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Gold
is tentatively higher against the euro but mixed against other currencies,
while silver is higher again in most currencies. Both probed upward this
morning and are exhibiting signs that they may push higher prior to a much
anticipated correction.
The
Greek 10-year yield has just surged over 13.2% and this is leading to falls
in the euro and risk aversion with equities, commodities and oil falling.
 
Both
gold and silver are less than 2% from their record nominal highs seen Monday
(gold all time and silver 31-year) and are remaining firm due to concerns
about the US dollar, the euro and sovereign debt issues in Europe.
While
markets are not focusing on geopolitical risk in Africa and the Middle East
and the Japanese natural and nuclear disasters, these problems remain and
will lead to continuing safe haven demand.
Resistance
in gold is at Monday’s record nominal high at $1,478.20/oz and the
psychological level of $1,500/oz.
Silver’s
resistance is at Monday’s multiyear nominal high at $41.95/oz. In
normal circumstances profit taking would be expected near $42/oz but this is
anything but a normal market due to the existence of massive concentrated
short positions being investigated by the CFTC.
A
short squeeze may be underway with longs buying all dips in order to punish
the shorts and force them to buy back their short positions thereby
propelling the price much higher.
The
dollar’s fall suggests that markets are skeptical of Obama’s
latest budget proposal to cut $4 trillion off the massive US budget deficit.
The US fiscal situation continues to deteriorate week on week and month on
month which could potentially lead to sharp falls in the dollar in the coming
weeks.
Eurozone
debt markets are under pressure again this morning with Greek 10-year bonds
surging to a lifetime record high of 13.2%. Greece appears to be heading
towards sovereign default despite the usual denials. Greece’s debt has
become unsustainable, only a year after it was granted the biggest bailout in
history. Debt levels in Ireland, Portugal and Spain also look increasingly
unsustainable.
GFMS’
prediction of gold rising to $1,600/oz and an average price of $1,455/oz in
2011 (today’s current price) was reported in much of the financial
press but as usual ignored by most of the non-specialist financial media.
GFMS
are bullish on gold in 2011 and into 2012 particularly due to investment and
monetary demand. This demand looks set to continue and they identify rising
inflation and US sovereign debt risk as a threat with America's AAA status
more likely than not to be questioned in H2 2011.
GFMS
say that global mining supply has increased primarily due to another
significant jump in Chinese gold production - up 8% to 350.9 tonnes from 324
tonnes.
The
increase in Chinese gold production in recent years has been very large, to
the degree, that some analysts have questioned their production figures. Mine
supply from other major producers continues to be flat or fall as seen in
South Africa and Russia production figures.
Gold
Gold
is trading at $1,455.40/oz, €1,011.40/oz and £891.68/oz.
Silver
Silver
is trading at $40.61/oz, €27.87/oz and £24.89/oz.
Platinum
Group Metals
Platinum
is trading at $1,766.50/oz, palladium at $757/oz and rhodium at $2,350/oz.
News
(Bloomberg)
-- Portuguese, Greek Bonds Fall as Dollar Weakens, Silver Rallies
Bonds of
Europe’s most-indebted nations fell, driving Portuguese and Greek
yields to records, on concern countries will reschedule debt. The Dollar
Index sank to a 16-month low, silver rose and European stocks retreated.
Portugal’s
five-year yields climbed to 10.43 percent as of 10:20 a.m. in London, while
the Greek 10-year yield rose above 13 percent for the first time since at
least 1998. Credit swaps on Greece signaled a 60 percent chance of a default
within five years. The Dollar Index slid 0.3 percent, and the yen gained
against its 16 major peers. Silver jumped 1.2 percent and copper lost 0.5
percent. The Stoxx Europe 600 Index sank 0.3 percent and Standard & Poor’s
500 Index futures declined 0.2 percent.
Bondholders
may see a 50 percent to 70 percent “haircut” on their Greek
securities if the nation restructures its debt, said Moritz Kraemer, head of
S&P’s European debt evaluation team. Inflation accelerated in the
U.S. and China, Bloomberg surveys of economists showed before reports
tomorrow. Singapore said it will allow a stronger currency to curb inflation,
and the European Central Bank’s Axel Weber said higher interest rates
may be needed if economic forecasts are met.
