Gold / Silver / Copper futures - weekly outlook: October 14 - 18

Investing.com - Gold futures tumbled to a three-month low on Friday, as hopes that U.S. lawmakers would reach a deal on the U.S debt ceiling impasse before the October 17 deadline reduced the safe-haven appeal of the precious metal.  

Some technical selling also contributed to losses after prices fell through key support levels.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery dropped 1.93% on Friday to settle the week at USD1,271.90 a troy ounce. 

Comex gold prices fell to USD1,259.60 a troy ounce earlier in the day, the weakest level since July 10. The December contract settled 0.79% lower at USD1,296.00 a troy ounce on Thursday.

Gold futures were likely to find support at USD1,242.35 a troy ounce, the low from July 10 and resistance at USD1,311.80, the high from October 10.

On the week, the precious metal lost 2.9%, the second consecutive weekly decline.

House Republicans and the Obama administration began a second day of negotiations on Friday on a deal to reopen the government and raise the U.S. debt ceiling for six weeks.

The federal government has been shut down since October 1. Lawmakers must raise the national borrowing limit by October 17 or run the risk of a U.S. sovereign debt default.

Technical selling also pressured gold after it fell through key support levels close to the USD1,280-level, triggering a flurry of automatic sell orders amid bearish chary signals.

An unusually large sell order at the start of the Comex floor trading session sent prices tumbling by USD30 within a minute, fuelling speculation hedge funds and large institutional investors unwound long positions.

Uncertainty surrounding the Federal Reserve's stimulus program was also in focus.

Wednesday’s minutes of the Fed’s September meeting said the decision not to begin tapering stimulus was a "close call," with all but one voting member opting to leave the program unchanged.

Concerns over economic impact of the U.S budget and debt ceiling impasse fuelled expectations that the central bank will further delay plans to start phasing out its USD85 billion a month asset purchase program.

Data released on Friday showed that U.S. consumer sentiment fell to the lowest level in nine months in October, as concerns over the impact of the government shutdown weighed.

The University of Michigan’s consumer sentiment index declined to 75.2 from a final reading of 77.5 in September, and below expectations for a reading of 76.0.

In the week ahead, investors will continue to closely monitor political developments in Washington. Gold traders will also scrutinize speeches from a number of Federal Reserve officials for clues on monetary policy.

Elsewhere on the Comex, silver for December delivery plunged 2.91% on Friday to settle the week at USD21.25 a troy ounce. Silver prices settled 0.02% higher at USD21.89 on Thursday.

On the week, silver future prices declined 2.29%, the fifth consecutive weekly loss.

Meanwhile, copper for December delivery advanced 0.63% on Friday to close the week at USD3.269 a pound. On Thursday, copper futures rose 0.54% to settle at USD3.248 a pound.

Despite gains on Friday, prices of the red metal declined 0.96% on the week, amid concerns a U.S. government shutdown will create a drag on fourth quarter economic growth.

Official data released on Saturday showed that China’s trade surplus narrowed sharply in September as exports declined unexpectedly, fuelling concerns over growth prospects in the world’s second-largest economy. 

China’s trade surplus narrowed to USD15.2 billion last month from a surplus of USD28.6 billion in August, compared to estimates for a surplus of USD27.7 billion.  

Chinese exports fell 0.3% from a year earlier, defying expectations for a 6% increase and following a 7.2% gain in August. 

Market players now looked ahead to a raft of Chinese economic data later in the week, including reports on inflation, gross domestic product, industrial production and retail sales.

