With the Fed’s excessive pumping of liquidity into the market, you would expect hard assets like gold to continuously rise higher. Nonetheless, gold recently dipped under $1,100, down almost 10% from its peak just a few weeks ago. Turns out, while expectations of inflation should push prices higher, at least in the short run, there are other critical factors — like renewed dollar strength — also at work in the commodities market.
According to The Pragmatic Capitalist:
“With most the commodities priced in USD, the recent strength in the greenback will hurt commodities. Demand may have become more price inelastic than in earlier years, but with the [Commodity Research Bureau] breaking its recent support expect further weakness to come…
“…the lesson from the Japanese experience of the 90’s was to sell the rally when the stimulus was removed. With the US and China both applying their own versions of the withdrawal method (though we note that Japan is still pumping away as furiously as ever) now is that time…
“…As with many market signals in recent times, the bounce back in the steel price has been unusual as it has not yet been accompanied by supply constraints. In the context of a slowing in new orders, growth this inconsistently looks even weirder. [...] The disconnect between price and supply is even stronger in the copper market. You could reasonably argue that the market is anticipating shortages to come as the new orders are stronger in this metal with only the US looking like turning weaker.”
The Pragmatic Capatalist is making the argument that in the near term commodity prices are set to weaken. However, should overall growth return to the world economy, and especially the emerging China and India markets, this trend will likely around soon enough. To read more visit The Pragmatic Capitalist to learn about where the commodity markets are headed.
Why Commodities are Looking Weak in the Short Run originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”
2:40p ET Wednesday, March 31, 2010
Dear Friend of GATA and Gold (and Silver):
Zero Hedge continues its interest in GATA’s work, today promoting the interview done by Eric King of King World News with GATA Chairman Bill Murphy, GATA board member Adrian Douglas, and your secretary/treasurer about last week’s CFTC hearing on futures trading in the precious metals. It’s about time for the mainstream media to pick up on the market manipulation story, Zero Hedge’s Tyler Durden writes, and, addressing the mainstream media, he adds, “The Wall Street ad revenue sources you may lose from highlighting this ‘must-read’ story will be more than offset by the increased readership you will gain.” Zero Hedge’s commentary is headlined “Eric King Follow-Up Interview With GATA On The Trail Of The Biggest Gold Manipulation Story” and you can find it here:
Or try this abbreviated link:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Market Blog submits:
By David Berman
It is tempting to dismiss gold producers as a homogeneous group of stocks that merely trade with the price of gold. What a mistake.
Since mid-2005, when concerns arose about the U.S. dollar and the health of the global financial system, the price of gold has risen about 160% in U.S. dollar terms. In Canadian dollar terms, according to information gleaned from Bloomberg, gold has risen 115%.
By comparison, the returns of a half-dozen Canadian gold producers (selected more or less randomly, but they tend to be the better-known names) look less impressive: If you had invested equal amounts of money in Barrick Gold Corp. (ABX), Goldcorp Inc. (GG), Kinross Gold Corp. (KGC), Iamgold Corp. (IAG), Yamana Gold Inc. and Gammon Gold Inc. (GRS), your return since mid-2005 would be 76% – and that is including dividends.
The problem is that the respective returns on these stocks have hardly been uniform, even as gold itself has marched steadily higher. Yamana and Kinross are standouts for their gains of 131% and 135%, respectively.
Meanwhile, Gammon Gold stands out for its 9.8% decline. Yes, even if you had made a prescient bet on gold at the start of the remarkable five-year bull market in the precious metal, you would have nothing to show for your wisdom but a big headache. Rising gold prices are one thing; how much a company has in the ground and the cost at which they can get it out of the ground is another.
Mark O’Byrne submits:
Gold fell to $1,101/oz in New York Tuesday before recovering to close with a loss of 0.53%. It has since risen from $1,105/oz to $1,110/oz in Asian trading this morning. Gold is currently trading at $1,109/oz and in euro and GBP terms, gold is trading at €825/oz and £732/oz respectively. Gold looks set for a lower close for the month of March (some 1%) but a higher close for the quarter.
Gold’s rise this morning is likely due to dollar weakness and oil, copper and some of the other commodities remaining firm. Global steel prices are set to soar after yesterday’s iron ore pricing deal and this will contribute to increasing inflation and more inflation hedging buying of gold.
SINGAPORE: Gold consumption in China may double within the next 10
years, boosting prices as supplies fail to keep pace with booming demand
from investors and the jewelry industry, the World Gold Council said.