“That
Greece may have no other alternative but to restructure in order to get
itself back on the sustainable debt path is probably the worst kept
secret,” said Greg Venizelos, a credit strategist at BNP Paribas SA in
London.
The
extra yield investors demand to hold Portuguese 10-year bonds instead of
benchmark German bunds widened to a euro-era record 545 basis points, with
the Greek-German spread increased 15 basis points. Yields on Spanish 10-year
debt jumped eight basis points, with Irish yields nine basis points higher.
The yield on the bund slipped two basis points.
Yen,
Pound
The yen strengthened 0.5 percent versus the euro and 0.7 percent against the
dollar. The pound advanced 0.4 percent against the dollar and appreciated 0.2
percent versus the euro as a Nationwide Building Society report showed U.K.
consumer confidence rose in March from a record low as Britons grew more
optimistic about the outlook for the economy and spending.
Three
stocks fell for every two that gained in the Stoxx 600. Banca Popolare di
Milano Scarl lost 1.9 percent, leading a decline in banks, as two people
familiar with the situation said Italy’s oldest cooperative lender will
consider a rights offer after the central bank asked it to boost capital.
Reckitt Benckiser Group Plc plunged 7.5 percent after saying Chief Executive
Officer Bart Becht will step down.
Jobless
Claims
The decline in S&P 500 futures indicated the U.S. equity gauge will fall
for the fifth time in six days. Reports today may show the number of people
filing first-time claims for unemployment insurance was little changed at
380,000 last week while producer prices increased 1 percent in March,
according to Bloomberg surveys of economists.
China’s
Shanghai Composite Index dropped 0.3 percent before government reports
tomorrow that may show inflation accelerated at the fastest pace since July
2008 and economic growth slowed, according to Bloomberg surveys of
economists.
Russia’s
Micex Index retreated 0.9 percent as mining companies including OAO GMK Norilsk
Nickel sank on lower copper and nickel prices. Copper fell for a fourth day,
the longest losing streak since February, and nickel slipped for a third day
in London.
Silver
climbed to $41.125 an ounce, near the 31-year high of $41.9525 on April 11,
and gold jumped 0.4 percent to $1,462.75 an ounce. Crude oil increased 0.2
percent to $107.34 a barrel.
(Bloomberg)
-- HSBC Asset Management Increases Gold Holdings to 6% From 3%
HSBC Global
Asset Management said it increased its gold holdings to 6 percent from 3
percent at the beginning of this quarter.
Gold
priced at $2,600 an ounce is a “reasonable fair value target,”
HSBC’s Charles Morris, head of the company’s Absolute Return
fund, said in a report.
(Bloomberg)
-- Russia’s Gold Production Beats South Africa’s Output, GFMS
Says
Russia
overtook South Africa as the fourth-biggest gold producer last year even as
output declined, said researcher GFMS Ltd. China’s production gained.
Russia’s
mine supply declined to 203.4 metric tons from 205.2 tons in 2009, the
London-based researcher said in a report published today. Output from South
Africa, now the fifth-biggest producer, slipped to 203.3 tons from 219.8
tons, GFMS said.
Mine
supply from China, the biggest producer, increased to 350.9 tons from 324
tons, GFMS said. Australia was second- largest at 260.9 tons followed by the
U.S. with an output of 233.9 tons, the researcher said.
(Bloomberg)
-- South African February Gold Production Fell 2.3% From Year Ago
South African
gold production fell 2.3 percent in February from a year earlier, Jean-Pierre
Terblanche, a spokesman for Statistics South Africa, said by phone from
Pretoria today.
(FT)
-- Indian investors take a shine to silver
Indian
investors, long known for their enthusiasm for gold, are ditching bullion for
silver as they expect it to generate higher returns than the yellow metal,
the country’s main industry body said.
The
Bombay Bullion Association’s head said that investors were buying more
silver than ever, underpinning prices in India that are already at record
highs.
“The
type of demand for silver that we have experienced in the last few months has
never been seen before,” Prithviraj Kothari, president of the BBA,
said. “Demand has gone up 25 per cent compared to a year ago as people
are going crazy for silver because they think it will give them better
returns than gold.”
In
2010 India consumed about 2,800 tonnes of silver, this year’s
consumption is expected to rise to 4,000 tonnes, according to the BBA. Silver
prices in Mumbai, India’s main trading hub for precious metals, hit an
all-time high of Rs60,125 a kilogram ($1,364) on Friday, more than double
year-ago levels. Global silver prices rose to more than $40 a troy ounce for
the first time since 1980 at the end of last week.