The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.

http://www.investing.com

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

Copper prices rise by 0.22%

Copper prices rose on Friday as a result of upbeat US economy as new U.S. claims for unemployment benefits dropped to a fresh four-year low last week, offering evidence the jobs market recovery. At the MCX, copper futures for April 2012 contract were trading at Rs. 430.85 per 1 kg, up by 0.22%, after opening at Rs. 430.50 against the previous closing price of Rs. 429.90. It touched the intra-day high of Rs. 431.40 till the trading. (At 10.52 AM today). The US Labour Department said 348,000 initial jobless claims were filed in the week ending March 17, down from a revised 353,000 in the previous week. Three-month copper on the London Metal Exchange rose 0.77 percent to $8,354 a tonne Copper is a key ingredient in plumbing and wiring, making it most appetizing for developing and emerging economies on urban building sprees At COMEX, copper futures for May 2012 contract traded at US$3.7950 per pound, up by 0.007 per cent. It opened at US$3.7730 against the previous closing price of US$3.7655. It touched the intra-day high of US$3.7980 till the electronic trading. (At 09.49 am IST). Yesterday, prices fell after manufacturing data on China that showed factory activity in the world's top metals consumer shrank for a fifth month. The headline flash HSBC/Markit manufacturing purchasing managers' index fell to a four-month low of 48.1 in March from 49.6 in February 

Copper Continues to Confound the Commodities Crowd

Source: Mickey Fulp, Mercenary Geologist  (1/30/12)

"In the long run, we will continue to use more copper worldwide every year than we are discovering in new deposits and developing into new mines. Therefore, I remain a long-term secular bull for copper, as the citizens of emerging market countries demand the electricity, modern-day transportation and myriad of consumer goods and conveniences that we view as necessities in the developed world."

Loyal subscribers know I often opine that world markets are in the midst of a secular bull market for commodities, or "stuff," as my recently passed friend Clyde Harrison was so fond of saying. Despite his traitorous penchant for Coors Light (instead of the classic St. Louis-brewed lagers), Clyde was one of those fellow Missourians who always had to be shown, and we all miss his wry wit, sense of humor and insight into the speculative commodities markets.

You may also be aware of my many writings and interviews on the supply-demand fundamentals of copper, the metal with a "Ph.D. in Economics." Copper is the one commodity that most directly reflects the near- and mid-term health of the world's economy.

The modern copper industry started in the early 1900s with advent of large, mechanized open pit mines that could mine lower grades through economies of scale. Development of these mines was coincident with the demand for and delivery of electricity to the industrialized world. Copper cable and wire is necessary for efficient transmission of electrical power and remains the main use of the metal.

Most of the easily exploited surface deposits of copper were discovered long ago. For many decades now, explorationists have depended on indirect surface geology clues, subsurface geophysics, geochemical sampling, and remote sensing to target and discover new economic deposits of copper that do not crop out. Increased exploration over the past eight years has resulted in discovery of major new resources, but long lead times to development and mining continue to hamper primary supply. The copper market will be "tight" for the foreseeable future.

As geologists and engineers, we simply are not finding, developing, and mining enough copper to meet future projections of 4% growth year over year. The world currently uses about 20 million tonnes (Mmt) of copper a year, mine production is flat at about 16.5 Mmt, and the growing shortfall is made up by increased recycling of scrap. Most of the increased demand will come from rapidly growing middle classes in the BIIC countries, and this bodes well for the near-, mid-, and long-term price of copper.

With worldwide economic uncertainty and uneasiness, Dr. Copper wasn't feeling so well during the last half of 2011; he was not really sick but certainly was a bit mixed up and had a lingering case of the blahs.

Despite less than robust supply and demand fundamentals, copper set all-time high price marks in the first half of 2011. I pointed to the dichotomy of rising inventory stocks and prices at the beginning of last year, commented that market fundamentals were unhealthy, and boldly predicted a correction.

We indeed saw some momentary dips in the mid-spring and mid-summer that shaved about 15% off an overbought market, but for the most part the red metal train kept rolling along. The much needed and long overdue correction finally came in early September for all resource commodities, when fears of the euro debt crisis resulted in a broad selloff in all speculative markets. Copper was predictably among the hardest hit with its persistently weak short-term fundamentals:

Since that precipitous four-week fall of nearly 30%, copper bounced off a low of $3.05/lb twice, hit a high spike of $3.75/lb, and until recently has been range-bound between $3.30 and $3.60/lb. It is showing renewed strength since the first of the year, with the latest spot copper close at a five-month high of $3.87/lb.

