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19 Sep 2013

Copper higher ahead of Fed statement

Trade was cautious ahead of a policy statement by the US Federal Open Market Committee, which was due out after the LME close.

 At the PM kerb close on Wednesday, LME three-month copper was up 1.6 per cent at $US7,183 a metric ton. Aluminium was 0.4 per cent higher at $US1,784.40 a ton.

Base metal prices found support from the Chinese market, where local traders stocked up on industrial metals ahead of the Mid-Autumn Festival later this week, said analysts and brokers. Markets in China - the world's top base metal consumer - will be closed on Thursday and Friday.

Other investors awaited the conclusion of a two-day FOMC meeting - which issued its policy statement at 1800 GMT (0400 Thursday AEST).

Markets had expected the FOMC to withdraw some of the $US85 billion-a-month it has been spending to buy bonds, known as quantitative easing. But, after the LME close, the FOMC surprised by announcing it was keeping its stimulus measures in place.

Since base metals have a range of everyday uses, from smartphones to household plumbing, efforts to spur economic growth tend to prop up demand.

"For the most part, participants are bracing for a degree of tapering, although the game now seems to have shifted towards guessing the exact amount," said INTL FCStone analyst Edward Meir.

Base metals also drew support from some solid US housing data on Wednesday.

Housing starts rose 0.9 per cent in August from July to a seasonally-adjusted annual rate of 891,000, the US Commerce Department said. That was less than the 915,000 forecast by economists.

August home starts were driven by a seven per cent increase in single-family homes, considered a more reliable barometer of the sector's health.

"The small rise in housing starts in August is not as disappointing as it appears," said Capital Economics analyst Paul Diggle. - news.com.au


Gold trends indicate possibility of $1500 by end-2013


             KOCHI (Bullion Street): When it comes to Gold, just about everyone on the street is an expert. Last week, when I went to buy from the local grocer, he was also eager to know how the markets are faring but only that he himself had a view on gold and equities in general. But much of it has been gathered from hearsay or  and not from any meaninful analysis of the markets.

As I have noted yesterday, gold bulls are cautiously returning but not many are venturing into any wild guess for the simple reason that they have often failed to accurately gauge market sentiments. 

I am not overly bullish on gold but there are some indications already to show that gold could move higher.
- India's Finance Minister P Chidambaram has said that gold imports could fall to 845 tons this year due to import restrcitions.Lesser gold flow into a market which has an insatiable appetite for it, could signal further upward pressure on prices.  Indian market is witnessing a seasonal weakness and hence prices are bound to go up until it attains a peak during Diwali festivities, wedding season.

-China's demand is witnessing a surge which could continue to provide support for gold, so is some buying by Central banks.

- Physical demand continues to overpower any distortions created in the market by the derivatives, according to Mark Mobius of Templeton Investments.

-Jeff Nichols, precious metals economist in an analysis has already mentioned about the possibility of staflation in US economy generating a bullish scenario for gold.

Perhaps, I may reserve the technical view on gold to a later day but some overview on technicals may be appropriate at this time. The Kitco charts for one year gold based on closing New York prices show a continous downard slope or in technical terminology a descending channel. It would require sustained break above $1400 to push prices higher to $1500 and later $1600 levels.

However the 30-day charts show a rising wedge which is a reversal pattern that shows up typically in a bear market. Rising wedge usually provides a low risk/high reward ratio but there are other aspects to be looked into including volume although targets are achieved quickly, according to technical experts.

Recent data from US Commodity Futures Trading Commission (CFTC) also indicate long positions by managed futures has increased by 5256 while short positions had fallen by 8257.

Meanwhile, the World Gold Council has published a new research report on the link between US interest rates and gold prices. It said that a normal rate of interest from 0-4% is not adverse to gold eventhough a low rate environment is more conducive for the metal.

Juan Carlos Artigas, Head of Investment Research at the World Gold Council said: While headlines have focused on the recent price moves, the long term drivers of gold including emerging market growth and central bank demand hold firm, particularly when combined with a likely reduction in supply from both mine production and recycling. Even with the highest rate of interest, the core value of gold is to balance out a portfolio. Most investors are under allocated; optimal levels are identified as between 2% and 10%.”

