Gold flat as stimulus buying fades, euro zone eyed

 NEW YORK: Gold traded flat on Wednesday, as renewed fears about a worsening euro zone debt crisis along with wider concern about the global economy dampened the metal's allure as a traditional inflation hedge.

Analysts said that some investors could take profits after gold had climbed for four consecutive months prior to October. The failure of recent rallies to break above $1,800 an ounce also triggered technical pressure.

The metal reached an 11-month high on Friday on hopes that the Federal Reserve, European Central Bank and other major central banks would continue pumping money into the global economy to stimulate growth, which has boosted gold's inflation-hedge appeal.

"Additional monetary policy easing in the United States and other countries is no longer fresh news, and so we do not anticipate further significant buying of gold based on monetary policy accommodation alone," said James Steel, HSBC's metal analyst.

Spot gold was down 0.1 percent at $1,762.70 an ounce by 11:10 a.m. EDT (1510 GMT). Bullion was still within reach to a 11-month high of $1,795.69, which marked the loftiest price since November.

US COMEX gold futures for December delivery were 40 cents lower at $1,764.60, with trading volume on track to finish sharply below average, preliminary Reuters data showed.

Silver, however, climbed 0.6 percent to $34.05 an ounce, boosted by better industrial-demand outlook as crude oil and base metals recovered after their recent losses.

Bullion tracked US equities lower, after the International Monetary Fund on Wednesday urged European policymakers to deepen the financial and fiscal ties within the euro area to restore sagging confidence in the global financial system.

Purchases of exchange-traded products (ETPs) reflected investors' positive outlook for bullion in the long term. Bullion backed ETPs rose to a record high on Oct 9.

A Reuters poll of 27 analysts released Wednesday showed they remained bullish on bullion in the long term. Analysts unanimously forecast a record high average price of $1,690.00 an ounce in 2012, up a touch from an estimate of $1,685.00 at the end of the second quarter and $1,765 suggested in January.

Analysts expect the metal to book a thirteenth successive year of gains in 2013, reaching an average price of $1,853.75.

Among platinum group metals that are mostly used as auto catalytic converters, platinum fell on signs that industrial unrest in South Africa, home to the largest platinum reserves, was abating.

Spot platinum was down 0.3 percent on the day at $1,674.75 per ounce, while palladium was down 0.2 percent at $651.47 an ounce.

Palladium also fell after data from China showed a decline in vehicle sales in September versus the year earlier period, the China Association of Automobile Manufacturers (CAAM) said on Wednesday.

OIL FUTURES: Crude Pushes Above $93/bbl

--U.S. crude oil adds gains as Middle East keeps traders on edge
--Nymex oil recently up 99 cents to $93.38/bbl
--Iran, Syria worries trump OPEC warning on demand slowdown

 
   By Jerry A. DiColo 
 

NEW YORK--U.S. crude-oil futures pushed higher Wednesday, adding to a $3 rally Tuesday as investors stay focused on renewed tensions in the Middle East.
Light, sweet crude oil for November delivery recently traded 99 cents, or 1.1%, higher at $93.38 a barrel on the New York Mercantile Exchange. Brent crude oil on the ICE futures exchange traded up 77 cents to $115.27 a barrel.
Oil prices rose Wednesday as concerns about Turkey and Syria continued to mount, after Turkey's top military commander warned that the country would take tougher action if Syrian shells continued to land on Turkish territory.
While Turkey and Syria aren't major oil producers, the possibility of expanded military activity highlights the threat that Syria's civil war could devolve into a regional conflict. Turkey is also an important oil-transportation route, and fears have grown that the 400,000 barrels a day of Iraqi oil piped to the Turkish port of Ceyhan could become a target.
"Elevated tensions and military activity along the Syria-Turkey border are reminders that isolated incidents could quickly spread," analysts at JP Morgan said in a note to clients.
On Tuesday, prices rose more than $3 a barrel as Israeli Prime Minister Benjamin Netanyahu called parliamentary elections for early 2013, a move seen by some as a way to shore up his political base ahead of possible military action against Iran.
The latest worries about oil supplies from the Middle East has trumped several reports this week suggesting global oil demand growth will stall.
The Organization of Petroleum Exporting Countries said Wednesday oil supplies will remain comfortable in the coming year, lowered its forecast for global demand growth this year and predicted a continued slowdown in 2013.
"Right now the market is undecided on the next move," said Phil Flynn, an energy analyst at Price Futures Group. "Weaker demand should mean lower prices but, in a world hellbent on keeping the economy afloat with stimulus, and the rising geopolitical risk, supply and demand won't matter."
Oil prices have seen big swings in recent days, but have still remained close to the level of $90 a barrel since falling from near $100 a barrel in mid-September.
In its monthly oil-market report, OPEC said oil-demand growth will fall to 800,000 barrels a day this year, down 100,000 barrels a day from its previous estimate. But the group warned that next year's demand faces "considerable uncertainties" that could lower its 2013 estimate by as much as 20%.
The OPEC report followed a report from the International Monetary Fund earlier this week suggesting that the risk of a global recession has risen, raising worries about oil demand even as Middle East tensions keep traders on edge.
Front-month November reformulated gasoline blendstock, or RBOB, recently traded 2.07 cents higher at $2.9794 a gallon. November heating oil recently traded 2.64 cent higher at $3.2296 a gallon.
--Ben Winkley contributed to this report.
Write to Jerry A. DiColo at jerry.dicolo@dowjones.com.

Gold extends losses to a third day

SAN FRANCISCO (MarketWatch) — Gold prices traded lower Tuesday as global-growth concerns and nervousness ahead of the corporate-earnings season preoccupied traders, and as the dollar gathered steam.

Gold for December delivery GCZ2 -0.41%  declined $8.10, or 0.5%, to $1,767.50 an ounce on the Comex division of the New York Mercantile Exchange. It earlier traded as low as $1,762 an ounce, and prices had spent most of the session in and out of the red.

Gold was getting mixed messages on Tuesday, said Adam Klopfenstein, a senior marketing strategist with Archer Financial. Some inflationary forces were at play, but amid equity weakness and dollar strength it could not get much traction, he said.

Gold dropped $5.10, or 0.3%, on Monday to settle at $1,775.70 an ounce, after the World Bank downgraded its growth forecast for Chinese growth.

The International Monetary Fund on Tuesday cut its forecast for global growth yet again, to 3.3% this year from a forecast of 3.5% made in July. The bank predicted growth of 3.6% in 2013, from a prediction of 3.9% in July.

The bank also said France, Spain and other euro-zone governments won’t meet fiscal targets agreed upon. IMF: key euro-zone nations to miss deficit targets.

The downgrade and the worries made the dollar the safe-haven of choice, crimping gold and other dollar-denominated commodities.

The ICE dollar index DXY +0.54% , which measures the dollar against a basket of six currencies, rose to 79.981, compared with 79.595 in late North American trading on Monday. See: Dollar rises as IMF sounds warning.

Also on Tuesday, the People’s Bank of China injected a big dose of liquidity to help ease tight money conditions.

That move strengthened hopes for more policy easing from the central bank, providing some underlying support for commodities. See: PBOC’s Zhou pledges flexible, pre-emptive policy

Analysts at Commerzbank said in a research note that markets seem to be recognizing that chances of cheap central bank liquidity will improve if global growth continues to slow. Gold has gained this year largely due to central-bank efforts to keep monetary policy loose.

“The chance of unlimited, cheap central bank liquidity and strong exchange-traded-fund inflows suggest that the price might soon rise towards $1,800,” the analysts wrote. Continuing strikes in the South African gold sector are another supportive factor, they noted.

