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Stocks
are higher in Europe after gains in Asia despite losses on Wall Street
yesterday. Gold and silver are showing tentative gains after 1% declines
yesterday. Gold is particularly strong in yen terms as the yen has weakened
against all 16 of its major peers (see cross currency tables). China’s
yuan climbed to a 17-year high versus the dollar but is lower against the
precious metals.
Cross Currency Rates at 1200 GMT
Treasuries have fallen as the US prepares to sell $21 billion of 10-year
notes today, the second of three auctions this week. Ten- year yields rose
three basis points and the yield on the five-year Treasury note rose three
basis points.
Commodities
have advanced with cocoa and coffee making gains and oil making tentative
gains.
Gold
Higher as IMF Warns Regarding US Massive Budget Deficit of 10.8% of GDP
With America
set to have the largest budget deficit of any of the developed economies, a
whopping budget deficit of 10.8pc of GDP this year alone, gold and
silver’s medium term prospects remain positive.
US Dollar Index - 31 Year (Monthly)
The IMF has warned that the US lacks credibility regarding its debt and must
implement stringent austerity measures.
This
is one of the primary factors which strongly suggests that, contrary to the
consensus, a double dip recession looks increasingly likely in the US This
would be negative for the dollar and US treasuries and lead to higher gold
and silver prices due to safe haven buying.
Central
banks are questioning the dollar and the euro as reserve currencies due to
the massive liabilities and debt levels confronting the US and the eurozone
(see News below). This is set to lead to central banks continuing to be net
buyers of gold for the foreseeable future.
Gold
Gold
is trading at $1,459.82/oz, €1,006.63/oz and £895.97/oz.
Silver
Silver
is trading at $40.42/oz, €27.87/oz and £24.80/oz.
Platinum
Group Metals
Platinum
is trading at $1,781.00/oz, palladium at $769/oz and rhodium at
$2,350/oz.
News
(Reuters)
- Central Banks turn Net Gold Buyers, Cut Euro Zone Debt: Survey
Central banks
turned net buyers of gold last year and cut exposure to debt issued by euro
zone members Greece, Ireland and Portugal, an annual survey of the world's
reserve managers showed.
A
quarter of managers polled said they had upped their exposure to
'non-traditional' reserve currencies such as the Australian and Canadian
dollars in the last two years and a majority said debt issued by the euro
zone rescue fund, the EFSF, had the makings of a sound reserve asset.
"Traditionally,
government bonds have been termed 'risk-free' assets but the euro zone
situation has made some of us change our understanding of that," said
one of the 39 reserve managers that responded to the poll conducted by
Central Banking Publications over the winter of 2010-2011.
Concerns
over sovereign default fueled demand for gold, turning central banks into net
buyers in 2010 after 20 continuous years of selling the metal.
"Gold's
quality as a store of value and fears over reserve currencies are the main
reasons that central banks turned net buyers of bullion in 2010," wrote
survey author Nick Carver.
The
survey's respondents, who manage central bank reserves worth $3.5 trillion in
total or 35 percent of total world reserves, identified gold as a
"safe" reserve asset at a time when rising sovereign debt levels
and super-loose monetary policy from the world's major central banks sapped
confidence in more traditional reserve currencies.
"Both
the euro zone and the U.S. are confronted by large deficits with
simultaneously modest growth, which has influenced the value of their
currencies and raised questions about debt sustainability," said one
respondent.
Gold,
investment grade corporate bonds and AAA-rated bonds were the three assets
that reserve managers saw as more attractive than the year before.
Over
70 percent of the managers surveyed said central banks were likely to remain
net buyers of gold given the level of uncertainty about sovereign debt.
CREDIBLE
ALTERNATIVES
The survey also found 69 percent of respondents had not changed their reserve
management strategies as a result of the Federal Reserve's expansion of its
bond purchase program.
Instead,
the second round of quantitative easing had prompted a tactical reaction with
some central banks shortening the duration of the U.S. debt they held.
U.S.
Treasuries remained the safest liquid asset "in the absence of a
credible alternative", said a reserve manager from the Middle East.
There
was, however, growing interest among reserve managers in non-traditional
reserve currencies.