Let’s review the basics of copper supply and demand in 2011. Certain fundamentals supported copper’s all-time high prices, others reflected the Q3 correction and partial recovery, and a couple continue to confound the commodities crowd:

• Supply and demand have been essentially balanced for the past four years. As a result copper price has been sensitive to both supply disruptions (e.g., mine strikes, accidents, and infrastructure failures) and demand destruction (e.g., economic downturns and natural disasters). In 2011, we saw significant disruptions in copper supply, largely due to strikes at major mines in Indonesia, Chile and Peru.

Copper Production, Consumption and Balance in Millions of Tonnes

• Warehouse inventories represent surplus copper that is stored for want of an immediate buyer. In a normal supply-demand scenario, rising inventories are negative and falling stocks are positive for the near-term copper price.

However, for much of 2011 there was a disconnect in this key metric as copper prices rose from late November 2010 and into Q111, while London Metal Exchange (LME) inventories increased. High prices were maintained along with high inventories through the late summer. Subsequently, the 30% correction in September occurred along with rapidly falling LME inventories. This abnormal behavior has corrected recently as prices have rebounded while inventories continue to fall.

Concomitant with falling inventories, there has been a steep rise in cancelled warrants. Cancelled warrants represent copper that is scheduled for delivery and leaving warehouses. These have gone from yearly lows of 1-2% during the market correction to a current high of 24%:

The charts show persistently strong prices, high warehouse inventories and low cancelled warrants in the first eight months of 2011. It is now apparent that Chinese speculators and hoarders, including the infamous pig farmers, went on a massive selling spree during this time. As the correction came and went and the price stabilized, these same speculators were likely restocking their hoards.

This hypothesis is backed by recent jumps in Chinese demand for November and December. Additionally, recent Shanghai premiums to North American spot prices have been high.

However, plummeting prices for the Baltic Dry Index indicates that worldwide demand for industrial materials has been weak since the first of the year:

Baltic Dry Index One-Year Chart

Chinese tightening of monetary policy in 2011 was designed to cool off an overheated and speculative housing market and higher inflation, especially in foodstuffs. Food inflation is problematic for the country’s poor who spend up to 50% of annual incomes feeding their families. GDP growth slowed significantly in 2011 but still remained at a robust 9%.

According to the International Copper Study Group, Chinese imports were down 21% for the first 10 months of 2011. However, they bounced back significantly with December imports of refined copper reaching the second highest total on record at 344,000 tonnes. Although 2011 copper demand in China was off 5%, worldwide demand was up about 2%, and mine production was off 3%.

Increased recycling of scrap stimulated by record high prices satisfied the shortfall. The world copper market remains in a delicate supply/demand balance with mine production stagnating and scrap market supply satisfying increased world consumption.

January 23, 2012 marked the beginning of the 15-day Chinese Lunar New Year celebration, a period typically accompanied by much lower industrial activity and reflected in the abnormally low Baltic Dry Index. The strength of the copper price over the past week bodes well in the near-term as Asian traders and speculators return to markets in early February.

Despite 2011's mixed and conflicting signals, it appears that the copper market's fundamental indicators have largely returned to normalcy in early 2012. Lower warehouse inventories and increase in cancelled warrants are usual indicators for strong and rising near-term prices. On the other hand, the slowing Chinese economy and the plummeting Baltic Dry Index are negative indicators for industrial demand.

Taking all the various factors into account, I am bullish on the copper price in the near term. A general range of $3.50-4.00/lb in 2012 will provide high margins for producers and stimulate mine production, scrap sales and capital finance requirements for mine development. Prices near the recent bottom at $3.05/lb will result in supply destruction, particularly in the scrap market, while prices higher than $4.00/lb will lead once again to selling by speculators as we saw in the first half of last year.