There are strikes at mines owned by AngloGold Ashanti Ltd. AU +0.07%   ZA:ANG +4.62% , Gold Fields Ltd. ZA:GFI +1.95% , and Harmony Gold Mining Co. ZA:HAR +1.91%   HMY -0.05% . Workers from other sectors have also joined the walkouts in recent days.

While South African gold production has been on the wane, the nation was still the fifth-largest gold producer last year, the Commerzbank analysts said.

“Every ounce which is lost to strikes exacerbates the supply bottlenecks, and since the beginning of September, (exchange-traded funds) have been absorbing virtually half of the global mine production during this period,” they said.

South Africa’s strikes are a strain but one that does not impact gold as much as it impacts platinum, Klopfenstein said.

Platinum, 80% of which is mined in South Africa, remains well supported by strikes that continue to spread, lately to Xstrata PLC’s UK:XTA +0.86%  Eland mine.

January platinum futures PLF3 -0.11%  turned lower, however, off $2.10, or 0.1%, to $1,696.70 an ounce, while palladium for December delivery PAZ2 +0.21%  rose $2.35, or 0.4%, to $659.30 an ounce.

Silver went back to the red, with the December contract SIZ2 -0.05%  down 8 cents, or 0.3%, to $33.93 an ounce.

December copper futures HGZ2 +0.01%  rose less than 1 cent, or 0.1%, to $3.72 a pound

Oil prices rebound; Brent jumps above $113

WORLD oil futures have recovered on Middle East tensions according to analysts, helping to offset Saudi Arabia's pledge to satisfy global energy markets and "moderate" prices. 
 
Brent North Sea crude for delivery in November jumped $1.65 to $US113.46 ($A111.84) a barrel in late London deals.
New York's main contract, light sweet crude for November, gained $1.99 to $91.32 a barrel.
"Crude oil prices rebounded on Tuesday, as renewed concerns about Middle East tensions provided some upside momentum to the oil market," said Sucden Financial Research analyst Myrto Sokou.
NATO head Anders Fogh Rasmussen on Tuesday warned against the dangers of the conflict in Syria escalating, saying alliance member Turkey had shown commendable restraint in response to shelling of its border area.
Syrian shells last week killed five people in a Turkish border village, sparking a series of retaliatory strikes.

Oil prices meanwhile held onto their gains on Tuesday despite bearish comments by Saudi Oil Minister Ali al-Naimi.
"We will provide the markets with what they need," Naimi told reporters on the sidelines of a ministerial meeting in Riyadh. "We will work to moderate prices."
Addressing fellow ministers, Naimi warned that rising oil prices would affect economic growth across the globe, mainly in developing economies.
"Oil prices rose in March to levels not seen since 2008, which may adversely affect the global economy, particularly the economies of developing nations and emerging countries, as well as negatively impact global oil demand," he said.
Crude futures had fallen on Monday as the International Monetary Fund and World Bank slashed their 2012 growth forecasts.
The IMF cut its forecast for Chinese economic growth this year to 7.8 per cent, while the World Bank said it expected the world's second-largest economy to grow at a slower-than-expected 7.7 per cent.
The brokerage Phillip Futures said in a note to clients that "China's economic growth and demand for petroleum have been key supports for oil prices since global energy demand was hit by recession after the financial crisis."

Oil prices rebound; Brent jumps above $113

WORLD oil futures have recovered on Middle East tensions according to analysts, helping to offset Saudi Arabia's pledge to satisfy global energy markets and "moderate" prices. 
 
Brent North Sea crude for delivery in November jumped $1.65 to $US113.46 ($A111.84) a barrel in late London deals.
New York's main contract, light sweet crude for November, gained $1.99 to $91.32 a barrel.
"Crude oil prices rebounded on Tuesday, as renewed concerns about Middle East tensions provided some upside momentum to the oil market," said Sucden Financial Research analyst Myrto Sokou.
NATO head Anders Fogh Rasmussen on Tuesday warned against the dangers of the conflict in Syria escalating, saying alliance member Turkey had shown commendable restraint in response to shelling of its border area.
Syrian shells last week killed five people in a Turkish border village, sparking a series of retaliatory strikes.

Oil prices meanwhile held onto their gains on Tuesday despite bearish comments by Saudi Oil Minister Ali al-Naimi.
"We will provide the markets with what they need," Naimi told reporters on the sidelines of a ministerial meeting in Riyadh. "We will work to moderate prices."
Addressing fellow ministers, Naimi warned that rising oil prices would affect economic growth across the globe, mainly in developing economies.
"Oil prices rose in March to levels not seen since 2008, which may adversely affect the global economy, particularly the economies of developing nations and emerging countries, as well as negatively impact global oil demand," he said.
Crude futures had fallen on Monday as the International Monetary Fund and World Bank slashed their 2012 growth forecasts.
The IMF cut its forecast for Chinese economic growth this year to 7.8 per cent, while the World Bank said it expected the world's second-largest economy to grow at a slower-than-expected 7.7 per cent.
The brokerage Phillip Futures said in a note to clients that "China's economic growth and demand for petroleum have been key supports for oil prices since global energy demand was hit by recession after the financial crisis."

Gold futures swing between gains and losses on USD strength

Gold futures swung between modest gains and losses in rangebound trade during U.S. morning hours on Tuesday, as ongoing concerns over Spain and Greece boosted demand for the U.S. dollar.

Lingering worries over the health of the global economy also weighed on sentiment.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,775.55 a troy ounce during U.S. morning trade, easing down 0.02%.    

Prices were stuck in a narrow trading range of USD1,771.95 a troy ounce, the daily low and a session high of USD1,781.55 a troy ounce.

Gold prices were likely to find support at USD1,765.75 a troy ounce, the low from October 1 and near-term resistance at USD1,793.85, October 1’s high.

Market sentiment remained under pressure after the International Monetary Fund cut its global growth forecasts and warned of even slower expansion unless officials in the U.S. and Europe address threats to their economies.

The IMF said that the world economy will grow 3.3% this year, the slowest since the 2009 recession, and 3.6% next year, compared with July predictions of 3.5% in 2012 and 3.9% in 2013.

Investors also remained cautious amid uncertainty over how soon Spain may formally request a bailout lingered after euro zone finance ministers said Monday that Madrid did not need external financial aid yet.

Meanwhile, German Chancellor Angel Merkel said earlier that Greece was on a “tough path” following talks with Prime Minister Antonis Samaras in Athens, but one which she believed would pay off.

The talks came amid ongoing uncertainty over whether international creditors will extend loans to Greece, as the country struggles to meet deficit reduction targets.

The risk-off trade environment prompted investors to shun riskier assets, such as stocks and commodities and flock to traditional safe haven assets like the U.S. dollar and Treasuries.

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.3% to trade at 79.92.

A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.

Elsewhere on the Comex, silver for December delivery was dipped 0.02% to trade at USD34.01 a troy ounce, while copper for December delivery added 0.25% to trade at USD3.728 a pound.

Copper prices found support after the People’s Bank of China injected CNY265 billion into the money market, in a bid to ease tight liquidity conditions.

The move raised optimism for further supportive policy measures out of China, the world’s largest consumer of the industrial metal.

Natural gas futures drop with warm weather in focus

Natural gas futures came under pressure during U.S. morning trade on Tuesday, as forecasts calling for warmer-than-normal autumn temperatures weighed on future demand expectations for the heating fuel.

Traders also looked ahead to Thursday’s closely watched U.S. government report on natural gas supplies.

On the New York Mercantile Exchange, natural gas futures for delivery in November traded at USD3.349 per million British thermal units during U.S. morning trade, dropping 1.6%.     

It earlier fell by as much as 1.65% to trade at a session low of USD3.348 per million British thermal units.

