion as a hedge against rising energy prices.
Crude oil rose for a second day in New York before the peak driving season in the U.S. that starts at the end of this month. Oil has gained 14 percent this year, stoking inflation. The U.S. Labor Department reported on May 17 consumer prices are rising at an annual rate of 5.1 percent in January through April, compared with a 4.6 percent pace in the same four months last year.
``There is continuing strong demand for the metal, particularly in Asia,'' said John Meyer, an analyst at Numis Securities in London. ``There are inflation fears, and gold is seen as a hedge against inflation.''
Gold for immediate delivery rose $2.10, or 0.3 percent, to $684.40 an ounce at 9:29 a.m. in London. The metal has dropped 4.3 percent this week, heading for its first weekly drop in ten.
Lower prices spurred consumers to buy the metal.
``There's Asian demand for gold whenever there's a dip in prices,'' said Jonathan Barratt, head of foreign exchange and precious metals at Tricom Futures Pty., in Sydney.
Platinum rose $9.50, or 0.7 percent, to $1,312 an ounce. Silver gained 11 cents, or 0.9 percent, to $12.78 an ounce.
Gold Fields's Purchase May Start Bid War With Harmony
May 19 -- Gold Fields Ltd. raised its stake in Western Areas Ltd., owner of half the world's biggest gold deposit, fueling the prospect of a bidding contest with rival South African producer, Harmony Gold Mining Co.
Gold Fields, the world's No. 4 producer, paid 730 million rand ($114 million) to raise its holding in Western Areas to 15.5 percent, Willie Jacobsz, a spokesman for Gold Fields, said by phone from the company's Johannesburg headquarters today. Harmony is Western Areas largest shareholder with a 29.2 percent stake.
``With Gold Fields going in there, we've got a bidding war on our hands,'' Wayne McCurrie, who oversees the equivalent of $7.2 billion at Johannesburg's Advantage Asset Management, said an interview from London, where he's seeing clients.
Western Areas stock jumped as much as 8.1 percent after Gold Fields's purchase threatened to spark renewed hostilities between its chief executive officer Ian Cockerill and his opposite number at Harmony Bernard Swanepoel. The two are vying for access to the South Deep gold mine, west of Johannesburg, less than a year after Swanepoel's $3.8 billion hostile bid for Gold Fields failed.
Harmony has already held preliminary talks over selling its Target mine to Western Areas in exchange for an increased holding in the company.
Gold Mine
Bullion's 34 percent gain this year, with a 26-year high of $732 an ounce reached on May 12, increased the attractiveness of South Deep, which contains as much as 29.3 million ounces of gold. That's equal to about a third of the world's annual gold production and almost half of Gold Fields's reserves of 65.2 million ounces.
Shares of Western Areas rose as much as 3.01 rand to 40 rand and traded at 39.70 rand at 1:08 p.m. in Johannesburg, valuing the company at 6.1 billion rand. Gold Fields's shares fell 0.7 percent to 146 rand, while Harmony's stock rose 1.1 percent, to 91 rand.
Gold Fields bought the 11.8 percent stake from ``various market players'', Jacobsz said, without naming them. The acquisition, at 40 rand a share, was 8 percent higher than Western's Areas closing price yesterday.
Western Areas Chief Executive Officer Gill Marcus couldn't be reached for comment in Johannesburg.
An accident on May 5, when an ore container plunged a mile down the main shaft, may halve output at South Deep for a year, Western Areas said on May 10, delaying the build-up to full output at the mine. South Deep cost more than $1 billion to develop and was three years late starting production.
Accident
The mine was originally forecast to produce about 562,000 ounces of gold this year, rising to 700,000 ounces in 2007.
``With the problems we've seen at Western Areas, they might look at getting it at a lower price,'' McCurrie said.
The second phase of development, below the current mining depth of 3 kilometers (1.8 miles), will allow easier and cheaper access to gold from Kloof than from South Deep's own shafts, Cockerill said on May 2.
``Our intention is not to start a hostile bid, but to ensure that cooperation takes place,'' Jacobsz said. ``This stake, together with our ownership of the neighboring Kloof mine, puts us in a position to ensure that co-operation takes place.''
There should be cooperation between Western Areas and Gold Fields on the development of the mine's second phase, Swanepoel said today in an interview from Johannesburg.
Project Meerkat
``My understanding has been that Western Areas is keen to deal,'' he said. The Gold Fields acquisition of the stake ``is an extreme way to get its proposal taken seriously.''
Gold Fields paid 170 million rand to lawyers, bankers and public relations firms to defend Harmony's takeover bid last year. The battle cost Harmony 151 million in fees.
Cockerill in 2002 commissioned engineers and geologists to determine the feasibility of accessing South Deep from Kloof's number four shaft by digging a 3-kilometer tunnel. The study, codenamed project Meerkat, after a small prairie dog-like animal, showed it can be done, Cockerill said on Oct. 26.
The second phase contains 13.6 million ounces of gold, including that which can't be profitably mined, according to Western Areas's 2005 annual report.
Sinking a new shaft to access the second part of the South Deep ore body could take as long as 10 years to complete, Terence Goodlace, Gold Fields head of international operations, said that day. Gold Fields could access South Deep's gold-bearing rock in about three years at ``a fraction of the cost,'' he said, without giving details of the price.
``The knee-jerk reaction is that this could lead to a bidding war,'' Steve Meintjies, a mining analyst at Imara SP Reid in Johannesburg said in a phone interview. ``This time, though, instead of crossing swords, you might just see Swanepoel and Cockerill cooperating.''
May 19 -- Gold Fields Ltd. raised its stake in Western Areas Ltd., owner of half the world's biggest gold deposit, fueling the prospect of a bidding contest with rival South African producer, Harmony Gold Mining Co.
Gold Fields, the world's No. 4 producer, paid 730 million rand ($114 million) to raise its holding in Western Areas to 15.5 percent, Willie Jacobsz, a spokesman for Gold Fields, said by phone from the company's Johannesburg headquarters today. Harmony is Western Areas largest shareholder with a 29.2 percent stake.
``With Gold Fields going in there, we've got a bidding war on our hands,'' Wayne McCurrie, who oversees the equivalent of $7.2 billion at Johannesburg's Advantage Asset Management, said an interview from London, where he's seeing clients.
Western Areas stock jumped as much as 8.1 percent after Gold Fields's purchase threatened to spark renewed hostilities between its chief executive officer Ian Cockerill and his opposite number at Harmony Bernard Swanepoel. The two are vying for access to the South Deep gold mine, west of Johannesburg, less than a year after Swanepoel's $3.8 billion hostile bid for Gold Fields failed.
Harmony has already held preliminary talks over selling its Target mine to Western Areas in exchange for an increased holding in the company.