The old adage "The cure for high prices is high prices" works equally well for low prices. Although copper is among the most speculative of commodities markets, it remains the best indicator of global economic sentiment and supply/demand fundamentals.

In the long run, we will continue to use more copper worldwide every year than we are discovering in new deposits and developing into new mines. Therefore, I remain a long-term secular bull for copper as the citizens of emerging market countries demand electricity, modern-day transportation, and the myriad of consumer goods and conveniences that we view as necessities in the developed world.

After a rough turn for the past few months, I think Dr. Copper is looking quite well and toward a very bright future. 

Gold rises on deepening euro zone crisis

London ( commodity news world ) Gold firmed on Wednesday, helped by safe-haven demand as the euro zone troubles deepened and business surveys showed the severe impact the crisis had on manufacturing in the region.

A recovering euro, which rebounded from a three-week low against the dollar, also helped underpin the precious metal. The dollar briefly extended losses against that euro after data showed the U.S. private sector created more jobs than expected in October.

Greece's Prime Minister George Papandreou shocked markets on Tuesday with a call for a referendum on a European Union 130 billion euro bailout package. He faces a grilling on Wednesday from the leaders of Germany and France.

Adding to the gloom, business surveys showed the downturn in euro zone manufacturing in October was even deeper than previously reported.

"There is more of a risk aversion type dynamic developing because of all the complications around Europe and with the Greek referendum on the cards," Standard Chartered head of metals research Dan Smith said.

"All these things will bring some doubts about the political and macro outlook."

But in positive news, U.S. private employers added more jobs than expected in October, and more were added in September than originally reported, while a separate report showed planned layoffs dropped sharply last month.

U.S. gold rose to an intraday high of $1,738.30 an ounce, and was $1,728.5 at 1321 GMT.

Spot gold rose around 1 percent to an intra-day high of $1,736.40, before trimming gains to $1,726.30 from $1,718.95 late in New York on Tuesday.

The euro edged up, rebounding from a three-week low against the dollar as investors took a breather from a deep sell-off, although it was vulnerable to the downside on worries over Greece's referendum and the weak data.

"Over the next few days, we think gold prices are likely to remain more resilient as the market should benefit from safe haven demand and its reasonable evaluation," Barclays Capital said in a note.

EYES ON BERNANKE

Eyes were on a news conference by the U.S. Federal Reserve chief Ben Bernanke later in the day after a two-day policy meeting.

The Fed looked set to take a breather from monetary stimulus measures, even if financial market turbulence heightens the chances of action later.

Investors will also closely watch the rate decision by the European Central Bank due on Thursday, just as a Group of 20 summit is to take place and likely to pressure Europe on the debt crisis solution.

Investor interest in gold continued to pick up this week, reflected in inflows of metal into exchange-traded funds.

Holdings of gold in the major exchange-traded funds (ETF) tracked by Reuters have risen by over 800,000 ounces this month, marking their first monthly increase since July.

In ETF flows on Wednesday, gold holdings were up by just over 11,000 ounces after an inflow into the COMEX Gold Trust.

Last month, global holdings of gold in ETFs rose by 852,000 ounces to 67.907 million ounces, more than offsetting the 444,000 ounces outflow in September and the 297,000 ounces outflow in August.

"They have been trending up for the last week or so. Investors are coming back in to those two (gold and silver) because of the weaker macro environment," Smith said.

"It's also a good time of the year for physical demand for gold as well as we head into the end of the year because of the Indian wedding season."

The bulk of the inflows were into European-based funds, rather than their larger U.S. counterparts, which analysts have said is reflective of the anxiety among investors in the region over the impact of the euro zone debt crisis on monetary policy, inflation and growth.

Silver was up 1.5 percent at $33.76 an ounce from $33.27 previously. Platinum rose 0.9 percent to $1,598.99 an ounce from $1,582.65, and palladium was $641.22 from $631.50.