Updated weather forecasts released Monday showed warmer-than-normal temperatures were expected across much of the U.S. Midwest and East Coast over the next two weeks, dampening early-Autumn heating demand for natural gas.

According to the Commodity Weather Group, spikes of "much-above-normal temperatures" in the Midwest are expected in the next six-to-10 days, while the East Coast will see similar weather patterns in the next 11-to-15 days.

Natural gas futures often reach a seasonal low in October, when mild weather reduces demand, before recovering in the winter, when heating-fuel use peaks.

Ongoing concerns over bloated U.S. inventory levels also added to the selling pressure. Total U.S. gas supplies stood at 3.653 trillion cubic feet, 8.3% above the five-year average level for the week.

Early injection estimates for this week’s storage data range from 76 billion cubic feet to 98 billion cubic feet, compared to last year's build of 108 billion cubic feet. The five-year average change for the week is an increase of 84 billion cubic feet.

Inventory did not top the 3.4-trillion cubic feet level in 2011 until October 5, with stocks peaking at a record 3.852 trillion cubic feet in November of last year.

Market analysts have warned that without strong demand through the early-Autumn shoulder season, gas inventories will reach the limits of available capacity later this year.

The shoulder season is the period in autumn when gas demand typically slackens and prices fall.

Elsewhere on the NYMEX, light sweet crude oil futures for delivery in November rallied 2.2% to trade at USD91.29 a barrel, while heating oil for November delivery rose 1.05% to trade at USD3.177 per gallon.

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The Bullion shine: How global Gold fared in the past week

LONDON   The bulk of the complex posted gains over the week, with gold prices closing at an 11-month high as the macro environment has become increasingly supportive.
Gold has consolidated its gains but has yet to breach $1800/oz as equity markets have edged higher and the dollar has weakened. Gold has been looking to macro events for reinforcement, and the ECB leaving rates unchanged in line with expectations has not derailed gold’s trajectory, but non-farm payrolls being broadly in line with expectations has triggered some profit-taking.
“Our FX strategists look for the EUR/USD to strengthen to 1.35 in three months, removing a sticky hurdle for gold prices.” Barclays said.
In terms of non-macro headwinds, the physical market has started to show signs of support, although it remains weaker than the seasonal norm. While markets remain closed with the week-long National Day holiday in China, local dealers in India have reported a pickup in gold buying as local prices have eased from record highs as the INR has strengthened against the USD to levels last seen in mid-April.
Meanwhile, scrap selling has started to slow in Indonesia and Singapore. Earlier in the week, reports highlighted the surge in scrap supply, with local dealers and the trade body estimating supply from India at 200-300 tons this year, compared with 58.5 tons last year.

The Crude Oil week: Of barrels and bullets

Crude oil markets have mirrored the price movement over the previous week, in that it has eased over the early half only to rebound by the end of the week. Front-month Brent continues to oscillate around the $111/bbl mark, while the equivalent WTI contract has once again bounced back after inching below the $90/bbl mark.
Geopolitical risks continue to escalate, with protests reported in Iran following the sharp depreciation of its currency, while tensions have escalated on the Turkish-Syrian border.
Fundamentally, the supply system has a cocktail of positives and shortfalls, both among OPEC and non-OPEC producers. Starting with the positives, Iraqi oil exports are showing strong growth due to recent capacity expansion at its southern fields and export system.
Further, with the central government and the Kurdistan region reaching an agreement on oil revenue sharing, exports have resumed from the former region as well, which has helped buoy output. This week saw a further firming of this agreement, as Baghdad made the first set of payments.
Although output is increasing, Barclays continues to highlight the geopolitical situation in the region that continues to pose a risk to output levels from the country. Further in the non-OPEC, Russian production continues to grow as well, although exports have been limited by strong demand within the FSU.
While the positives on the supply side are welcomed by a market with limited supply buffers, the tally of shortfalls continue to build up as well.
This week saw further cargo delays in the North Sea. Three more Forties crude cargoes for export in October were delayed, bringing the total deferrals for the month to ten. The delays are a result of longer-than-expected maintenance at UK’s biggest oil field Buzzard (200 thousand b/d), as well as reduced output from other North Sea fields.
Among the OPEC producers, shortfalls in Nigeria have come to the spotlight again as on Sunday, a fire on the Bomu-Bonny trunk line has affected about 150 thousand b/d of Nigerian Bonny light exports. So far, although Shell has not declared force majeure for Bonny light exports so far, two October loadings of cargoes have been delayed.
Finally, in terms of data releases, the weakness in Brazilian output continues to persist. Output from the country touched a 22-month low in August. The latest data peg total output at 2.096 mb/d, lower y/y by 43 thousand b/d (- 2%). NGL output growth was flat, and the weakness was due entirely to the falling crude profile, pegged at 2.006 mb/d (46 thousand b/d lower y/y).
Along with the delays in bringing new fields online, the weakness was pronounced in August because of scheduled maintenance at the giant Rancador and Marlim Leste fields in the Campos Basin. Further risks to production were expected in September as offshore drilling contractors Transocean and Chevron were served with injunctions to shut in their oil production. The injunctions were issued as part of a civil case involving last November’s oil spill at the Frade field. If the injunction had gone through, this would have dented Brazilian output significantly. However, Brazil’s court lifted the injunction on Transocean on 1 October.
With regards to Chevron, the court has not lifted the full ban, asking the company to continue only those activities related to the mitigation and monitoring of the November oil spill in the Frade offshore field. In the year-to-date, Brazilian production growth is now flat. Overall, Barclays expects Brazilian output to decline y/y by 60 thousand b/d in 2012.

Epic Debate: It is Jim Rogers Vs. Marc Faber on China

Jim Rogers reply that he is bullish on China and he believes that China is about to become the greatest country in 21st century. “I only buy China when it collapses” he said, and added that he bought into Chinese assets thrice: 1999, 2005 and 2008 November when there were collapses.

While the investment gurus Jim Rogers and Marc Faber agree on certain points in a CNBC TV debate, there are instances where they disagree.
For example China: Marc points out that China’s bench mark stock index the Shanghai Stock Exchange Composite Index was at 6100 in 2007 even as it is currently at 2086 levels these days; how would Jim Rogers be able to maintain that he is bullish on China?
Jim Rogers reply that he is bullish on China and he believes that China is about to become the greatest country in 21st century. “I only buy China when it collapses” he said, and added that he bought into Chinese assets thrice: 1999, 2005 and 2008 November when there were collapses.
“But there is a huge difference when one says that China is going to be the greatest country in 21st century and one should buy Chinese stocks” Jim Rogers stressed. “But I do buy Chinese stocks and would buy more if China collapses.” he said. And I buy them for my daughters; one day they may say that, “old man was a smart guy.”
Marc Faber meanwhile is bullish on Russia, as per Jim Rogers.
On US’ QE initiatives, Jim Rogers said that the biggest problem with authorities is that, “they think they know what they are doing” which actually may not be the case.
On Romney and Obama, Jim said, “they are both the same” to which Marc Faber agreed.
Jim Rogers mentioned that he is long on commodities and currencies and short on stocks. “If money printing continues by central bankers, bond markets would collapse and interest rates would shoot up.” he added.

Merkel to visit Greece next week; Rumors of imminent Spanish bailout denied

The trading week, dominated by contradictory reports concerning the Spanish bailout, ends with European markets in the green, after the sentiment was boosted on Thursday by ECB's announcement that its bond-buying program could be activated whenever needed. Following the release of the solid US NFP data for September EUR/USD broke above the 1.3030 level.