Gold Mine
Bullion's 34 percent gain this year, with a 26-year high of $732 an ounce reached on May 12, increased the attractiveness of South Deep, which contains as much as 29.3 million ounces of gold. That's equal to about a third of the world's annual gold production and almost half of Gold Fields's reserves of 65.2 million ounces.
Shares of Western Areas rose as much as 3.01 rand to 40 rand and traded at 39.70 rand at 1:08 p.m. in Johannesburg, valuing the company at 6.1 billion rand. Gold Fields's shares fell 0.7 percent to 146 rand, while Harmony's stock rose 1.1 percent, to 91 rand.
Gold Fields bought the 11.8 percent stake from ``various market players'', Jacobsz said, without naming them. The acquisition, at 40 rand a share, was 8 percent higher than Western's Areas closing price yesterday.
Western Areas Chief Executive Officer Gill Marcus couldn't be reached for comment in Johannesburg.
An accident on May 5, when an ore container plunged a mile down the main shaft, may halve output at South Deep for a year, Western Areas said on May 10, delaying the build-up to full output at the mine. South Deep cost more than $1 billion to develop and was three years late starting production.
Accident
The mine was originally forecast to produce about 562,000 ounces of gold this year, rising to 700,000 ounces in 2007.
``With the problems we've seen at Western Areas, they might look at getting it at a lower price,'' McCurrie said.
The second phase of development, below the current mining depth of 3 kilometers (1.8 miles), will allow easier and cheaper access to gold from Kloof than from South Deep's own shafts, Cockerill said on May 2.
``Our intention is not to start a hostile bid, but to ensure that cooperation takes place,'' Jacobsz said. ``This stake, together with our ownership of the neighboring Kloof mine, puts us in a position to ensure that co-operation takes place.''
There should be cooperation between Western Areas and Gold Fields on the development of the mine's second phase, Swanepoel said today in an interview from Johannesburg.
Project Meerkat
``My understanding has been that Western Areas is keen to deal,'' he said. The Gold Fields acquisition of the stake ``is an extreme way to get its proposal taken seriously.''
Gold Fields paid 170 million rand to lawyers, bankers and public relations firms to defend Harmony's takeover bid last year. The battle cost Harmony 151 million in fees.
Cockerill in 2002 commissioned engineers and geologists to determine the feasibility of accessing South Deep from Kloof's number four shaft by digging a 3-kilometer tunnel. The study, codenamed project Meerkat, after a small prairie dog-like animal, showed it can be done, Cockerill said on Oct. 26.
The second phase contains 13.6 million ounces of gold, including that which can't be profitably mined, according to Western Areas's 2005 annual report.
Sinking a new shaft to access the second part of the South Deep ore body could take as long as 10 years to complete, Terence Goodlace, Gold Fields head of international operations, said that day. Gold Fields could access South Deep's gold-bearing rock in about three years at ``a fraction of the cost,'' he said, without giving details of the price.
``The knee-jerk reaction is that this could lead to a bidding war,'' Steve Meintjies, a mining analyst at Imara SP Reid in Johannesburg said in a phone interview. ``This time, though, instead of crossing swords, you might just see Swanepoel and Cockerill cooperating.''
Thursday, May 18, 2006
NEW YORK (AP) - Gold and silver prices slipped Thursday, despite a sharp rise in U.S. jobless claims and the dollar's drop against the euro.
However, without the effect of a partial government shutdown in Puerto Rico, jobless claims would have dropped from the previous week, the Labor Department said, suggesting strength in the job market.
Investors typically turn to safe-haven gold when the U.S. economy appears to be weakening.
June gold futures settled $11 lower at $687.80 an ounce on the New York Mercantile Exchange.
Analysts at MKS Finance said precious metals prices have the potential to go higher, but that volatility plagues the market.
"For the short term we believe that the metal will continue being influenced by the U.S. dollar moves and that the consolidation phase is not over yet," the analysts said.
The dollar fell against other major currencies Thursday, with the euro buying $1.2829 in late afternoon New York trading, up from $1.2741 late Wednesday.
July silver fell to a low of $12.50 an ounce Thursday -- its lowest level April 27 -- before settling at $12.52 an ounce, down 72 cents from a day earlier.
Platinum settled below the key $1,300-an-ounce level for the first time since Monday. July platinum closed $18.60 lower at $1,297.80 an ounce.
Palladium also ended down at $372.50 an ounce, a loss of $10.60 on the day.
Base metals and energy prices, however, rose on Thursday.
The most-active July copper contract rose 3.95 cents to settle at $3.7110 per pound
However, without the effect of a partial government shutdown in Puerto Rico, jobless claims would have dropped from the previous week, the Labor Department said, suggesting strength in the job market.
Investors typically turn to safe-haven gold when the U.S. economy appears to be weakening.
June gold futures settled $11 lower at $687.80 an ounce on the New York Mercantile Exchange.
Analysts at MKS Finance said precious metals prices have the potential to go higher, but that volatility plagues the market.
"For the short term we believe that the metal will continue being influenced by the U.S. dollar moves and that the consolidation phase is not over yet," the analysts said.
The dollar fell against other major currencies Thursday, with the euro buying $1.2829 in late afternoon New York trading, up from $1.2741 late Wednesday.
July silver fell to a low of $12.50 an ounce Thursday -- its lowest level April 27 -- before settling at $12.52 an ounce, down 72 cents from a day earlier.
Platinum settled below the key $1,300-an-ounce level for the first time since Monday. July platinum closed $18.60 lower at $1,297.80 an ounce.
Palladium also ended down at $372.50 an ounce, a loss of $10.60 on the day.
Base metals and energy prices, however, rose on Thursday.
The most-active July copper contract rose 3.95 cents to settle at $3.7110 per pound
Gold futures lose $12 an ounce in two days
Last Update: 1:55 PM ET May 18, 2006
SAN FRANCISCO -- Gold futures closed Thursday at a nearly two-week low to tally a two-session loss of more than $12 an ounce. Prices finished the day almost 6% below their week-ago level of $721.50, which was the highest futures settlement price in nearly 26 years. June gold closed at $680.90, down $10.90. July silver dropped 72 cents, or 5.4%, to close at a three-week low of $12.52 an ounce. July platinum fell 1.4% and June palladium lost 2.8%. But July copper gained 3.95 cents to close at $3.711 a pound.
Last Update: 1:55 PM ET May 18, 2006
SAN FRANCISCO -- Gold futures closed Thursday at a nearly two-week low to tally a two-session loss of more than $12 an ounce. Prices finished the day almost 6% below their week-ago level of $721.50, which was the highest futures settlement price in nearly 26 years. June gold closed at $680.90, down $10.90. July silver dropped 72 cents, or 5.4%, to close at a three-week low of $12.52 an ounce. July platinum fell 1.4% and June palladium lost 2.8%. But July copper gained 3.95 cents to close at $3.711 a pound.