Hence, present trends including a possible threat of tapering of QE is not entirely negative for gold while some really positive factors are in the background providing firm support. Therefore, given a strong push above $1400 in next two months could see prices moving higher to $1550-1600 levels. - Bullionstreet.com

Gold could climb back to $1500, Silver to $26 as Fed taper threat goes


            LONDON (Bullion Street): US Gold futures and spot gold now stand a better chance to reach $1500 per ounce while silver prices could rise to $26 by year end as US Federal Reserve has indicated that it is not implementing tapering of stimulus as expected by September.

US Gold futures for December delivery shot up by $60 to $1360 an ounce while Silver futures for December delivery shot up to $23.015 levels. According to Sreekumar Raghavan, Chief Strategest at Commodity Online Group (India's leading commodity-equity trading services group), who had earlier forecasted $1500 gold by December 2013, precious metals is at the beginning of the strong demand cycle from September to January and market had taken a beating on speculation that Fed may announce tapering measures.

"This could eventually take gold near to $1500 levels aided by a weaker dollar and safe haven buying as continued stimulus measures will be inflationary," Sreekumar Raghavan said. Silver is backed by sufficient industrial demand and hence could move upwards of $26, he added.

Fed surprised everyone on Wednesday by postponing tapering measures and revising downwards the outlook on US economy from 2.3% GDP growth to 2% and this caused US dollar to fall to a seven month low against major currencies. Gold soared 4%.
Reuters quoting some economists said that winddown of stimulus measures may not start until present Fed Chairman Ben Bernanke's term ends in January. And it could be left to his successor to try out such measures. Fed Vice Chair Janet Yellen is the front runner for the job.

It may be recalled that a few days ago HSBC Global Research had revised its gold outlook for 2013 from $1396 per ounce to $1446/Oz in view of strong Asian demand. China demnad for gold jewelry, coins and bars had shot up recently while India is entering a seasonally strong demand period amidst a steep hike in customs duty on gold and silver to 10% and jewelry duty from 10 to 15%. - bullionstreet.com

Crude Oil Continues To Tumble While Natural Gas Climbs


               Global oil prices were mixed in Asian trade Wednesday as investors await the end of the US Federal Reserve’s closely watched policy meeting to find out its plans for its stimulus program. Brent crude is trading at 108.00 even gaining 21 cents while WTI crude oil gave up a few cents to trade at 104.87. The spread is under $4.00 well below the average.
 With the threat of military action in Syria receding, attention has turned to the outcome of the Fed’s two-day meeting, with expectations for a reduction in its $85 billion a month bond purchases, known as quantitative easing (QE). Federal Reserve Chairman Ben Bernanke will make a statement after the meeting before holding a news conference. “The Fed is expected to announce the long-awaited decision to taper asset purchases,” DBS Bank said in a market commentary, adding that market consensus is for a “cautious” reduction of about $15-20 billion. 
Oil prices rose to multi-month highs this month on fears that the US would launch military strikes against Syria to punish the Assad regime for its alleged use of chemical weapons on its own people. But prices eased after a US-Russia deal that will see Syria’s toxic arsenal destroyed has averted an attack for now. News that Libya has resumed some oil production has also helped put downward pressure on prices. The announced resumption of some oil production in Libya is also weighing on the market after the state-run news agency reported that output of over 400,000 bbls from two fields had resumed,” Armstrong wrote in a research note. Worker protests at the fields since July had crippled Libyan production.
Besides watching the upcoming FOMC meeting oil traders will be closely watching today’s EIA inventory release. The American Petroleum Institute (API) report yesterday that, US crude oil inventories declined by 252,000 barrels to 359.0 million barrels for the week ending on 13th September 2013. Gasoline inventories dropped by 641,000 barrels to 218.32 million barrels and distillate inventories slipped by 167,000 barrels to 130.40 million barrel.
The US Energy Department (EIA) is scheduled to inventories report today and US crude oil inventories expected to fall by 1.4 million barrels for the week ending on 13th September 2013. Gasoline stocks are expected to gain by 0.3 million barrels whereas distillate inventories are expected to shoot up by 0.8 million barrels for the same period.
Natural gas ended higher for a fourth straight session on Tuesday, backed by rising nuclear plant outages and bullish inventory expectations, despite light profit taking after posting an eight-week high early in the day. Natural gas is trading at 3.749 gaining 22 points today. Nuclear production has been down boosted the demand for natural gas which was compounded by higher temperatures across the US pushing up residential demand. - Fxempire.com