Samaras and Merkel to meet in Athens next Tuesday

German Chancellor Angela Merkel will travel to Greece on October 9 to hold talks with PM Anotnis Samaras. This is the first time since the onset of the crisis that the German leader will visit Athens. Greek labor unions are planning a rally outside the parliament on Tuesday to demonstrate their opposition towards the visit

Earlier on Friday Samaras warned that Greece was running out of funds and that it was crucial for the country to receive the next tranche of the bailout money before the end of November, in order to prevent it from defaulting on its debts. On Saturday the Greek government will meet with Troika inspectors for the last time before the October 8 EcoFin meeting, in an attempt to reach an agreement on the remaining 2 billion euros of austerity measures.

"The troika is demanding above all further cuts to pensions and wages. That is very difficult, because we are already bleeding," Samaras said in an interview for the German daily Handelsblatt. "The existing cuts already go to the bone. We are at the limit of what we can expect of our population."

Eurogroup considers Spanish bailout unnecessary

A EU official told reporters on Friday that Spanish banks would not be recapitalized through the ESM this year and that the exact timing of the procedure was not known yet. He added that the Eurogroup also did not see the need for a complete Spanish bailout such as those granted to Greece, Ireland or Portugal.

The official said that the results of the latest Spanish debt auctions were satisfactory and that the situation on the financial markets improved considerably over the last six months. Eurozone finance ministers, who will hold a meeting on October 8, will discuss the situation in Spain, but they do not expect that Mariano Rajoy's government will ask for the activation of the ESM.

These declarations further contradict rumors of an imminent request for a Spanish bailout, which have been circulating in recent days. On Tuesday Mariano Rajoy said that such a request would not be made in the nearest future while on Thursday night Finance Minister Luis de Guindos denied that Spain needs a bailout at all.

Spanish FinMin denies that Spain needs a bailout

During a lecture at the London School of Economics Spanish Finance Minister Luis de Guindos told the audience that Spain does not need a bailout, despite the increasing rumors that the country might officially ask for aid as soon as this weekend. He said that what the country really needs is ECB's intervention on the secondary market of government bonds under certain conditions.

Referring to the harsh austerity measures, introduced recently by the Spanish government and triggering violent protests in Madrid Luis de Guindos assured that “what we are doing is what we think is the correct thing not only for Spain but for the future of the Eurozone."

During Luis de Guindos's speech a group of young Spaniards protested by displaying placards with the inscription “Spain for Sale.”

Metals sell off in U.S. economic number anticipation

Gold futures moved lower in European trade Friday as profit takers hit the yellow metal while investors anticipate crucial numbers from the U.S. economy later in the session.

On the Comex division of the New York Mercantile Exchange, Gold futures for December delivery traded at USD1793.75 a troy ounce slipping 0.15%.

It earlier traded at a session high USD1798.05 a troy ounce. Gold was likely to find support at USD1765.75 and resistance at USD1798.05.
Gold prices advanced Thursday, after ECB President Mario Draghi reiterated that the central bank was ready to start purchasing the debt of troubled euro zone states.

Speaking at the ECB’s post-policy meeting press conference earlier in the day, Draghi said the central bank was ready to undertake Outright Monetary Transactions when the prerequisites are in place.

Draghi reiterated that the central bank was acting strictly within its mandate in undertaking a bond buying program via OMT’s.

The ECB left rates on hold at a record low 0.75% earlier, in a widely anticipated decision.

Meanwhile, the minutes of the Federal Reserve's September policy meeting showed that the central bank is moving toward linking its outlook for near-zero interest rates to specific economic conditions such as a decline in the unemployment rate.

On Thursday, the Department of Labor said the number of people who filed for unemployment assistance in the U.S. last week rose to 367,000, compared to expectations for an increase of 7,000 to 370,000.

Investors were eyeing the release of key U.S. jobs data, including the nonfarm payrolls for September, later in the session.

US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, rose 0.04% to trade at USD79.46.

Elsewhere on the Comex, Silver for December delivery dropped 0.16% to trade at USD35.995 a troy ounce while Copper for December delivery gave back 0.08% to trade at USD3.783 a pound.

Crude drops on profit-taking, shrugs off strong U.S. jobs data

Crude oil futures fell on Friday amid profit-taking, as investors shrugged off surprisingly strong U.S. employment data.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in November traded at USD89.46 a barrel on Friday, down 2.45%, off from a session high of USD91.65 and up from an earlier session low of USD89.03.

Oil ignored otherwise bullish data.

The U.S. unemployment rate fell to 7.8% percent in September from 8.1% in August, the Bureau of Labor Statistics reported earlier Friday.

Employers added a net 114,000 jobs in September, while households reported that total employment rose by 873,000 in September following three months of little change.

The number of unemployed Americans stands at 12.1 million, the fewest since January 2009.

Oil gained when the news broke but later fell amid profit-taking on sentiment that despite the improvement, not enough new jobs were created last month.

More workers took on part-time jobs last month, which accounted for the drop in the headline unemployment rate.

On the ICE Futures Exchange, Brent oil futures for November delivery were up 2.94% and trading at USD111.34  a barrel, up USD21.88 from its U.S. counterpart.

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Gold drops despite solid U.S. employment figures

 Gold prices fell in U.S. trading on Friday as investors sold the precious metal for profits, shrugging off solid unemployment data that sent gold's traditional hedge, the dollar, dipping.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery were down 0.94% at USD1,779.85 a troy ounce, up from a session low of USD1,774.95 and down from a high of USD1,798.05 a troy ounce.

Gold futures were likely to test support at USD1,774.95 a troy ounce, the earlier low, and resistance at USD1,798.05, the earlier high.

The U.S. unemployment rate fell to 7.8% percent in September from 8.1% in August, the Bureau of Labor Statistics reported earlier Friday.

Employers added a net 114,000 jobs in September, while households reported that total employment rose by 873,000 in September following three months of little change.

The number of unemployed Americans stands at 12.1 million, the fewest since January 2009.

Gold fell shortly after the news broke on sentiment that not enough new jobs were created last month and would likely not alter U.S. monetary policy.

More workers took on part-time jobs last month, which accounted for the drop in the headline unemployment rate.

Gold has risen in recent sessions due to loose monetary policies around the world, in the U.S. especially.

The U.S. Federal Reserve is currently running a third round of quantitative easing, a monetary stimulus tool that sees the U.S. central bank buy USD40 billion in mortgage-backed securities a month on an open-ended basis to spur recovery.

Such policy tools weaken the greenback and make gold an attractive hedge.

Elsewhere on the Comex, silver for December delivery was down 1.78% and trading at USD34.475 a troy ounce, while copper for December delivery was down 0.56% and trading at USD3.765 a pound.

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Global Gold ETFs: Biggest Outflows In Three Months

An opportunity to buy or a danger sign? ETF Securities reports that global gold exchange-traded products such as the SPDR Gold Trust (GLD) suffered their largest outflows in three months last week. As that was happening, net speculative long positions in the futures market fell near April 2009 lows.

With gold futures down 1.7% to $1657 an ounce recently, the market is a-chatter about the strong dollar and the outlook for interest rates, though an Indian jeweller strike and weak data from China have also played roles. Traders are taking little consolation from Goldman Sachs’(GS) bullish view this morning, which repeated the bank’s call for gold to reach $1,840 in six months and $1,940 in a year.