Over a
20 percent of respondents said they held more than 5 percent of their
reserves in currencies such as the Australian dollar, the Swedish crown and
the Singapore dollar.
(Wall
Street Journal) -- Indian Investors Switch to Silver From Gold
NEW DELHI --
Higher returns are tempting many small Indian investors to buy silver and
sell some of their gold jewelry as the price of the white metal has more than
doubled over the past year, traders said.
Spot
silver prices rose to an all-time high of 60,125 rupees ($1364) a kilogram
Friday in India's main bullion hub, Mumbai, from 28,535 rupees on April 12
last year, driven by firm global cues as concerns over unrest in the Middle
East and North Africa have improved its safe-haven appeal. Gold prices too
rose, but at a much slower pace of about 21% to 21,500 rupees per 10 grams.
"Ordinary
investors are buying silver as if there is no tomorrow," Suresh Hundia,
president emeritus of the Bombay Bullion Association, told Dow Jones
Newswires. "Many people are selling their gold and buying silver because
gold has not given them as good a return."
According
to him, Mumbai alone is recording daily silver purchases of 400-500
kilograms.
Typically,
most Indians prefer buying gold rather than silver for investment. The change
in trend may hit gold demand to some extent this year in the world's largest
consumer where 700-800 tons of the yellow metal is bought annually.
Mr.
Hundia said the higher demand hasn't driven up silver imports.
"Most
of the supplies are coming from recycled silver from wholesalers, who want to
make a quick buck," he said, adding that monthly imports of silver were
more or less static at around 30-50 tons.
The
investment demand for the white metal is so high that there is a shortage of
silver in the key western Indian bullion hub of Ahmedabad, said Girish
Choksi, a bullion dealer based in the city.
At the
same time, demand for gold is steady to lower.
Demand
for gold in southern states such as Tamil Nadu and Kerala has crashed in the
past 10-15 days due to a combination of high prices as well as ongoing state
elections, which have made it difficult for people to carry cash for
purchases because of law and order problems, said Krishna Kumar Nathani,
managing director of Indiabullion.com.
"Elections
have overshadowed gold demand for marriages... That demand will now come
around June," he said.
Mr.
Nathani said he expected a 10%-15% price correction in silver in May-June,
but investors shouldn't panic because returns will still outshine that from
gold over a period of a year or so.
"It
has already beaten gold in the past one year and it will continue to do so
because the scope for price growth is still more in silver."
(Bloomberg)
-- Fresnillo Silver Output Falls on Lower Grades, Gold Advances
Fresnillo Plc,
the world’s largest primary silver producer, said first-quarter output
of the metal fell 4.3 percent as ore grades declined.
Fresnillo
produced 9.08 million ounces of silver, compared with 9.49 million ounces a
year earlier, the Mexico City-based company said in a statement today. That
excludes 1.01 million ounces from the Silverstream agreement, an accord
between Fresnillo and Mexico’s Industrias Penoles SAB.
The
company reported “slightly” lower ore grades at its Fresnillo
mine in Mexico. “We are currently taking measures to increase the
volume of ore processed to compensate the lower ore grade,” it said.
Gold
production rose 13 percent to a record 96,407 ounces in the quarter following
a capacity expansion and improved recovery at the Soledad-Dipolos project,
Fresnillo said.
(Bloomberg)
-- Fresnillo’s Gold Output Climbs to Record During First Quarter
Fresnillo Plc
said gold production rose 13.3 percent to a record 96,407 ounces during the
three months to March 31.
(Bloomberg)
-- Silver Options Bears Boost Bets on Metal’s Drop for Second Day
Trading of
bearish options on a silver exchange-traded fund jumped to almost triple the
four- week average, boosted by a single trade for a second day, as futures on
the metal snapped a seven-day winning streak.
More
than a third of all volume for puts to sell the iShares Silver Trust ETF was
concentrated in a single trade of 100,000 contracts in a strategy known as a
butterfly, according to OptionsHawk.com, a Boston-based provider of
options-market analytics. The trade profits most if the fund falls 8 percent
to $36 before May options expire.
The
fund fell 0.2 percent to $39.12 at 1:33 p.m. in New York and is down from
yesterday’s intraday record of $40.33.
Silver
futures for May delivery fell 59.2 cents, or 1.5 percent, to $40.02 an ounce
on the Comex.