Gold futures lose as much as $9
Dollar retreat fails to lift gold; silver falls, but copper rises
Last Update: 12:52 PM ET May 18, 2006
SAN FRANCISCO (MarketWatch) -- Gold futures fell as much as $9 an ounce Thursday, after a fresh retreat in the U.S. dollar failed to take prices back above the $700 mark.
"Precious metals appear to be in a dilemma as to whether to continue their (welcome) correction or simply turn around and climb higher as dollar difficulties continue to undermine confidence and bolster defensive posturing," said Jon Nadler, an investment products analyst at bullion dealers Kitco.com.
"The consensus among traders remains that several sustained closings above $690 to $700 might be required to resume gold's climb beyond the $730 and $750 marks," he said.
On the other hand, "several successful tests of price areas beneath $675 could pressure the yellow metal to previous support points such as $650 then $630 or, conceivably, even $585," he warned.
That sort of move "might encourage additional physical offtake and complete a 50% correction of the overall move achieved since last year," he said. Gold futures are up more than 30% year to date.
Gold for June delivery fell to a low of $682.50 an ounce on the New York Mercantile Exchange. It was last down $7.30 at $684.50.
The dollar moved modestly lower against other major currencies in choppy trading Thursday, with traders cautious about taking large positions after the latest sharp move in the currency market. And the accelerated its decline after U.S. Treasury Secretary John Snow expressed dissatisfaction with China's yuan adjustments. See Currencies.
"Long-term gold investors are apparently undeterred, as they watch the sad saga of the U.S. dollar unfold while the yen and euro bask in a glow of strength," said Nadler.
"Stock market weakness could also add to gold's current resilience as will, no doubt, the Iranian rejection of the terms of appeasement it was recently offered," he said, referring to the recent European Union offer of certain incentives in exchange for Iran's halt of nuclear activities.
Overall, "the persistent impression among investors ... is that inflation is making an unwelcome return in the near future and thus portfolios need the protection offered by counter-cyclical assets," said Nadler.
In other metals trading Thursday, July silver shed 61 cents, or 4.6%, to $12.61 an ounce, after already losing more than 2% in the previous session. It's trading at its weakest levels since late April.
July copper tacked on 1.85 cents to $3.69 a pound after losing more than 4% on Wednesday.
June palladium fell $20.10 to $363 an ounce, while July platinum traded down $13.50 at $1,305.90 an ounce.
Dollar retreat fails to lift gold; silver falls, but copper rises
Last Update: 12:52 PM ET May 18, 2006
SAN FRANCISCO (MarketWatch) -- Gold futures fell as much as $9 an ounce Thursday, after a fresh retreat in the U.S. dollar failed to take prices back above the $700 mark.
"Precious metals appear to be in a dilemma as to whether to continue their (welcome) correction or simply turn around and climb higher as dollar difficulties continue to undermine confidence and bolster defensive posturing," said Jon Nadler, an investment products analyst at bullion dealers Kitco.com.
"The consensus among traders remains that several sustained closings above $690 to $700 might be required to resume gold's climb beyond the $730 and $750 marks," he said.
On the other hand, "several successful tests of price areas beneath $675 could pressure the yellow metal to previous support points such as $650 then $630 or, conceivably, even $585," he warned.
That sort of move "might encourage additional physical offtake and complete a 50% correction of the overall move achieved since last year," he said. Gold futures are up more than 30% year to date.
Gold for June delivery fell to a low of $682.50 an ounce on the New York Mercantile Exchange. It was last down $7.30 at $684.50.
The dollar moved modestly lower against other major currencies in choppy trading Thursday, with traders cautious about taking large positions after the latest sharp move in the currency market. And the accelerated its decline after U.S. Treasury Secretary John Snow expressed dissatisfaction with China's yuan adjustments. See Currencies.
"Long-term gold investors are apparently undeterred, as they watch the sad saga of the U.S. dollar unfold while the yen and euro bask in a glow of strength," said Nadler.
"Stock market weakness could also add to gold's current resilience as will, no doubt, the Iranian rejection of the terms of appeasement it was recently offered," he said, referring to the recent European Union offer of certain incentives in exchange for Iran's halt of nuclear activities.
Overall, "the persistent impression among investors ... is that inflation is making an unwelcome return in the near future and thus portfolios need the protection offered by counter-cyclical assets," said Nadler.
In other metals trading Thursday, July silver shed 61 cents, or 4.6%, to $12.61 an ounce, after already losing more than 2% in the previous session. It's trading at its weakest levels since late April.
July copper tacked on 1.85 cents to $3.69 a pound after losing more than 4% on Wednesday.
June palladium fell $20.10 to $363 an ounce, while July platinum traded down $13.50 at $1,305.90 an ounce.
Wednesday, May 17, 2006
SINGAPORE, May 18 (Reuters) - Gold fell on Thursday as the U.S. dollar retained most of its gains against other currencies, raising fears the metal's bull run may be coming to an end.
Silver dropped as much as 1.8 percent while palladium lost around $5 before rebounding. Platinum firmed as fund buying persisted in Tokyo Commodity Exchange but remained below Wednesday's record high of $1,336 an ounce.
Spot gold slipped to $687.50/688.25 an ounce from $690.90/691.70 late in New York. It briefly hit a high of $692.10 in Asian trade.
Benchmark gold futures <0#JAU:> on the Tokyo Commodity Exchange, currently April 2007, fell 24 yen per gram to 2,489 yen
($22.43), tracking losses in the U.S. market.
Gold, used in jewellery and investment, saw volatile trade on Wednesday, when it rose nearly 4 percent to hit a high of $716 before a firming dollar prompted profit taking.
"A rebound in the dollar was seen to draw investors away from some commodities and undermined the hopes that Monday's sharp fall was just a pause in a record run for the asset class," said N M Rothschild in a daily report.
"Indeed now, many analysts are beginning to say the extreme volatility and thin trade is a symptomatic of an overstretched market and suggest that we may have reached a peak for the metals," it said.
Gold and other commodities fell victim to speculative selling from record highs this week, falling to a one-week low of $674 before some physical demand helped it rebound.
Bullion has risen 33 percent since the start of the year and 64 percent from a year earlier.
"We see a break of $675 on the downside as significant and a possible trigger for more selling with $655, $620 and $600 the targets," said Rothschild.
"We feel for the present volatility will persist and movements in the currency and energy markets will offer fresh leads going forward," it said.
The dollar kept most of its gains after rising on comments from European officials the euro's gains in the past months could stymie economic growth in the region.
The dollar was at 110.90 yen in early trade, after surging to 111.35 yen on Wednesday when the U.S. currency posted its biggest one-day gain since June.