China copper demand weakening as Shanghai stockpiles climb near 10 year highs

NEW YORK ( Commodity news world ): Chinese copper demand is expected to fall in the coming months on growing indications of weak domestic demand. China is the largest copper consumer in the world. Accounting for 40% of global copper production.

 

Reuters reported that inventories at warehouses monitored by the Shanghai Futures Exchange has climbed to 221,487 tonnes, the highest since August 2002- almost 10 years! Chinese importers of refined copper are also being reported to have delayed some February and March shipment and also are believed to have diverted some cargoes to South Korea on the back of weak domestic demand.

 

The Chinese central bank is currently engaging in monetary easing policies, something which is expected to continue for 2012. As such, copper was seen as bullish by investors. But the continuing disappointment in manufacturing data is proving bearish for the metal.

 

Benchmark LME copper prices are trading at $8500/tonne while COMEX copper is trading around $3.80/lb

 What's your WebStory today?

Copper Has Longest Bull Streak Since October

Copper traders are bullish for a fourth consecutive week, the longest streak since October, as manufacturing strengthens from China to the U.S. and stockpiles decline to the lowest in more than two years.
Thirteen of 29 analysts surveyed by Bloomberg expect the metal to gain next week and six were neutral. Inventories tracked by the London Metal Exchange fell to 289,000 metric tons today, the lowest since August 2009, and orders to withdraw more metal are at an almost eight-year high, bourse data show.
Manufacturing from China to the U.S. is expanding as the American recovery strengthens and European leaders work to contain the region’s debt crisis. That’s boosting demand for raw materials from consumers and investors, with Barclays Capitalpredicting a third consecutive annual shortage in global copper supplies in 2012. Commodities beat stocks, bonds and the dollar for the first time since July last month.
“People feel that the U.S. is on a gradually improving trend and overall the tone is better,” said Carole Ferguson, an analyst at Fairfax IS in London. “If you get a demand-led story in copper then it can rally again. It’s supported by the long-term supply and demand picture.”
Copper rose 13 percent to $8,585 a ton this year on the LME, the best start to a year since 2008. The Standard & Poor’s GSCI gauge of 24 commodities climbed 9.1 percent and MSCI All-Country World Index (MXWD) of equities advanced 11 percent. Treasuries lost 0.5 percent, a Bank of America Corp. index (MXWD) shows.

Manufacturing Gains

China’s manufacturing expanded for a third month and at a faster pace in February, the statistics bureau and logistics federation said yesterday. An Indian purchasing managers’ index released by HSBC Holdings Plc and Markit Economics was near an eight-month high. A U.S. factory index showed growth last month, the Institute for Supply Management said yesterday. China consumes about 40 percent of the world’s copper and North America accounts for 11 percent of demand.
Investors are increasing bets on higher prices on mounting confidence the world will skirt another recession. About $300 million was added to wagers on industrial metals in January, taking the total across commodities to $3.7 billion, Barclays said in a Feb. 29 report. Open interest, or contracts outstanding, across 24 commodities tracked by Bloomberg rose 3.3 percent last month, extending a 9.3 percent advance in January, the first back-to-back monthly gains in a year.
Copper consumption will outpace supply by 376,000 tons this year and there will be another shortage in 2013, Barclays predicts. London-based Rio Tinto Group (RIO), the world’s third-biggest mining company, said Feb. 9 its mined copper output fell 23 percent last year because of lower ore grades.

ECB Loans

Slower growth in Europe may curb manufacturing and weaken construction, which accounts for about 40 percent of copper demand, according to the Copper Development Association. Euro-area manufacturing shrank for a seventh month in February, London-based Markit Economics said yesterday. The European Central Bank awarded 529.5 billion euros ($706 billion) in three-year loans to 800 European banks on Feb. 29, after supplying 489 billion euros to 523 institutions on Dec. 21.
There’s “less enthusiasm associated with the European longer-term refinancing operation,” said Bart Melek, the head of commodity strategy at TD Securities Inc. in Toronto. “Copper should correct next week as prices are likely higher than the fundamentals imply.”