Crude Oil keeps climbing after Fed passes on tapering


                  Crude Oil futures continued higher during Thursday’s Asian session after the Federal Reserve shocked markets by saying it will not taper its quantitative easing program. 

On the New York Mercantile Exchange, light, sweet crude futures for November delivery jumped 0.41% to USD107.72 per barrel in Asian trading Thursday. The November contract settled higher by 2.35% at USD107.28 per barrel on Wednesday. 

Many investors felt the Fed would announce plans to trim the amount of bonds it buys each month to spur recovery, a stimulus tool known as quantitative easing that drives down long-term interest rates and weakens the dollar to spur recovery, a recipe for rising gold prices. However, the Fed surprised markets by saying tapering of its easing efforts is tied to economic data and not the calendar. 

While that could be viewed as a sign that the U.S. economy is not as deep into recovery as the Fed would like to see, data points suggest oil demand is picking up. 

The Energy Information Administration reported earlier that U.S. crude oil stockpiles dropped by 4.37 million barrels in the week ending Sept. 13, well beyond expectations for a decline of 1.39 million barrels and far past a decline of 219,000 barrels in the previous week. 

In U.S. economic news out Wednesday, the Commerce Department said single-family housing starts jumped 7% last month to an annual rate of 628,000 units, the highest level in six months. New construction for apartments and condominiums fell 11.1%. Permits for single-family homes rose 3% to the highest level since May 2008. 

Oil futures could continue to rise on the expectation that with QE remaining in place for the foreseeable future, the U.S. dollar will weaken. Oil is denominated in dollars. 

Elsewhere, Brent futures for November delivery rose 0.26% to USD110.86 per barrel on the ICE Futures Exchange. - investing.com

Gold jumps after Fed says no to tapering



                 Gold futures surged in the early part of Thursday’s Asian session as the Federal Reserve surprised markets by opting not to alter its USD85 billion-per-month bond-buying program known as quantitative easing. 

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery soared 4.28% to USD1,363.60 per troy ounce in Asian trading Thursday. The December contract settled lower by 0.14% at USD1,307.60 per ounce on Wednesday. 

Gold futures were likely to find support at USD1,334.60, the high from Sept. 15 and resistance at USD1,375. 

Many investors felt the Fed would announce plans to trim the amount of bonds it buys each month to spur recovery, a stimulus tool known as quantitative easing that drives down long-term interest rates and weakens the dollar to spur recovery, a recipe for rising gold prices. However, the Fed surprised markets by saying tapering of its easing efforts is tied to economic data and not the calendar. 

That could be taken as a sign that the central bank does not yet feel the U.S. economy, the world’s largest, is far enough along in the recovery cycle to withdraw stimulus measures. 

The Fed also appears to be betting that by keeping easing in place, the U.S. economy will be able to continue adding jobs and with the specter of tapering gone, mortgage rates will fall and stimulate housing demand, an integral part of U.S. GDP. 

In U.S. economic news out Wednesday, the Commerce Department said single-family housing starts jumped 7% last month to an annual rate of 628,000 units, the highest level in six months. New construction for apartments and condominiums fell 11.1%. Permits for single-family homes rose 3% to the highest level since May 2008. 

Elsewhere, Comex silver for December delivery surged 6.46% to USD22.958 per ounce while copper for December delivery rose 0.16% to USD3.322 an ounce. - investing.com