India
silver imports increased nearly sixfold last year, according to Bloomberg, as
wholesale buyers boosted their stocks while the price of the metal was
trading at half its current level. Since February imports have moderated as
traders wait for a correction in the market.
Historically,
silver was bought in India’s poor rural areas, which account for 70 per
cent of the country’s 1.2bn population. However, since January a
growing number of urban middle-class investors have also started hoarding
silver. Anjani Sinha, chief executive of National Spot Exchange, said that
since the start of the year it has been opening 3,000-4,000 new silver
accounts every month.
Bharagava
Vaidya, a precious metals trader in Mumbai, said that Indian investors
started switching from gold to silver about a year ago when prices for the
grey metal were particularly low relative to bullion.
“Demand
spiked in an absolutely unprecedented manner,” said Mr Vaidya.
The
price of the grey metal globally has been rallying since February when
pro-democracy protests and social unrest throughout the Middle East that
toppled regimes in Tunisia and then Egypt sent investors scrambling for
havens.
But
traders warned that, although India’s demand for silver was expected to
remain strong in the long term, the country’s love affair with gold was
far from over, especially once the festival season started next month.
Mr
Vaidya said: “During the Akshaya Tritiya festival [May 6] many people
will buy gold...it might be less of an investment-driven decision and more of
religious one.”
For
India’s Hindu-majority population, Akshaya Tritiya is a holy day during
which devotees pray, fast and buy gold believing that it brings good fortune.
Some dealers said that closer to Akshaya Tritya silver holders might
contemplate cashing in on the extraordinary gains of the grey metal to get
back into bullion.
(FT)
-- Gold forecast to reach $1,600 level
The rally in
gold prices has further to run, says a leading precious metals consultancy,
which predicts waves of investor buying will take gold prices to as much as
$1,600 a troy ounce by the end of the year.
GFMS,
the London-based consultancy that compiles benchmark statistics for gold,
said on Wednesday in its bi-annual “gold survey” that fears that
the market was approaching a turning point were premature. “In terms of
gold fundamentals, there is a strong case for arguing that the glass is, at
least, ‘half full’,” it said.
Investors
have become nervous that prices are nearing a peak, triggering some selling.
But rising concerns about inflation, as oil and other commodities prices
surge, the eurozone debt crisis and unrest in the Middle East have helped to
underpin further price gains.
Gold
prices hit a nominal all-time high of $1,476.21 an ounce on Monday, up 28.4 per
cent over the last year. However, in real terms, adjusted by inflation, gold
remains well below the peak set in 1980 of more than $2,300 an ounce.
Philip
Klapwijk, GFMS chairman, said the prospects for gold remained bright and
forecast an average price for 2011 of $1,455 an ounce. “Investors
continue to be concerned about the outlook for inflation, with governments in
general showing little appetite to tighten monetary policy
significantly,” he said.
Mr
Klapwijk said that mounting debt problems in the US and a stalemate to cut
the budget could benefit gold later in the year and in 2012. As well as
investor demand, GFMS said that consumption should hold up as official sector
purchases continued and became more substantial, with solid gains in electronics
countering a slight drop in jewellery demand.
The
official sector, a group that includes central banks and sovereign wealth
funds, bought 73 tonnes of gold on a net basis, a “remarkable change of
direction for a market that has been used to absorbing substantial volumes of
gold sold by central banks over the last two decades,” the consultancy
said.
GFMS
estimated that central banks had not been net buyers of gold since 1988. It
said the official sector’s sales accounted for about 16 per cent of
global supply per year from 1989 to 2009. The consultancy expected another
strong year of official sector buying, potentially rising to 100 tonnes and
setting a new 22-year peak.
The
consultancy warned that supply was set to grow by a large amount on the back
of gains from both mine production and scrap this year, tempering the bullish
influence of increased demand. Mine output increased nearly 4 per cent last
year to 2,689 tonnes, surpassing the production peak of 2,646 tonnes set in
2001.
“A
second year of strong production confirms that, after years of falling
output, mine production is now responding positively to rising gold
prices,” GFMS said
Mark O’Byrne
Goldcore
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