Like Goldman, ETF Securities seems confident that the metal will keep its pace:

ƒ Global gold ETPs see largest outflows in 3 months as gold price fall shakes out short-term investors. Sustained gold price weakness and a pull-back in broader risk positions caused ETP investors to pare back gold holdings last week. Total global outflows amounted to around 0.7mn ounces or around $1.1bn at the current gold price. This compares to total gold inflows of around 1.7mn ounces ($2.9bn at current gold price) up until the previous week. The gold ETP selling coincides with a further large-scale clearing of speculative futures market positions, with the latest CFTC data (data to March 20) showing that net speculative longs in the futures market have dropped back down towards April 2009 lows (see positioning charts on page 4). The gold price decline and investor selling has been sparked by upward revisions to the US rate outlook (and related US dollar strength) as US economic growth has continued to improve. It appears that shorter-term investors, recognizing the near-term headwinds to further gold price gains resulting from current improving US growth prospects, are trimming positions. However, with real interest rates expected to remain structurally low in most reserve currency countries, sovereign debt and financial system risks still high and structural demand from emerging markets and central banks still in their early stages, it is unlikely the recent price declines will shake out longer-term gold ETP investors. With net long speculative positions now near April 2009 lows, a firmer base has been set for future long-term price gains.

Some key points from the Goldman report:

Gold prices remain too low relative to the current level of real ratesUnder our gold framework, US real interest rates are the primary driver of US$-denominated gold prices. However, after being remarkably strong in the first half of 2011, this relationship broke down last fall, with gold prices falling sharply in the face of declining US real rates, as tracked by 10-year TIPS yields. While gold prices have returned to trading with a strong inverse correlation to US real rates since late December, at sub-$1,700/toz they remain below the level implied by the current 10-year TIPS yields. The gold market’s expectation that real rates would be rising along with economic growth may help explain this valuation gap We believe that despite last fall’s decline in 10-year TIPS yields, the gold market may have been expecting that real rates would soon be rising along with better economic growth, leading to a sharp decline in net speculative length in gold futures. Accordingly, a simple benchmarking of real rates to US consensus growth expectations suggested a level of +40 bp by year end. Our models suggest this higher level of real rates would be consistent with the current trading range of gold prices. As we look forward, our US economists expect subdued growth and further easing by the Fed in 2012, which should push the market’s expectations of real rates back down near 0 bp and gold prices back to our 6-mo forecast of $1,840/toz.Subdued US growth in 2012 will likely support gold prices, although risks to our constructive view are rising We reiterate our constructive outlook for gold prices in 2012 and our 3, 6-and 12-mo forecasts of $1,785/toz, $1,840/toz and $1,940/toz, respectively. We acknowledge, however, that continued strong US economic data poses growing risk to our forecast for rising gold prices. Net, we reiterate our view that at current price levels gold remains a compelling trade but not a long-term investment, and we continue to recommend a long position in Dec-12 COMEX gold futures.

Chinese Copper demand will disappoint: Barclays

The current state of Chinese demand is varied across industries. The spot demand for copper in China is weak, the improvement in Q2 may be tepid and imports are likely to remain strong in March and possibly April before trailing off until later in the year.

Sentiment amongst Chinese fabricators and manufacturers is negative. Orders have been slow to improve following the Chinese New Year and in some sectors are below year-ago levels. Inventories of cathode at consumers are low, but inventories of finished product are higher than usual for the time of year.

Fabricators and some manufacturers increased production strongly in January-March in expectation of a pick up in demand during the seasonally stronger Q2. But, so far, demand has been softer than they expected. Bonded warehouse stocks of copper have continued to increase. Current copper bonded warehouse stocks is estimated to be around 600Kt, in line with the 2011 peak.

March and April copper imports could be stronger than the market expects. The metal that had been booked in October/November 2011, when the arb on six-month forward prices was open, will continue to flow into the country. It is also likely that we might see a pick up in exports. Chinese smelters have been delivering metal into bonded warehouses from which traders have been exporting metal onto the LME, attracted by the backwardation.

Overall, the Chinese demand in the short term is likely to disappoint before beginning on a recovery trajectory later in Q2. Subsequently, imports may weaken until bonded stocks are run down to more normal levels, possibly in Q3 12. With the market already expecting a drop in Chinese imports, it is doubtful that this alone would have a significant negative impact on LME prices.

That’s more likely to be determined by the market’s evaluation of how long imports will weaken for and whether it's the result of short-term dislocation or longer lasting core weakness. The LME backwardation meanwhile is likely to continue unless Chinese exports are big enough to begin offsetting the draws in LME inventories.

Source: Barclays Commodities Research report

India gold imports to fall 53% in 2012: Bombay Bullion Association

Indian gold imports is set to crash by over 50% in 2012 owing to high prices and increasing taxes imposed by the government, as per the Bombay Bullion Association (BBA). India is the world's biggest gold market and such a big fall in imports could effectively dethrone the country from being the leading gold importer in the world.

In a Reuters Survey, Prithviraj Kothari, President of the BBA estimated that 2012 gold imports could fall down to 450 tonnes, down 53% compared to 969 tonnes imported in 2011. “Last year we had good imports but looking at the pace of the fall so far we are heading for a big fall in 2012"

Meanwhile Q1, 2012 gold imports are seen down 56% at 125 tonnes due to Jeweller's strike and a slow season. "It is March, which is a lean period for jewellery business. Moreover the loss in sales incurred during the 10 days of ongoing strike by jewellers will hit imports. It is likely to be less than 125 tonnes in the January-March period,", The Press Trust of India (PTI) quotes Kothari. Q1, 2011 imports were at 283 tonnes.

The Indian government had raised the import duty on gold while also doubling the customs duty. This was seen as a move to control the influx of huge quantities of gold that has been putting a strain on India's fiscal deficit. Coupled with the current higher prices of gold, many analysts are predicting Indian demand to fall drastically.

And with the crashing Indian demand, China could overtake India to become the biggest gold market in 2012.

High Oil prices strain Gold mining companies, keeps stocks undervalued against Gold

High oil prices are squeezing the profits of oil companies who are already battling the headaches of high labour cost and higher taxes. And with gold prices stabilizing at the same time, some producers may just fell the heat until the yellow metal resumes its bull trend.

The high volatility in oil prices have forced gold companies to hedge their oil needs. Even the world's biggest gold producer- Barrick Gold- had to hedge oil prices considering the uncertainty in the markets. “As the oil spike relates to our cost structure, we've got things under control. But as far as what an oil price rise means to the broader economy, obviously we have some concerns there”, Reuters quotes Barrick CEO Aaron Regent.

Some analysts argue that high oil prices can dent the profits of gold miners even if gold climbs. And as the producer is forced to mine for lower grades, the company yields lower gold for every processed rock with energy costs remaining the same- and this situation of lower yields and higher input cost will inevitably lead to lower profits for the gold mining companies.

The market seems to have picked up on the reasoning as well as gold stocks have constantly underperformed gold prices for most of the gold's bull market- a period when input costs like energy, labour and other prices have been rising as well.

Chart showing performance of Gold (GLD etf) and Gold mining companies (GDX etf)

Gold Price Heads for 2nd Monthly Drop, "Uptrend Needs New Investment" as Saudi Arabia Tries to Talk Down Oil Price

The Gold Price retreated below last week's finish Thursday morning in London, heading for its second monthly fall in succession against all major currencies bar the Japanese Yen.

Italian and Spanish debt prices fell amid fresh bond sales and a national strike respectively, while Frankfurt's stock market fell for the 7th session in nine.

Crude oil slipped to a 1-week low after French prime minister Francois Fillon followed yesterday's news of a sharp rise in US stockpiles by saying the prospects "are good" for a joint Euro-US release of strategic reserves.

Down 2.0% in February, the Gold Price in US Dollars was trading at $1657 per ounce by lunchtime today – some 7.0% below the start of March.

Gold hasn't fallen for more than two months in succession since spring 2001 vs. the Dollar, autumn 2006 vs. Sterling, and mid-2007 vs. the Euro.

"The view that the US economic recovery is looking more sustainable is becoming increasingly accepted," wrote UBS analysts Edel Tully and Julien Garran in a new report on Wednesday, slashing the Swiss banks's 2012 average Gold Price target by 18% to $1680.