Bernanke Comments

Copper slid 1.2 percent on Feb. 29 after Federal Reserve Chairman Ben S. Bernanke gave no signal that the central bank will take new steps to boost liquidity. He described “positive developments” in the job market while saying it’s still “far from normal” in testimony to lawmakers. Signs that growth prospects are improving in China may mean the government there will refrain from more monetary easing.
Hedge funds and other money managers cut bets on higher copper prices by 11 percent to 13,260 futures and options in the week ended Feb. 21, the first decline in six weeks, Commodity Futures Trading Commission data show. Speculators held wagers the week before at the highest level since August.
The metal’s 14-day relative-strength index is at 57.8. A level of 70 indicates to some analysts who study technical charts that a drop in prices may be imminent and a figure of 30 suggests a rebound may be due.

Gold Survey

Twenty-one of 32 traders and analysts surveyed by Bloomberg expect gold to gain next week. Futures on the Comex in New Yorkplunged 4.3 percent to $1,711.30 an ounce on Feb. 29, and gained 9.2 percent this year. It is in the 12th year of a bull marketand holdings in gold-backed exchange-traded products stand at a record 2,404.2 tons, data compiled by Bloomberg show.
Eight of 13 people surveyed expect raw-sugar prices to decline next week. The commodity climbed 7.2 percent this year to 24.98 cents a pound on ICE Futures U.S. in New York.
Fourteen of 22 people surveyed anticipate higher corn prices next week, while the same amount said soybeans will climb. Corn rose 0.9 percent to $6.525 a bushel this year as soybeans advanced 10 percent to $13.295 a bushel.
“With the second LTRO completed and considering Bernanke’s comments, monetary policy will in all likelihood become less of an immediate market driver going forward,” said Michael Widmer, the head of metals research at Bank of America Merrill Lynch in London. “The extent to which the rebound in the U.S. can be sustained may have more of an influence.”

Gold survey results: Bullish: 21 Bearish: 8 Hold: 3
Copper survey results: Bullish: 13 Bearish: 10 Hold: 6
Corn survey results: Bullish: 14 Bearish: 5 Hold: 3
Soybean survey results: Bullish: 14 Bearish: 6 Hold: 2
Raw sugar survey results: Bullish: 4 Bearish: 8 Hold: 1
White sugar survey results: Bullish: 4 Bearish: 7 Hold: 2
White sugar premium results: Widen: 5 Narrow: 5 Neutral: 3

http://www.bloomberg.com/news/2012-03-02/copper-bull-streak-extends-to-longest-since-october-on-demand-commodities.html

MCX Copper to boil on improved demand factor

AHMEDABAD (Commodity news world): MCX Copper traded higher on Monday late night trade following overseas market trends, but a strong rupee kept the uptrend limited. Copper April delievery contract was trading more than 4 percent higher from last week close of 422.60 and made high of 433 rupees per kilogram.

Copper price remains upbeat on positive note of demand outlook in international market. On wednesday, MCX Aluminum future for April opened at 428.40 rupees. Resistances for the contract are at 435 rupees and instant support looks at 425 rupees for coming days.


The prices have bounced after a series of fall in the market last week due to gain on lower LME stocks and some buying at lower level, according to Amrita Mashar, Commodity Analyst with Commodity Online.

Overall, Copper prices may remain upbeat till prices are supported at 420 levels on daily basis. One can buy Copper April contract near 429 rupees by maintaining stop loss of 427 for target near 434 in intraday trade, added Amrita.

Gold Looks to US Inflation Bets, Dollar Price Action for Direction

Talking Points

• Crude Oil May Pull Back but Bias Favors the Upside on Iran Tensions
• Gold Looks to US Inflation Outlook, Dollar Price Action for Direction
• Copper at Risk on Risk Aversion But Reports of Shortage May Support

Tensions with Iran continue to inject a considerable geopolitical risk premium into crude oil prices, with the WTI contract touching an 8-month high yesterday. The latest bit of escalation came after talks between Tehran and IAEA came apart after the government refused to allow inspection of a site in Pachin reported to be testing explosives.