The euro was little changed at $1.2745, after sliding 1.7 percent to around $1.27 the previous day.
"I think we need to crack $675.50 before we talk about those big numbers below. My outlook is more range trading of $670 to $730 until after the first half of the year if the going is good," said a bullion dealer in Singapore.
"For a complete sell-off, then every single one of those commodity and pension funds must change their mind and decide not to invest in gold anymore. That possibility seems a little remote," he said.
Platinum rose to $1,316/1,324 an ounce from $1,308/1,316 late in New York, aided by gains in Tokyo platinum futures given the metal's bullish outlook.
Precious metal refiner Johnson Matthey said in a closely watched report on Monday that platinum demand was expected to outpace supply in 2006.
Sister metal palladium also rose to $373/381 an ounce from $370/376.
Silver dropped to $13.14/13.24 an ounce from $13.29/13.44.
Precious Metals Prices by 0127 GMT*
Last Net change Pct Move
Gold 687.30 -2.20 -0.32
Platinum 1318.00 10.00 +0.76
Palladium 372.00 2.00 +0.54
Silver 13.14 -0.01 -0.08
Change so far in 2006
Metal Latest bid End prev year Pct Move
Gold 687.30 517.20 +32.89
Platinum 1318.00 968.00 +36.16
Palladium 372.00 254.00 +46.46
Silver 13.14 8.81 +49.15
* The closing prices used to calculate the net change may differ from New York's last quoted prices.
($1=110.95 yen)
Silver dropped as much as 1.8 percent while palladium lost around $5 before rebounding. Platinum firmed as fund buying persisted in Tokyo Commodity Exchange but remained below Wednesday's record high of $1,336 an ounce.
Spot gold
Benchmark gold futures <0#JAU:> on the Tokyo Commodity Exchange, currently April 2007, fell 24 yen per gram to 2,489 yen
($22.43), tracking losses in the U.S. market.
Gold, used in jewellery and investment, saw volatile trade on Wednesday, when it rose nearly 4 percent to hit a high of $716 before a firming dollar prompted profit taking.
"A rebound in the dollar was seen to draw investors away from some commodities and undermined the hopes that Monday's sharp fall was just a pause in a record run for the asset class," said N M Rothschild in a daily report.
"Indeed now, many analysts are beginning to say the extreme volatility and thin trade is a symptomatic of an overstretched market and suggest that we may have reached a peak for the metals," it said.
Gold and other commodities fell victim to speculative selling from record highs this week, falling to a one-week low of $674 before some physical demand helped it rebound.
Bullion has risen 33 percent since the start of the year and 64 percent from a year earlier.
"We see a break of $675 on the downside as significant and a possible trigger for more selling with $655, $620 and $600 the targets," said Rothschild.
"We feel for the present volatility will persist and movements in the currency and energy markets will offer fresh leads going forward," it said.
The dollar kept most of its gains after rising on comments from European officials the euro's gains in the past months could stymie economic growth in the region.
The dollar was at 110.90 yen
The euro was little changed at $1.2745
"I think we need to crack $675.50 before we talk about those big numbers below. My outlook is more range trading of $670 to $730 until after the first half of the year if the going is good," said a bullion dealer in Singapore.
"For a complete sell-off, then every single one of those commodity and pension funds must change their mind and decide not to invest in gold anymore. That possibility seems a little remote," he said.
Platinum
Precious metal refiner Johnson Matthey said in a closely watched report on Monday that platinum demand was expected to outpace supply in 2006.
Sister metal palladium
Silver
Precious Metals Prices by 0127 GMT*
Last Net change Pct Move
Gold 687.30 -2.20 -0.32
Platinum 1318.00 10.00 +0.76
Palladium 372.00 2.00 +0.54
Silver 13.14 -0.01 -0.08
Change so far in 2006
Metal Latest bid End prev year Pct Move
Gold 687.30 517.20 +32.89
Platinum 1318.00 968.00 +36.16
Palladium 372.00 254.00 +46.46
Silver 13.14 8.81 +49.15
* The closing prices used to calculate the net change may differ from New York's last quoted prices.
($1=110.95 yen)
Gold Resumes Rally, Heads for Biggest Advance Since Sept. 11
May 17 -- Gold rose in London, heading for the biggest gain since the terrorist attacks on the U.S. on Sept. 11, 2001, as the dollar fell against the euro, making the precious metal more attractive as an alternative investment.
Bullion, which fell the most since 1993 two days ago after a nine-week rally, gained almost 38 percent this year while the dollar weakened 8.9 percent against the euro. The dollar is trading near a one-year low versus the euro on expectations the U.S. Federal Reserve will pause its interest-rate cycle after 16 straight increases.
``This market is hit, inch by inch, by a tsunami of money from institutional investors,'' Ross Norman, a director of TheBullionDesk.com, in Saffron Walden, U.K., said in an interview today. ``It's almost a buyers-only market.''
Gold for immediate delivery gained as much as $26.30, or 3.8 percent, to $716.70 an ounce. A close at that level would mark the biggest one-day advance since the 5.3 percent jump on Sept. 11, 2001. It traded at $712.05 as of 12:37 p.m. local time.
The dollar traded at $1.2895 versus the euro, from $1.2858 last night in New York.
The U.S. government said yesterday producer prices excluding food and energy rose 0.1 percent for a second month, less than forecast. Builders in the U.S. broke ground on the fewest homes in 17 months in April, a separate report showed. Investors are at their most bearish on the dollar in five years, according to a Merrill Lynch & Co. report yesterday.
Gold may rise to $800 an ounce this year as a store of value against declining currencies, Ian Telfer, chief executive officer of GoldCorp Inc., Canada's second-largest gold producer, said yesterday.
Dollar Support
``The dollar, and also the firmer oil price are clearly providing the underpinning for bulls coming back into the market,'' Norman said. Following Monday's sell-off, ``more investors are willing to take up the positions of those leaving this market.''
Gold surged almost 70 percent in the past year and climbed to a 26-year high of $730.40 on May 12, partly as investors bought the metal as an anti-inflationary hedge amid record oil prices. Bullion also gained as some investors purchased gold as a haven as the standoff between the U.S. and Iran over the latter's nuclear research program intensified.
Investors buy gold during periods of political tension because the metal is considered to hold its value better than other securities.
Crude Gains
Crude oil earlier today gained after Iranian President Mahmoud Ahmadinejad rejected European Union calls to suspend uranium enrichment, raising concern that shipments of crude from Iran, the world's fourth-largest producer, will by disrupted.
Crude oil for June delivery rose 15 cents to $69.68 a barrel on the New York Mercantile Exchange. Earlier it gained as much as 57 cents, or 0.8 percent, to $70.10.