"Gold is at risk, for it needs persistent inflows of investor money to keep it on its upward trajectory."

"Investors need to put in well over $100 billion to the gold market in 2012 to keep prices high," said GFMS chairman Philip Klapwijk at a CME conference in Singapore today, quoted by Reuters.

Globally, Gold Investment demand rose 33% by Dollar value to $83bn in 2011, according to GFMS data.

Klapwijk forecasts a "short-term" drop in the Gold Price below $1600 per ounce.

New data today showed Russia selling down its Gold Bullion reserves for the first time in 5 years last month.

Slipping by 3.8 tonnes, Russia's gold reserves have doubled by weight since 2007 to 883 tonnes, and quadrupled as a proportion of its total foreign exchange reserves by value to 9.8%.

Figures from Data Explorers, quoted by CityWire, say that hedge funds and other investors have sharply increased their short sales of Gold Mining stocks, with 10% of Chinese miner Zijin Mining Group currently out on loan.

"Indian [gold] demand has been dead for 3 months," said a senior Swiss logistics executive to BullionVault on Thursday, as the strike by India's jewelry retailers protesting a hike in import duties to 4% by value entered its 14th day .

"Nothing's moving, everyone's waiting."

Jewelry demand in India – the world's #1 consumer market – "was reasonably positive" in the first two months of 2012, according to GFMS's Klapwijk, but the hike in India's gold import duties is denting sales.

"If the excise duty is corrected, the trade will be happy," MarketWatch quotes Bhargav Vaidya of the Bombay Bullion Association.

"The strike will not be indefinite, and customers will not go high and dry during [the key Gold Buying] wedding season."

Meantime in the UK – which the OECD today said has fallen back into recession – daily petrol sales jumped 81% and diesel sales by 43% on Wednesday, according to the Petrol Retailers Association, blaming Government minister Francis Maude for the "panic buying" by advising motorists to fill jerry cans ahead of a possible strike by tanker drivers next week.

More broadly, and with crude oil prices near all-time records in Sterling and Euros today, "It is the perceived potential shortage of oil keeping prices high – not the reality on the ground," says Saudi oil minister Ali al-Naimi writing in the FT today.

"There is no lack of supply. There is no demand which cannot be met."

"Used to be that Saudi Arabia produced more oil when it wanted lower oil prices," notes Olivier Jakob at Petromatrix. "Today, when Saudi Arabia wants lower prices it produces an op-ed in the Financial Times.

"It shows that you either do not want or can't produce more."

Also in the UK today, Bank of China Ltd applied for membership of the London Metal Exchange, the world's #1 base metals exchange.

BoC's UK commodities arm is the first Chinese-owned business to apply for membership. Barclays Capital reckons that China now buys some 40% of annual global demand for copper, aluminum and nickel.

In the last 3 months of 2011, Chinese households overtook Indian consumers as the world's top buyers of physical gold according to GFMS data, despite the Gold Price recording its second-ever highest quarterly average against the Yuan.

India to Review Gold Tax

But duty hike on Gold Bullion imports to stay...

IN A MAJOR reversal, India's government has said it will review the tax on unbranded gold jewelry, following 12 days of protests by gold traders across India, writes MineWeb's Shivom Seth in Mumbai.

Following an uproar in Parliament, the Indian government has stipulated that it will tweak the tax on gold jewelry but will not roll back the duty on gold imports,

The doubling of import duty on gold came in for severe criticism from opposition party members in India, during the debate on the Union Budget 2012-13 in Parliament. Allied political parties have joined the opposition members on the issue, in a bid to pressurize finance minister Pranab Mukherjee to consider a rollback.

Following the nationwide strike by jewelers, former finance minister Yashwant Sinha pressed for a rollback of the excise duty on non branded jewelry and called for doing away with the requirement of a PAN card to Buy Gold jewelry worth $3936 (Rs 2,00,000).

PAN or Permanent Account Number refers to a ten-digit alphanumeric number, issued in the form of a laminated card, by the Income Tax Department in India. It is a must to have a PAN number for all those who file their income tax returns. The recent budget has stipulated that any transaction at the jewelers over $3936 would necessitate a PAN card. Sinha has called for the practice to be abolished.

The budget proposal to include unbranded jewelry in the ambit of 1% excise duty on branded jewelry has led to protests and strikes by bullion dealers. Replying to Sinha, Pranab Mukherjee told members of Parliament, ``I understand the plight of small jewelers and an acceptable solution will be found. There is no intention to harass anyone. The argument was that all states were charging value added tax. When you can pay value added tax, you can easily pay excise duty. But let me assure that I am considering it.''

Key political ally DMK joined the opposition members in demanding a rollback of the hike. Participating in the budget debate, DMK leader Kanimozhi said, ``The increase in import duty on gold to 4% is bound to add pressure. It will lead to smuggling.'' Higher import taxes on gold would affect demand in India, where households view the precious metal as a saving instrument, she said.

In Parliament, the issue was raised by different political parties – Arun Jaitley from the BJP, Sukhendu Sekhar Roy of the TMC and Tapan Sen of the CPI (M). West Bengal's industries and commerce minister, Partha Chatterjee, and TMC members have written to the Centre asking for a review in customs duty on gold and excise on jewelry.

While agreeing to reconsider some of the tax proposals on unbranded jewelry, Mukherjee reiterated his resolve to bring jewelers under the tax net under a new formulation. He also made it clear that he needed more time to study the legal implications of whether or not it would come into force immediately.

"I know it (gold) is part of our culture...but the import of gold of such magnitude strains balance of payments and affects exchange rate of the rupee through impacting supply-demand balance of foreign exchange,'' Mukherjee told Parliament members. He expressed concern over the out flow of precious foreign exchange on the import of ``dead assets that cause problems in the country.''

Referring to gold mined in India, he said, the quality of the country's gold bearing ore was ``extremely poor'' and as a result, it was uncompetitive to mine such ore to produce the precious metal indigenously.

India has around 30 gold mines. Each tonne of Indian gold bearing ore yields only 22 grams of gold, Mukherjee said, adding that experts opine that unless each tonne of ore does not produce 45 to 50 grams of gold, then the exercise becomes uncompetitive.

India produces around two tonnes of gold a year against the imports of 900 tonnes, he added.

Though the government has said there will be no step down from the import duty hike on gold and platinum to 4%, the government's proposal "to come out with an acceptable formula'' has left jewelers undeterred in their fight for a rollback, with most deciding to continue with the strike.

Jewelers in Nashik, Maharashtra have decided to continue their strike indefinitely. A decision in this regard was taken at a meeting organized by the Maharashtra Gold Jewellers' Association in Mumbai.

A delegation of the All India Gems and Jewellery Trade Federation recently met the All India Congress Committee member Digvijay Singh, who has assured the delegation that he would discuss the matter with Congress president Sonia Gandhi and Prime Minister Manmohan Singh.

Bachhraj Bamalwa, chairman of the Federation which called for the nationwide strike said members would continue with their demand to roll back the import tax hike.

"Though the finance minister has shown optimism in his speech, we will continue with the strike and will open our shops only after the excise duty and tax on cash purchase are rolled back,'' said  Zaveribhai Shah, president of the Jewellers Association, Ahmedabad.

US gold and copper slide as dollar steadier

NEW YORK, March 29 (Reuters) - U.S. gold futures slipped

Thursday as the dollar recovered and copper eased more following

its weaker performance in the previous session.