(Washington
Post) -- Rio Tinto to Provide Gold, Silver, Copper for Medals At 2012 London
Olympics
LONDON —
The gold, silver and copper that will be used in the 4,700 medals at the 2012
London Olympics will be provided by international mining company Rio Tinto.
By
signing up as a tier-three backer of the games, Rio Tinto’s sponsorship
will be worth about $16 million.
Rio
Tinto has supplied the metals for Olympic gold, silver and bronze medals once
before — at the 2002 Salt Lake City Games.
The
metals for the London medals will come from the Kennecott Utah Copper mine in
Salt Lake City and the Oyu Tolgoi site in Mongolia.
Rio
Tinto chief executive Tom Albanese says the company is “excited to have
the special job once again of digging the ore that will become treasured
medals for the world’s elite athletes.”
(Bloomberg)
-- Gold Is Set to Rise as Industrial Metals Decline, UBS Says
Gold is poised
to rise over the next few months as industrial metals drop on concern global
growth may slow, UBS AG said.
Gold
may climb 5 percent in the second quarter as industrial metals fall by the
same amount, UBS analysts including London-based Julien Garran said in a
report today. The bank lowered estimates for copper, aluminum and zinc prices
in 2011 and raised its silver forecast by 21 percent.
UBS
acted a day after the International Monetary Fund cut its projection for
growth this year in the U.S., the world’s second-biggest copper
consumer, citing higher oil prices and the pace of job gains. The IMF also
lowered its projection for Japan’s expansion in 2011 and said weaker
global growth will reduce demand for commodities and encourage destocking.
“We
see a difficult three months looming for metals and mining,” the
analysts said. “A combination of a global slowdown, Middle East
tensions, Fed policy normalization and post-Japan quake disruption all
threaten a tactical pullback from the current benign market.”
Precious
metals are its top pick among commodities for the second quarter, UBS said,
followed by thermal coal and other bulk raw materials, with industrial metals
least preferred.
Copper,
which touched $10,190 a metric ton on Feb. 15, has likely peaked for the year
because of tighter monetary policy in China and in the West, the report
shows.
Chinese
Demand
Demand remains “lackluster” in China, the world’s biggest
industrial-metals user, while further interest-rate increases to curb
inflation may sap raw-materials demand, UBS said. The country’s central
bank has raised rates four times since early October. China’s consumer
price inflation reached 4.9 percent in February, above the government’s
4 percent target.
Commodities
also may suffer as the Federal Reserve is likely to announce plans to end its
second round of Treasury purchases, known as QE2, around the middle of the
year, UBS said. The Fed last month stuck to plans to purchase $600 billion of
bonds.
The
IMF lowered its U.S. growth forecast to 2.8 percent from January’s 3
percent and reduced its forecast for Japan to 1.4 percent from 1.6 percent.
Crude oil exceeded $113 a barrel in New York trading yesterday for a second
session.
In
Japan, power shortages in the aftermath of the March 11 earthquake will also
constrain demand for industrial commodities, UBS said. In addition, it cited
a “major disruption” to auto production.
Aluminum,
Zinc
Copper will average $4.12 a pound this year, 2 percent below a prior estimate
of $4.20, UBS said. The bank lowered its estimate for aluminum to $1.08 a
pound from $1.12 and said zinc will average $1.09 a pound, down from $1.15.
UBS expects silver to average $40 an ounce, compared with $33 previously.
Global
thermal-coal demand may rise 2.3 percent this year to 736 million tons, even
as about 5 million tons of demand might be lost because of the Japanese
quake, UBS said. Rains have cut production in Indonesia, Australia and
Colombia, while demand is climbing in China and India at respective annual
rates of 17 percent and 10 percent, the report showed.
“As
the world economy enters a soft patch and as the fiscal spotlight stretches
to include the U.S., this will be a catalyst for higher gold prices,”
UBS said. “Against this backdrop, gold should outperform other
commodities.”
(Bloomberg)
-- UBS Raises 2011 Silver Price Target by 21% to $40 An Ounce
UBS AG said it
expects silver to average $40 an ounce in 2011, up 21 percent from a previous
estimate of $33 an ounce.
Mark O’Byrne
Goldcore
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