Bullion may rise to as high as $1,000, Norman said. His forecast echoes that of Quantum Fund co-founder Jim Rogers. The former George Soros partner, who foresaw the start of the commodity rally in 1999, also predicted bullion may climb to $1,000 an ounce. Rogers said May 12 he ``wouldn't buy stocks now'' because the returns will be eclipsed by commodities.
Marc Faber, the money manager who told investors to bail out of U.S. stocks a week before the 1987 Black Monday crash, said he prefers holding gold over industrial metals including copper and zinc because bullion won't be affected by an economic slowdown. Investors shouldn't buy gold now because prices may fall further to $550 or $600 before resuming its rally, he said in an interview from New York yesterday.
Platinum Gains
Other precious metals for immediate delivery in London also rose. Silver gained 30 cents, or 2.2 percent, to $13.92 an ounce.
Platinum rose $40.50, or 3.1 percent, to $1,338.50 an ounce, close to the record $1,340 traded on May 12. The metal used in jewelry and car catalysts has jumped 38 percent this year. Palladium rose $12, or 3.2 percent, to $387.50, and has risen 52 percent this year.
The price gains on the platinum and palladium markets may deter jewelers from buying, Michael Widmer, an analyst with Macquarie Bank Ltd. in London, said in an emailed report today. Jewelry demand is set for a decline ``for a fourth year in a row,'' Widmer said.
May 17 -- Gold rose in London, heading for the biggest gain since the terrorist attacks on the U.S. on Sept. 11, 2001, as the dollar fell against the euro, making the precious metal more attractive as an alternative investment.
Bullion, which fell the most since 1993 two days ago after a nine-week rally, gained almost 38 percent this year while the dollar weakened 8.9 percent against the euro. The dollar is trading near a one-year low versus the euro on expectations the U.S. Federal Reserve will pause its interest-rate cycle after 16 straight increases.
``This market is hit, inch by inch, by a tsunami of money from institutional investors,'' Ross Norman, a director of TheBullionDesk.com, in Saffron Walden, U.K., said in an interview today. ``It's almost a buyers-only market.''
Gold for immediate delivery gained as much as $26.30, or 3.8 percent, to $716.70 an ounce. A close at that level would mark the biggest one-day advance since the 5.3 percent jump on Sept. 11, 2001. It traded at $712.05 as of 12:37 p.m. local time.
The dollar traded at $1.2895 versus the euro, from $1.2858 last night in New York.
The U.S. government said yesterday producer prices excluding food and energy rose 0.1 percent for a second month, less than forecast. Builders in the U.S. broke ground on the fewest homes in 17 months in April, a separate report showed. Investors are at their most bearish on the dollar in five years, according to a Merrill Lynch & Co. report yesterday.
Gold may rise to $800 an ounce this year as a store of value against declining currencies, Ian Telfer, chief executive officer of GoldCorp Inc., Canada's second-largest gold producer, said yesterday.
Dollar Support
``The dollar, and also the firmer oil price are clearly providing the underpinning for bulls coming back into the market,'' Norman said. Following Monday's sell-off, ``more investors are willing to take up the positions of those leaving this market.''
Gold surged almost 70 percent in the past year and climbed to a 26-year high of $730.40 on May 12, partly as investors bought the metal as an anti-inflationary hedge amid record oil prices. Bullion also gained as some investors purchased gold as a haven as the standoff between the U.S. and Iran over the latter's nuclear research program intensified.
Investors buy gold during periods of political tension because the metal is considered to hold its value better than other securities.
Crude Gains
Crude oil earlier today gained after Iranian President Mahmoud Ahmadinejad rejected European Union calls to suspend uranium enrichment, raising concern that shipments of crude from Iran, the world's fourth-largest producer, will by disrupted.
Crude oil for June delivery rose 15 cents to $69.68 a barrel on the New York Mercantile Exchange. Earlier it gained as much as 57 cents, or 0.8 percent, to $70.10.
Bullion may rise to as high as $1,000, Norman said. His forecast echoes that of Quantum Fund co-founder Jim Rogers. The former George Soros partner, who foresaw the start of the commodity rally in 1999, also predicted bullion may climb to $1,000 an ounce. Rogers said May 12 he ``wouldn't buy stocks now'' because the returns will be eclipsed by commodities.
Marc Faber, the money manager who told investors to bail out of U.S. stocks a week before the 1987 Black Monday crash, said he prefers holding gold over industrial metals including copper and zinc because bullion won't be affected by an economic slowdown. Investors shouldn't buy gold now because prices may fall further to $550 or $600 before resuming its rally, he said in an interview from New York yesterday.
Platinum Gains
Other precious metals for immediate delivery in London also rose. Silver gained 30 cents, or 2.2 percent, to $13.92 an ounce.
Platinum rose $40.50, or 3.1 percent, to $1,338.50 an ounce, close to the record $1,340 traded on May 12. The metal used in jewelry and car catalysts has jumped 38 percent this year. Palladium rose $12, or 3.2 percent, to $387.50, and has risen 52 percent this year.
The price gains on the platinum and palladium markets may deter jewelers from buying, Michael Widmer, an analyst with Macquarie Bank Ltd. in London, said in an emailed report today. Jewelry demand is set for a decline ``for a fourth year in a row,'' Widmer said.
Tuesday, May 16, 2006
oaring gold prices seen hitting Thai demand
BANGKOK: High gold prices are expected to hit demand in Thailand, a major jewellery exporter where people already struggle with high oil prices and rising costs of living, a leading industry executive said on Tuesday.
“Thailand’s gold imports this year are expected to be cut by 20-30 percent from last year’s due to high prices,” Jitti Tangsithpakdi, head of the Thai Gold Traders’ Association told Reuters.
Thailand imported around 120 tonnes of gold in 2005, 40 percent of it for domestic consumption and the rest for either investment or re-export as jewellery. Thais usually buy gold for jewellery, Jitti said.
But demand for gold bars remains strong as Thai investors, who have dominated the physical market in Southeast Asia in recent months, were expected to continue buying bullion for investment, he said. Jitti, who has been in the business for around 50 years, told Reuters investing in gold was probably more profitable than stocks or property.
“Buying gold could possibly be the best investment choice at the moment given its better returns of more than 20 percent so far this year,” he said. Thailand is also expected to see its gold jewellery exports, mainly to Hong Kong, Japan and the United States, fall this year as demand falls, Jitti said.
A large number of jewellery makers had already lost their jobs in an industry that employs up to 300,000 people, he added. Reuters
BANGKOK: High gold prices are expected to hit demand in Thailand, a major jewellery exporter where people already struggle with high oil prices and rising costs of living, a leading industry executive said on Tuesday.
“Thailand’s gold imports this year are expected to be cut by 20-30 percent from last year’s due to high prices,” Jitti Tangsithpakdi, head of the Thai Gold Traders’ Association told Reuters.