       
     FUNDAMENTALS
     * Gold prices slipped under $1,680 an ounce, extending a
fall from 2-week highs into a third session as the dollar
recovered from near a one-month low and crude oil values turned
lower.
    * Copper was off following a 2 percent fall in the previous
session although doubts over demand in China and the pace of
economic recovery in the U.S. made investors cautious.
    * China's Minmetals Resources plans to use its C$1.3 billion
Anvil Mining acquisition as a platform to buy more copper assets
in central and southern Africa.
    * South Korea's Hyundai Steel expects the steel market to
recover in the second half of this year led by a pickup in
automobiles and construction despite high oil prices, weak
Chinese demand and euro zone debt issues.

    ECONOMY
    * Germany's March unemployment rate fell to 6.7 percent from
6.8 percent in February.
    * The March euro zone economic sentiment index fell 0.1 to
94.4, compared with the expected 94.6.
    * Final fourth quarter U.S. GDP at 0830 EDT (1230 GMT) is
seen unchanged from the second estimate at 3.0 percent.
    * U.S. initial jobless claims at 0830 EDT are expected at
350,000, up from last week's 348,000.
         
    MARKETS
    * Global stocks dipped after disappointing U.S. data
tempered the outlook for the world's biggest economy while the
price of oil stabilized following some sharp losses.
    * The euro fell against the dollar as concerns about
contagion from the euro zone debt crisis overshadowed a solid
Italian bond auction.
   
 Prices at 7:17 a.m. EDT (1117 GMT)                      

                               LAST      NET    PCT     YTD
                                         CHG    CHG     CHG
 US gold                    1655.60    -2.30  -0.1%    5.7%
 US silver                   31.825   -0.006   0.0%   14.0%
 US platinum                1635.40     0.20   0.0%   16.8%
 US palladium                647.50     0.15   0.0%   -1.3%
 US copper                   377.05    -2.20  -0.6%    9.7%
   

US GAS : Futures Sell Off Ahead Of Inventory Report

NEW YORK (Dow Jones) --Natural gas futures sank Thursday ahead of a weekly report expected to show an unusually large build in U.S. inventories, amid weak demand.

Natural gas for May delivery recently fell 3.8 cents, or 1.6%, to $2.244 a million British thermal units on the New York Mercantile Exchange.

The even-cheaper April contract expired Wednesday at a fresh 10-year low of $2.191 million British thermal units.

The Energy Information Administration's weekly survey is expected to show natural gas inventories last week rose 46 billion cubic feet, sharply topping the year-ago level and the five-year average for the week.

If the survey is correct, the data would put inventories at 2.426 trillion cubic feet, 50% higher than a year ago and a record high for the week. Inventories would be 47% above the five-year average for this time of year.

Last year this week, inventories rose just 7 billion cubic feet.

"We feel that odds heavily favor additional selling following release of today's weekly EIA storage report," according to Jim Ritterbusch, head of the trading advisory firm Ritterbusch and Associates.

The sizeable build is expected amid weak demand for natural gas in the face of near-record production. The unusually mild winter and early spring has clobbered demand for natural gas used to heat homes and offices, leaving natural gas stores brimming and prices at their lowest levels in 10 years.

The unusually large spring inventory builds has raised fears among market observers that stockpiles could reach capacity when inventories peak in the autumn. Such an event would send prices sliding even further, as buyers disappear amid an absence of locations to store gas, according to analysts.

Front-month natural gas prices have already fallen 25% this year.

The mild temperatures are likely to persist for the foreseeable future, according to weather forecasts, suggesting that heating demand is unlikely to see a significant return this season. Commodity Weather Group said it sees above-average temperatures on the gas-consuming East Coast through the next two weeks.

Natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $2.02/MMBtu, according to IntercontinentalExchange, compared with Wednesday's average of $2.0482/MMBtu. Natural gas for next-day delivery at Transcontinental Zone 6 in New York traded at $2.19/MMBtu, down from $2.2056/MMBtu.

Limited Demand For Indian Public Sector ETF

India ETF

            India’s ongoing need for asset sales to help fund its budget deficit were behind one of the less likely ETF proposals floated this month. According to the Economic Times, the finance ministry is considering setting up a “PSU ETF” to take on stakes in state-controlled companies—known as Public Sector Undertakings—that the government wants to divest. For the government, the appeal is obvious. Such an ETF would not only allow blocks of shares in several firms to be sold off quickly and easily, but might reduce the problem of poor stock performance that has dogged previous PSU divestments. If enough patriotic retail investors could be encouraged to buy and hold the ETF, the share prices of companies involved would hopefully hold up better than they have in the past. But from an investor’s point of view, the value of such an ETF seems very limited. The PSUs are of variable quality and the majority stakes held by the state leaves them under obvious pressure to put national interests ahead of private shareholders, as some activist investors are currently alleging. Even where an investor is willing to accept this conflict, there are few good arguments for investing in such a disparate group of stocks as a whole purely because they are all state-run firms. And in any case, it’s hard to see such an ETF really getting off the ground—the current structure of the local ETF market suggests the demand wouldn’t be strong enough to make a difference. To put it into context, the government’s target for PSU divestments for this fiscal year is Rs 30,000 crore, or about US$5.9 billion. Yet as of last week, India had 33 listed ETFs, with a total of just US$2.1 billion in assets under management. Even more tellingly, about three-quarters of that sum is held in gold ETFs, reflecting local investors’ strong preference for precious metals over most other assets. While that remains the case, any PSU ETF would seem likely to have to scramble for a very small share of the market indeed. In fact, ETF development in India has almost stagnated lately, with few providers showing signs of doing more than jumping on the gold ETF bandwagon. The only new listing this month was yet another such product, this one from Canara Robeco, a joint venture between state-owned Canara Bank and Dutch asset management group Robeco. This is the 13th gold ETF to make it to market and it is hard to see how it will stand out from its peers. Even the total expense ratio of 1.5 percent— although high by global standards—falls towards the middle of the range for India. With the Goldman Sachs-owned Benchmark Asset Management holding around 35 percent of gold ETF AUM, Reliance overseeing another 30 percent and HDFC managing around 10 percent, the market is heavily concentrated and gaining scale is difficult for new arrivals. Still, the forthcoming 14th entrant in this increasing crowded field is at least trying to differentiate itself. Backed by independent fund house Motilal Oswal, the MOSt Shares Gold ETF will allow even relatively small investors to redeem their units for gold bars on demand, something that could be a selling point with retail investors who have traditionally bought physical gold from jewelers. Whether that will be enough to make it a success remains to be seen. But it is at least a hint of innovation in a market that now risks lagging behind the rest of Asia. Lyxor Leaves Hong Kong, Steps Up In Singapore Lyxor has completed its regional refocusing by delisting all of its 12 Hong Kong-listed synthetic ETFs. As first reported towards the end of last year, the French provider has decided to quit the Hong Kong market for reasons that were widely thought to be related to the Securities and Futures Commission’s tougher rules on synthetic ETFs, although executives have since said that it was driven more by an intention to focus on institutional clients. Lyxor now plans to base its Asian business around listings in Singapore, where the regulator has so far focused on restricting access to ETFs to investors with a certain level of expertise rather than imposing tougher rules on the structure of the products. This month it launched two additional funds on the Singapore Exchange, bringing its total listings locally to 28. The new products are Southeast Asian country trackers, following the Thailand SET50 and the MSCI Indonesia indices. Both are total return products that capitalise dividends and have total expense ratios of 0.45 percent and 0.55 percent, respectively. Also in Singapore, Malaysian banking group CIMB added its second product locally (and fourth overall), with the launch of the S&P Ethical Asia Pacific Dividend ETF. This aims to produce a yield of 4.5-5.5 percent while investing in stocks that have less than 5 percent revenue exposure to alcohol, gambling, tobacco and pork (the last reflecting a desire to attract investors who adhere to Islamic principles). The index holds the top 40 stocks in the Asia Pacific region that pass this ethical screen, weighted by dividend yield, and the result is a fairly unusual portfolio that looks unlike existing regional ETFs. The fund has around 30 percent in China and Hong Kong, 25 percent in Australia and 20 percent in Singapore, while in sector terms, financials, industrials and telecoms each account for around 25 percent. Major individual holdings include Chinese construction machinery group Lonking, Hong Kong clothing retailer Giordano, Indonesian fuels and chemicals distributor AKR Corporindo and Australian electronics retailer Jb Hi-Fi, as well as more widely held income plays such as China Mobile, Singapore Press Holdings and Telekomunikasi Indonesia. The fund uses physical replication, distributes dividends and has a TER of 0.65 percent. China Approves Cross-Market ETFs There were no new launches in mainland China, with the biggest news being the regulator’s decision to approve two cross-market ETFs from Harvest and Huatai-PineBridge. These should not be confused with the long-awaited cross-border ETFs that will allow mainlanders to invest directly in foreign stocks; instead, these will be the first mainland ETFs to hold stocks listed on both the Shanghai and Shenzhen stock exchanges. Both funds will track the CSI300 index, with the Harvest fund to be listed in Shenzhen and the Huatai-PineBridge offering to list in Shanghai. With the CSI300 increasingly seen as the key benchmark for the mainland stock markets, these funds are expected to see significant interest from investors. BetaShares Launches Cash ETF, Other Launches Elsewhere, Australian provider BetaShares expanded its range with a new launch aimed at income-hungry investors looking for maximum flexibility. The Australian High Interest Cash ETF will place all of its assets into high interest instant access and term deposit accounts with one or more of the major banks in Australia—at present, all cash is deposited with Westpac. The average rate on the ETF’s holdings is currently 5.2 percent and the TER is 0.18 percent. There were two new launches in Korea. Market leader Samsung expanded its Kodex range with a money market product, the KRW Cash ETF. This invests in Korean government bonds with a maturity of less than one year and has a TER of 0.15 percent. Meanwhile, Kiwoom Securities, a brokerage firm that has started moving into asset management over the last couple of years, made its debut in the ETF business with its iKon100 ETF. This is a price return product that will track the Kospi 100 benchmark. It uses physical replication and has a TER of 0.3 percent. And in Japan, Nikko Asset Management listed the Tokyo exchange’s third fixed income ETF. The Listed Index Fund Emerging Bond tracker will follow the Barclays Capital Emerging Markets Local Currency Government Bond Index, with the maximum weighting to each country capped at 10 percent. The TER is 0.45 percent. Lastly this month, the Philippines may be a step closer to listing its first ETFs, according to a report in Ignites Asia. The country has fallen behind its regional peers in developing a domestic ETF market due to limitations in the local legislation governing funds that make it unclear how they should be regulated. Potential changes to these rules that would provide a framework for ETFs have been proposed for many years, with few concrete signs of progress. But the Philippine Stock Exchange and the Securities and Exchange Commission are apparently in reasonably advanced discussions, with the possibility that rules could be finalised within a couple of months and the first funds launched by the end of the year.