“China has an insatiable appetite for gold, which looks likely to
continue in an environment where domestic mine supply lags behind
demand,” the Council said in a report today.
China’s economy grew 10.7% in the fourth quarter from a year earlier,
the fastest pace in two years, after a 4 trillion yuan ($586 billion)
stimulus package spurred record lending and consumption. The world’s
biggest gold producer has increased reserves by 76% to 1,054 metric tons
since 2003 and has the fifth-biggest holdings by country, Hu Xiaolian,
deputy governor of the People’s Bank of China, said in April.
“Near-term inflationary expectations and rising income levels are likely
to support the investment case for gold as an asset class, especially
given that Chinese consumers are high savers and are looking to gold to
protect their wealth,” the council’s report said. “Jewelry and
investment growth are expected to be the chief drivers of demand.”
Bullion prices have gained 21% in the past year as the global recession
spurred demand for haven assets and the dollar weakened 5% against six
major currencies. Gold for immediate delivery dropped 0.3% to $1,104.55
an ounce at 9:17 a.m. in Singapore.
“Supply issues such as higher mine development costs, rising input costs
and potential threats relating to supply disruption, tougher safety
regulations and depleting ore bodies could put a much higher floor under
the gold price,” the council said in the report.
Demand in China from investors and the jewelry industry, the two largest
buyers in the country, reached a combined 423 tons in 2009, while
domestic mine supply was 314 tons, according to World Gold Council data.
The shortfall will create a “snowball effect” as the country’s
production may not keep pace with the annual leap in consumption, the
report said. China’s gold output rose 8% a year from 2006 to 2009, it said.
If gold jewelry buying in China reaches the same per capita rate as
India, Hong Kong or Saudi Arabia, the nation’s annual demand could
increase by at least 100 tons to as much as 4,000 tons, the Council said.
Gold accounts for 1.6% of The People’s Bank of China’s $2.4 trillion
total reserves, according to the report. If the bank raised its gold
holdings to the peak of 2.2% reached in the fourth quarter of 2002, the
“incremental demand would amount to a further 400 tons at the current
gold price,” the report said.
Ivanhoe/Rio Tinto have completed procedural and administrative processes with the Mongolian Government and mine construction is now due to begin in the 2nd quarter.
Rosemont Copper, a new copper project in southern Arizona, with strong environmental credentials, has ordered 14 filter presses from FL Smidth’s Salt Lake City facility.
John Lounsbury submits:
There has been a lot of news in recent weeks about precious metals trading, but a lot of it is not on the front pages. In fact, you have to dig to find some details. One recent nugget involves a London silver trader, Andrew Maguire. You can read Andrew Maguire’s e-mails to the CFTC (Commodity Futures Trading Commission) alleging silver market (and gold market) manipulation by JP Morgan Chase (JPM), available here, courtesy of King World News.
Maguire spells out in advance of the events exactly what moves will occur in six moderately lengthy detailed e-mails from January 26 through February 9, 2010.
Responses from the CFTC: Two e-mails containing a total of two terse sentences each.
KNW also has an audio of an interview with Maguire, as well as with Adrian Douglas, board member of GATA (Gold Anti-Trust Action Committee,http://www.gata.org/). In the interview, it is stated that Maguire was refused the opportunity to testify before a hearing of the CFTC.
A meeting of the CFTC was held on March 25 in Manchester, CT to address metals market manipulation. William Murphy, Chairman of GATA, testified. Murphy said:
The Gold Anti-Trust Action Committee [GATA] was formed in January 1999 to expose and oppose the manipulation and suppression of the price of gold. What we have learned over the past 11 years is of great importance in regard to this hearing on position limits in the precious metals futures markets. Our efforts to expose manipulation in the gold market parallel those of Harry Markopolos to expose the Madoff Ponzi scheme to the Securities and Exchange Commission.
The latest round of United States Mint weekly sales figures are in and they show collectors focused on the newly released 2010 Boy Scouts of America Centennial Silver Dollars. The coins are sprinting out Mint doors, as are bullion American Silver Eagles.
The Boy Scouts coins were launched on Tuesday, March 23. By [...]
For any long term purchaser of silver, there is no agency more important than the Commodity Futures Trading Commission, or the CFTC. The CFTC is charged with ensuring that the futures markets are trading fairly at all times and investigating manipulative trades and fraud within the trading system. Now more than ever, the CFTC is critically important in investigating banks like JP Morgan and their roles in manipulating market orders.