Thailand imported around 120 tonnes of gold in 2005, 40 percent of it for domestic consumption and the rest for either investment or re-export as jewellery. Thais usually buy gold for jewellery, Jitti said.
But demand for gold bars remains strong as Thai investors, who have dominated the physical market in Southeast Asia in recent months, were expected to continue buying bullion for investment, he said. Jitti, who has been in the business for around 50 years, told Reuters investing in gold was probably more profitable than stocks or property.
“Buying gold could possibly be the best investment choice at the moment given its better returns of more than 20 percent so far this year,” he said. Thailand is also expected to see its gold jewellery exports, mainly to Hong Kong, Japan and the United States, fall this year as demand falls, Jitti said.
A large number of jewellery makers had already lost their jobs in an industry that employs up to 300,000 people, he added. Reuters
Gold rises after huge pullback
MAY. 16 3:23 P.M. ET Gold prices rose Tuesday, recovering from a big drop a day earlier as the dollar weakened against the euro.
June gold rose $7.90 to settle at $692.90 an ounce Tuesday on the New York Mercantile Exchange. Gold had fallen about 4 percent on Monday.
The dollar fell after the release of weak U.S. economic data Tuesday, with the euro rising as high as $1.2868. Gold is typically seen as a safe-haven, alternative investment to the U.S. currency.
Dave Meger of Alaron Trading said that not only is gold reacting to the dollar, but the yellow metal also has entered a period of consolidation since breaching the $700 an ounce level last week. On Thursday, it hit a 26-year high above $730 an ounce.
"There have been traders looking to sell into rallies and then buy on the dips," said Meger of the choppy trading conditions in gold.
Others have said the recent pullback in price attracted a good degree of traditional physical demand from India, Hong Kong and Dubai.
"That type of physical demand is underpinning the market, and now we are also seeing bargain-hunter buying," said Bernard Hunter of Scotia Mocatta.
A 7.4 percent fall in U.S. housing starts during April contributed to the idea that the Federal Reserve may pause in its monetary tightening, said Frank Lesh of Future Path Trading. Annualized starts were 1.849 million, below the consensus forecast of 1.95 million.
The Producer Price Index was mixed relative to expectations. Overall PPI was up 0.9 percent in April, compared to a 0.8 percent forecast. But core PPI, excluding food and energy, was down 0.1 percent, compared to a 0.2 percent consensus expectation.
Analysts at Barclays Capital in London said that even though gold and silver are higher on the day, further near-term weakness is possible given the large speculative length. On a technical basis, the analysts said, there is little that suggests the trend is actually over.
Looking ahead to the rest of the week, Lesh said the market will get an even more important inflation report Wednesday when the government releases the Consumer Price Index.
July silver rose 20.5 cents to settle at at $13.54 an ounce, after falling as low as $13.15 an ounce.
MAY. 16 3:23 P.M. ET Gold prices rose Tuesday, recovering from a big drop a day earlier as the dollar weakened against the euro.
June gold rose $7.90 to settle at $692.90 an ounce Tuesday on the New York Mercantile Exchange. Gold had fallen about 4 percent on Monday.
The dollar fell after the release of weak U.S. economic data Tuesday, with the euro rising as high as $1.2868. Gold is typically seen as a safe-haven, alternative investment to the U.S. currency.
Dave Meger of Alaron Trading said that not only is gold reacting to the dollar, but the yellow metal also has entered a period of consolidation since breaching the $700 an ounce level last week. On Thursday, it hit a 26-year high above $730 an ounce.
"There have been traders looking to sell into rallies and then buy on the dips," said Meger of the choppy trading conditions in gold.
Others have said the recent pullback in price attracted a good degree of traditional physical demand from India, Hong Kong and Dubai.
"That type of physical demand is underpinning the market, and now we are also seeing bargain-hunter buying," said Bernard Hunter of Scotia Mocatta.
A 7.4 percent fall in U.S. housing starts during April contributed to the idea that the Federal Reserve may pause in its monetary tightening, said Frank Lesh of Future Path Trading. Annualized starts were 1.849 million, below the consensus forecast of 1.95 million.
The Producer Price Index was mixed relative to expectations. Overall PPI was up 0.9 percent in April, compared to a 0.8 percent forecast. But core PPI, excluding food and energy, was down 0.1 percent, compared to a 0.2 percent consensus expectation.
Analysts at Barclays Capital in London said that even though gold and silver are higher on the day, further near-term weakness is possible given the large speculative length. On a technical basis, the analysts said, there is little that suggests the trend is actually over.
Looking ahead to the rest of the week, Lesh said the market will get an even more important inflation report Wednesday when the government releases the Consumer Price Index.
July silver rose 20.5 cents to settle at at $13.54 an ounce, after falling as low as $13.15 an ounce.
JOHANNESBURG --Gold’s huge correction in the past few days – from 25-year highs of $730 an ounce late last week to under $690 on Tuesday – has left specialist gold investors facing tough realities and even tougher choices.
Some helpful guru advice was, however, made available by RBC Capital Markets on Friday last week, just before the heavy correction really set in. In a 36-page inter-disciplinary global gold review, analysts at RBCCM said that given the various fundamental factors impacting gold bullion, there was potential for $800 an ounce in 2006.
It was noted, however, that “an important near-term risk” was that weak jewelry demand over the traditional quiet summer period could undermine prices, “potentially resulting in a gold price correction back to a range of $600 to $625 per ounce.” After the price correction, RBCCM restated its view: “We see the potential for gold prices to continue higher in this ongoing secular recovery.”
RBCCM analysts believe that “a secular recovery for metals remains in place, driven in large part by concerns regarding the health of reserve currencies, as well as the growing economies and incomes in Asia and OPEC nations. At the same time, traditional disinflationary trends observed over the past two decades are becoming a thing of the past. As a result, tangible assets such as precious/base metals, oil/natural gas and related equities are expected to continue to outperform monetary-based assets such as bonds, bank equities and currencies.”
On the flip side, the Bank Credit Analyst argued in recent research that it was “on the back of growing inflation fears and speculative demand” that gold bullion had made it up to around $730 an ounce. Gold prices had risen almost 20% in the past three weeks alone and were now “deeply overbought,” according to BCA Research, “highlighting that a ‘mania’ is underway.”
Using very different tools to those applied by stock analysts, BCA Research argued that gold prices had now far outstripped the research unit’s cumulative liquidity measure that had correlated well with bullion prices for the past 30 years. Meanwhile, BCA Research noted that sentiment towards gold had reached record optimistic readings, “even surpassing the apex in the earlier mania phase in 1979-80. From a contrarian standpoint, this may be a sign of an impending top, although with prices climbing vertically, timing a correction is dangerous.”