Technical positioning warns a pullback may be ahead however (see below), hinting the recent batch of supportive news-flow has been priced in already. Still, with Iran reportedly starting to conduct civilian defense drills in preparation for armed conflict, the satiation is unlikely to be defused quickly (if at all) so the path of least resistance continues to broadly favor the upside.

Gold prices jumped to the highest in 3 month yesterday on the back of a widely-circulated Financial Times article that claimed the Federal Reserve will extend the so-called “Operation Twist” stimulus program beyond June. The scheme has the Fed selling shorter-term assets on its balance sheet in exchange for further-dated ones to target a decline in the long-term borrowing costs. Bloomberg News also cited sources saying buying by automated trading systems buoyed prices.

Looking ahead, strong correlations between precious metal prices US inflation expectations (measured by “breakeven rates”, the spread between nominal and inflation-linked Treasury bond yields) puts the spotlight on US jobless claims and House Price Index figures due today. An overnight pullback in the US Dollar may also emerge as a supportive factor, although a sudden downward reversal in S&P 500 stock index futures in early European trade may reboot safe-haven demand for the greenback to the detriment of both gold and silver. The selloff appears to have followed an EU Commission report forecasting the regional bloc’s collective economy will shrink 0.3 percent in 2012 (compared with previous estimates of a 0.5 percent expansion).

The emerging adverse reversal in risk appetite trends likewise bodes ill for Copper prices. The metal remains highly sensitive to global economic growth expectations, meaning the return of slowdown fears is likely to be a considerable headwind. Selling pressure may be at least partially offset near-term however amid reports that production lagged demand by the largest margin (119,000 metric tons) in November, according to ICSG.

WTI Crude Oil (NY Close): $106.28 // +0.44 // +0.42%

A candle in Star position below resistance at 106.81, the 138.2% Fibonacci extension,gives earlywarning thata pullback may be ahead. Initial support lines up at 105.61, the 123.6% Fib. A break lower exposes the January 4 swing high at 103.66.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1776.22 // +17.10 // +0.97%

Prices continued higher after putting in a Bullish Engulfing candlestick pattern above support 1714.60, breaking resistance at 1763.00. The bulls now aim to challenge the November 8 high at 1802.80, although early signs of negative RSI divergence hint upward momentum may not prove long-lasting. The 1763.00 level has been recast as near-term support.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $34.27 // -0.04 // -0.12%

Prices are testing above range resistance at 34.37, the February 2 swing high, with an upward breakout exposing the 35.30-66 area. For now, support remains at 32.60, the 23.6% Fibonacci retracement level, though a confirmed upward piercing of 34.37 on a daily closing basis would recast that level as the immediate downside barrier.

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.834 // -0.002 // -0.05%

Prices have paused after taking out resistance at 3.789 (now acting as near-term support). Renewed upward momentum initially targets 3.909. Alternatively, a break back below 3.789 sees rising trend line support at 3.720.

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

Copper to average $9,000 a metric ton in Q2; nickel at $23,500: Deutsche Bank

 A strong showing by industrial base metals in the second quarter, said Deutsche Bank in a weekly commodities report.

“Over the next several months, we believe that re-stocking could surface in China and Europe as economic conditions normalize. We therefore expect that industrial metals prices could be underpinned in the second quarter as the physical market catches up with the improvement in financial market sentiment,” the bank added.

Deutsche Bank looks for copper to have its strongest quarter in the second quarter, forecasting $9,000 a metric ton before $8,500 and $8,700 in the third and fourth periods.

Other second-quarter forecasts include aluminum, $2,400; lead, $2,250; nickel, $23,500; tin, $26,000; and zinc, $2,350. This is higher than where all are currently trading.