Silver Wheaton Corp’s net earnings rise 92% on record production

Silver Wheaton Corp (TSX:SLW, NYSE:SLW) has reported record revenue, earnings and operating cash flows on record production of silver at 25.4 mn silver equivalent ounces (24.6 million ounces of silver and 18,400 ounces of gold) , a 7% gain compared to 2010.

The company reported that revenue increased 73% compared to 2010, to US$730.0 million, on silver equivalent sales of 21.1 million ounces (20.2 million ounces of silver and 18,300 ounces of gold).

Peñasquito mine was the primary driver of our production growth, as the mine continued its ramp up to full design capacity of 130,000 tonnes per day. Silver Wheaton's 2011 attributable silver production from the mine was 5.3 million ounces, an increase of 39% compared to 2010.

"Silver Wheaton finished 2011 with its strongest ever quarter of production and sales," said Randy Smallwood, President and Chief Executive Officer of Silver Wheaton. "We are proud to have now grown for three consecutive years, and in 2011 we achieved record annual production levels of over 25 million silver equivalent ounces. The combination of increased silver equivalent sales and strong silver prices also generated record financial results including revenue, earnings, operating cash flows, and cash operating margins which increased a tremendous 82% to US$30.61 per ounce of silver."

"The exceptional growth in cash flows allowed us to initiate an inaugural dividend, which grew threefold by year-end, and positions the company to quickly capitalize on new acquisition opportunities. We are now stronger than at any other time in our company's history, and more capable than ever of helping mining companies achieve their production and expansion goals by providing value-enhancing silver streaming funding. And, with low fixed costs, an exceptional production growth profile, and more silver reserves than any other silver company in the world, we believe we offer the premier investment vehicle for silver investors worldwide."

2012 Outlook
-Goldcorp Inc.'s world-class Peñasquito mine is forecast to achieve full production capacity of 130,000 tonnes per day by the end of Q1 2012. This cornerstone asset is poised to become our largest contributor of silver and will drive our production growth in 2012. As a result, Silver Wheaton anticipates a 6% increase in its 2012 attributable production to approximately 27 million silver equivalent ounces, including 16,500 ounces of gold.
-Given the Company's unique business model of essentially fixed cash costs2, average cash costs in 2012 are estimated to be approximately US$4.071 per silver equivalent ounce, virtually unchanged from 2011.
-Executing on its growth strategy of acquiring additional value-enhancing silver and precious metals streams will remain Silver Wheaton's top priority in 2012.

recious metals beat gold as cyclical assets rally

Gold price falls, platinum price rallies as global growth confidence continues to improve. The gold price fell to its lowest level in two months last week as continued improvements in US economic data and an increase in the Fed’s assessment of the economic outlook cuased investors to reduce their expectations of further near-term monetary easing.

While the recent price correction has pushed gold down below its 200-day moving average, underlying structural fundamentals supporting the gold price such as low real interest rates, currency debasement concerns, sovereign debt risks, emerging market central bank diversification of reserve assets into gold, rising China consumer and investor demand, have not changed.

Perhaps not surprisingly, with confidence in a sustainable global growth rebound improving, cylically-sensitive precious metals such as platinum and palladium are benefitting, with the platinum price surging above the gold price last week for the first time in six months. As long as this growth optimism continues, the more cyclically sensitive precious metals will likely continue to outperform.

India doubles gold import duties in an attempt to slow rising current account deficit. India’s finance minister, in his budget speech, announced that the basic customs duty on standard gold coins and bars will be increased fom 2% to 4% in a bid to reduce the current account deficit.

Mr Muherjee noted that ‘one pf the primary drivers of the current account deficit has been the growth of almost 50% in imports of gold and precious metals’. The rise in duties is expected to be passed onto consumers by jewelers and likely to be another constraint on the world’s largest jewellery market at a time when the Indian rupee is hovering near 2-month lows against the US Dollar.

Zimbabwe pushes ahead with ‘indigenisation’ plans. Impala Platinum’s Zimbabwean subsidiary, Zimplats, has agreed to transfer a 51% stake to local indigenous groups and the government after a threat by the government to nationalise the company. Platinum Group metals prices have remained well supported despite the selloff in both gold and silver in recent weeks.

Global growth and US housing data likely to be main market focus this week. The release of US housing data is likely to be a key investors focus this week, with strong data expected to add to investors’ confidence in the US economic recovery and continue to support cyclical precious metals.

In Europe, investors’ will scrutinize Eurozone industrial new orders as well as advance Purchasing Manager Index (PMI) readings to gauge whether the US recovery is spilling over to Europe.

Courtesy: ETF Securities Research