With this note of caution in mind, there is no question that any investor would agree that currency values are critical to any investment decision and that, at the same time, forecasting currency rates is nothing more than a mug’s game. However, it has been noted that the positive correlation between gold bullion and the dollar observed over most of 2005 broke down in February 2006 and has since returned to its conventional negative correlation.
RBCCM’s multi-disciplinarian view is that the value of the dollar will continue to decline over the remainder of 2006, despite the fact that another lift to the US Fed funds rate (the core US interest rate, as governed by the Federal Reserve) may be on the cards. At least 50% of investors appear to agree with the view that the dollar is in for further troubles. Concern over the ballooning US current account deficit could once again take a front seat in the global investment landscape.
Weighing up all the factors, RBCCM has selected seven stocks in the global gold sector as “best picks:” Eldorado, IAMGOLD, Kinross, Centerra, Lihir, Newmont and Harmony, though not necessarily in that order.
Eldorado Gold is also fancied by CIBC World Markets, which has just reiterated its "sector outperform" rating on the stock, and raised the price target from $6,50 to $8,10 a share. IAMGOLD is also fancied by analysts at Wellington West, who have raised the stock’s target price from C$13 to C$15 a share; the RBCCM target is at C$14 a share. Kinross Gold has just been initiated as a “sector outperform” by analysts at Scotia, with a target price of $17, identical to that named by RBCCM.
The Centerra Gold target price has recently been raised by National Bank to $46 a share, compared to the C$69 mentioned by RBCCM. Lihir Gold was recently upgraded to "buy" by UBS and at RBCCM, the price target has been set at A$4.65 a share.
This leaves two so-called Tier One gold diggers to populate the ranks of the world’s hottest gold stocks: Newmont and Harmony. On Monday, CIBC World Markets reiterated a "sector underperform" rating for Newmont, but raised the stock’s price target from $65 to $76. RBCCM has a price target of $80 a share, and mentions that possible “risks and impediments” to the target price include the challenge of maintaining 8m ounces of annual consolidated gold production.
This leaves Harmony, which, for some time now, has been seen by a number of investors as offering among the best value due to the marginal nature of a number of its operations. The overall lower grades of its ores provide it with greater upside leverage to rising bullion prices, enabling it to outperform higher quality ore owners such as its South African peers, AngloGold Ashanti and Gold Fields.
RBCCM’s 12-month price target for Harmony is $25 a share (the stock was trading just below $14 a share in early Wall Street trade on Tuesday). RBCCM mentions that possible price impediments for Harmony include gold bullion price fluctuations, rand exchange rates, the inflation outlook, and production risks. The bulk of Harmony’s value, according to RBCCM, lies in its growth projects in South Africa and Papua New Guinea.
Harmony’s heavy exposure to South Africa (at 90% of current production) has put the company under severe financial strain due to the strength of the South African rand relative to the dollar.
Some helpful guru advice was, however, made available by RBC Capital Markets on Friday last week, just before the heavy correction really set in. In a 36-page inter-disciplinary global gold review, analysts at RBCCM said that given the various fundamental factors impacting gold bullion, there was potential for $800 an ounce in 2006.
It was noted, however, that “an important near-term risk” was that weak jewelry demand over the traditional quiet summer period could undermine prices, “potentially resulting in a gold price correction back to a range of $600 to $625 per ounce.” After the price correction, RBCCM restated its view: “We see the potential for gold prices to continue higher in this ongoing secular recovery.”
RBCCM analysts believe that “a secular recovery for metals remains in place, driven in large part by concerns regarding the health of reserve currencies, as well as the growing economies and incomes in Asia and OPEC nations. At the same time, traditional disinflationary trends observed over the past two decades are becoming a thing of the past. As a result, tangible assets such as precious/base metals, oil/natural gas and related equities are expected to continue to outperform monetary-based assets such as bonds, bank equities and currencies.”
On the flip side, the Bank Credit Analyst argued in recent research that it was “on the back of growing inflation fears and speculative demand” that gold bullion had made it up to around $730 an ounce. Gold prices had risen almost 20% in the past three weeks alone and were now “deeply overbought,” according to BCA Research, “highlighting that a ‘mania’ is underway.”
Using very different tools to those applied by stock analysts, BCA Research argued that gold prices had now far outstripped the research unit’s cumulative liquidity measure that had correlated well with bullion prices for the past 30 years. Meanwhile, BCA Research noted that sentiment towards gold had reached record optimistic readings, “even surpassing the apex in the earlier mania phase in 1979-80. From a contrarian standpoint, this may be a sign of an impending top, although with prices climbing vertically, timing a correction is dangerous.”
With this note of caution in mind, there is no question that any investor would agree that currency values are critical to any investment decision and that, at the same time, forecasting currency rates is nothing more than a mug’s game. However, it has been noted that the positive correlation between gold bullion and the dollar observed over most of 2005 broke down in February 2006 and has since returned to its conventional negative correlation.
RBCCM’s multi-disciplinarian view is that the value of the dollar will continue to decline over the remainder of 2006, despite the fact that another lift to the US Fed funds rate (the core US interest rate, as governed by the Federal Reserve) may be on the cards. At least 50% of investors appear to agree with the view that the dollar is in for further troubles. Concern over the ballooning US current account deficit could once again take a front seat in the global investment landscape.
Weighing up all the factors, RBCCM has selected seven stocks in the global gold sector as “best picks:” Eldorado, IAMGOLD, Kinross, Centerra, Lihir, Newmont and Harmony, though not necessarily in that order.
Eldorado Gold is also fancied by CIBC World Markets, which has just reiterated its "sector outperform" rating on the stock, and raised the price target from $6,50 to $8,10 a share. IAMGOLD is also fancied by analysts at Wellington West, who have raised the stock’s target price from C$13 to C$15 a share; the RBCCM target is at C$14 a share. Kinross Gold has just been initiated as a “sector outperform” by analysts at Scotia, with a target price of $17, identical to that named by RBCCM.
The Centerra Gold target price has recently been raised by National Bank to $46 a share, compared to the C$69 mentioned by RBCCM. Lihir Gold was recently upgraded to "buy" by UBS and at RBCCM, the price target has been set at A$4.65 a share.
This leaves two so-called Tier One gold diggers to populate the ranks of the world’s hottest gold stocks: Newmont and Harmony. On Monday, CIBC World Markets reiterated a "sector underperform" rating for Newmont, but raised the stock’s price target from $65 to $76. RBCCM has a price target of $80 a share, and mentions that possible “risks and impediments” to the target price include the challenge of maintaining 8m ounces of annual consolidated gold production.
This leaves Harmony, which, for some time now, has been seen by a number of investors as offering among the best value due to the marginal nature of a number of its operations. The overall lower grades of its ores provide it with greater upside leverage to rising bullion prices, enabling it to outperform higher quality ore owners such as its South African peers, AngloGold Ashanti and Gold Fields.
RBCCM’s 12-month price target for Harmony is $25 a share (the stock was trading just below $14 a share in early Wall Street trade on Tuesday). RBCCM mentions that possible price impediments for Harmony include gold bullion price fluctuations, rand exchange rates, the inflation outlook, and production risks. The bulk of Harmony’s value, according to RBCCM, lies in its growth projects in South Africa and Papua New Guinea.
Harmony’s heavy exposure to South Africa (at 90% of current production) has put the company under severe financial strain due to the strength of the South African rand relative to the dollar.
Gold off 1-week low as physical buying emerges
Tue May 16, 2006 8:21 AM GMT
SINGAPORE (Reuters) - Gold rebounded from its lowest level in a week on Tuesday as bargain hunters and physical buyers emerged, lifting the price of other precious metals.
Spot gold hit a low of $676.80 an ounce, just above key support of $675 an ounce, before rebounding to $686.75/687.75 an ounce, up from $682.60/683.60 late in New York.
"A lot of people want to buy gold at very low prices, and now there's a collapse, so everyone jumps into the market. They are all happy," said a dealer in Singapore.
"Some of the purchases are physical-based," said the dealer, referring to buying from investors and jewellery makers.
Gold, used in jewellery and investment, fell more than 4 percent in the U.S. market on Monday, when a broad financial market sell-off saw base metals, oil and equities buckling under speculative selling from record highs.
Gold hit a 26-year high of $730.00 on Friday on fund buying as investors diversified into precious metals on record-high oil prices, tensions in the Middle East over Iran's nuclear ambitions and uncertainty over the dollar's outlook.
Some dealers said physical demand was limited, which suggested that buyers were keen to see more price correction.
"It's human nature. People have seen a big correction. Are we going to see more?" said Darren Heathcote, head of trading at N M Rothschild in Sydney.
"I think there's scope for gold to fall further yet," he said.
The benchmark gold futures contract on the Tokyo Commodity Exchange, currently April 2007, fell by its daily 60-yen limit to 2,516 yen per gram as sell-offs in London and New York ignited active follow-through sales by Japanese investors.
"I think it's accepted that it's probably moved way ahead of fundamentals in the recent last couple of weeks as far as gold is concerned," said Heathcote.
"In the back of my mind, I seem to feel it has ... that strong bull run, you know, getting ahead of itself," he said.
In other precious metals, platinum rose to $1,272/1,280 an ounce from $1,270/1,278 late in New York but off last week's record high of $1,334 an ounce.
Refiner Johnson Matthey released its widely anticipated annual review on Monday, saying the market was expected to register a deficit for the eighth year in a row. Palladium rose to $367/374 from $363/369 in New York on Monday, when it had fallen to its lowest in nearly three weeks at $352 an ounce on fund selling.
Silver fell to its lowest in nearly three weeks to $13.04 before rebounding to $13.45/13.55. The metal was last quoted at $13.29/13.30 in New York.
Silver hit a 25-year peak of $15.17 last week.
The currency market could also offer leads to precious metals ahead of the release of the U.S. April Producer Price Index due at 1230 GMT. Market players are watching for clues on the Federal Reserve's next move on interest rates.
Economists in a Reuters survey forecast a median 0.8 percent rise compared with a 0.5 percent increase in March.
The dollar erased earlier gains as the covering of short positions eased and investors looked to the data for clues about when the Fed will pause its two-year run of interest rate rises.
The dollar was at 110.25 yen down from a session high around 110.90 yen and 110.50 yen in late U.S. trade on Monday. The U.S. currency hit an eight-month low of 109.31 yen hit late last week.
Tue May 16, 2006 8:21 AM GMT
SINGAPORE (Reuters) - Gold rebounded from its lowest level in a week on Tuesday as bargain hunters and physical buyers emerged, lifting the price of other precious metals.
Spot gold hit a low of $676.80 an ounce, just above key support of $675 an ounce, before rebounding to $686.75/687.75 an ounce, up from $682.60/683.60 late in New York.
"A lot of people want to buy gold at very low prices, and now there's a collapse, so everyone jumps into the market. They are all happy," said a dealer in Singapore.
"Some of the purchases are physical-based," said the dealer, referring to buying from investors and jewellery makers.
Gold, used in jewellery and investment, fell more than 4 percent in the U.S. market on Monday, when a broad financial market sell-off saw base metals, oil and equities buckling under speculative selling from record highs.
Gold hit a 26-year high of $730.00 on Friday on fund buying as investors diversified into precious metals on record-high oil prices, tensions in the Middle East over Iran's nuclear ambitions and uncertainty over the dollar's outlook.
Some dealers said physical demand was limited, which suggested that buyers were keen to see more price correction.
"It's human nature. People have seen a big correction. Are we going to see more?" said Darren Heathcote, head of trading at N M Rothschild in Sydney.
"I think there's scope for gold to fall further yet," he said.
The benchmark gold futures contract on the Tokyo Commodity Exchange, currently April 2007, fell by its daily 60-yen limit to 2,516 yen per gram as sell-offs in London and New York ignited active follow-through sales by Japanese investors.
"I think it's accepted that it's probably moved way ahead of fundamentals in the recent last couple of weeks as far as gold is concerned," said Heathcote.
"In the back of my mind, I seem to feel it has ... that strong bull run, you know, getting ahead of itself," he said.
In other precious metals, platinum rose to $1,272/1,280 an ounce from $1,270/1,278 late in New York but off last week's record high of $1,334 an ounce.
Refiner Johnson Matthey released its widely anticipated annual review on Monday, saying the market was expected to register a deficit for the eighth year in a row. Palladium rose to $367/374 from $363/369 in New York on Monday, when it had fallen to its lowest in nearly three weeks at $352 an ounce on fund selling.
Silver fell to its lowest in nearly three weeks to $13.04 before rebounding to $13.45/13.55. The metal was last quoted at $13.29/13.30 in New York.
Silver hit a 25-year peak of $15.17 last week.
The currency market could also offer leads to precious metals ahead of the release of the U.S. April Producer Price Index due at 1230 GMT. Market players are watching for clues on the Federal Reserve's next move on interest rates.
Economists in a Reuters survey forecast a median 0.8 percent rise compared with a 0.5 percent increase in March.
The dollar erased earlier gains as the covering of short positions eased and investors looked to the data for clues about when the Fed will pause its two-year run of interest rate rises.
The dollar was at 110.25 yen down from a session high around 110.90 yen and 110.50 yen in late U.S. trade on Monday. The U.S. currency hit an eight-month low of 109.31 yen hit late last week.
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