Metals In The Morning – Chinese Data & Fed Speakers In View

           Precious metals spent last week on a roller coaster ride all on hopes and dreams of Fed tapering. Those dreams were dashed on Wednesday after Mr. Bernanke and team, held rates and policy in place for the time being. Gold is down at 1320.80 falling close to $12 in the Asian session to start the week. Silver fell harder to trade at 21.473 giving up 2% this morning. Platinum and palladium diverged with platinum trading at 1429.60 slightly in the red and palladium gaining 30 cents to trade at 717.10. Copper is the surprise this morning as industrial metals do not seem to be responding to positive data from China. Copper is down 33 points after the data release to trade at 3.272.

Precious metals slumped as comments from a slate of Federal Reserve officials cause traders to reassess their expectations for the duration of the central bank’s bond-buying program. Gold had surged by nearly five per cent during the previous session, the largest rally in percentage terms since March 2009.

Bearish gold traders scrambled to close out their bets on lower prices following the Fed’s decision late Wednesday to leave its $US85 billion-a-month bond-buying program unchanged.

James Bullard, president of the Federal Reserve Bank of St Louis, said on Bloomberg TV on Friday that “a small taper is possible in October”. Bullard also said the Fed’s move this week to hold to the pace of bond purchases was a “close decision”.  Also on Friday, Kansas City Fed President Esther George said she was worried that the Fed’s ongoing efforts to stimulate the economy fail to account for economic progress already made. George was the lone dissenting vote at the Fed’s policy meeting on Wednesday.

Indian gold imports could fall during this year, which may also curb down the rally of gold prices. According to one report, India’s gold imports may fall by 11% (y-o-y). Conversely, the Rupee gained more than 8.9% of its value in the recent month. If the Rupee continues its upward trend, this could pull up gold and silver prices. In China, the ongoing recovery of the economy along with the strong demand for gold and silver are likely to keep the prices of gold and silver from further falling.  China’s economy showed new signs of strength in September as an initial gauge of manufacturing activity rose to a-six month high The preliminary HSBC China Manufacturing Purchasing Managers Index rose to 51.2 in September compared with a final reading of 50.1 in August, HSBC Holdings PLC said on Monday.

Lastly gold holdings of SPDR gold trust ETF slipped again for the third consecutive week.  During the month, the ETF’s gold holdings fell by 1.18%. The ETF was also down by 32.62% since the beginning of 2013 (up-to-date). Current gold holdings are at 910.19 tons. If the ETF’s gold holdings keep falling, this will signal that the demand for gold as an investment is weakening.

Industrial metals prices edged lower after hitting their highest in almost a month as investors, following the U.S. Federal Reserve’s decision to stick to its stimulus program, shifted focus back to fragile fundamentals but declines were limited by Chinese data this showing that manufacturing rose to a six-month high in Sep, signaling that a rebound in the Chine’s economy is gaining steam. The preliminary reading of 51.2 for PMI by HSBC Holdings Plc and Markit Economics compared with a 50.9 by Bloomberg. The gauge was at 50.1 in Aug. - fxempire.com

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Natural gas futures - Weekly review: September 16 - 20

                     Natural gas futures ended Friday’s session at a four-day low, as forecasts showing mild temperatures across much of the U.S. through late-September weighed.

On the New York Mercantile Exchange, natural gas futures for delivery in October fell 0.9% on Friday to settle the week at USD3.687 per million British thermal units. 

Prices declined by as much as 1.7% earlier in the day to hit a session low of USD3.656, the weakest since September 16. 

Nymex gas prices settled 0.2% higher on Thursday at USD3.720 per million British thermal units, as a round of profit taking kicked in after prices rallied to a two-month high of USD3.820.

Despite Friday’s losses, natural gas prices advanced 0.3% on the week.

Market players continued to monitor near-term weather forecasts to gauge the strength of demand for the fuel.

Updated weather forecasting models pointed to mostly normal to below-normal temperatures across most parts of the U.S. Northeast Midwest for the next ten days.

Bearish speculators are betting on the mild weather to reduce demand for the fuel with autumn’s low-demand shoulder season looming.

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

Prices rallied to the highest level since July 19 on Thursday after the U.S. Energy Information Administration said natural gas storage in the U.S. rose by 46 billion cubic feet last week, below market expectations for an increase of 56 billion cubic feet.

Inventories increased by 61 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a build of 74 billion cubic feet.

Total U.S. natural gas storage stood at 3.299 trillion cubic feet as of last week, 0.5% above the five-year average for the same week and 5.4% below last year's unusually high level.

Early injection estimates for this week’s storage data range from 70 billion cubic feet to 80 billion cubic feet, compared to a 79 billion cubic feet increase during the same week a year earlier.

The five-year average for the week is a build of 75 billion cubic feet.

Elsewhere in the energy complex, light sweet crude oil futures for November delivery settled at USD104.75 a barrel by close of trade on Friday, losing 2.6% on the week. 

Meanwhile, heating oil for October delivery fell 3.49% on the week to settle at USD3.006 per gallon by close of trade Friday. investing.com

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Crude oil futures - Weekly review: September 16 - 20

                       New York-traded crude oil futures fell to a one-month low on Friday, amid lingering uncertainty over the future of the Federal Reserve's stimulus program and as fears a disruption to supplies from the Middle East continued to fade away.

On the New York Mercantile Exchange, light sweet crude futures for delivery in November declined 1.05% on Friday to settle the week at USD104.75 a barrel by close of trade. 

Prices fell by as much as 1.3% earlier in the day to hit a session low of USD104.51 a barrel, the weakest level since August 23. The November contract settled 1.3% lower at USD105.86 a barrel on Thursday.

Oil futures were likely to find support at USD103.56 a barrel, the low from August 22 and resistance at USD108.14 a barrel, the high from September 19.

On the week, Nymex oil futures lost 2.6%, the biggest weekly decline since the week ended July 26.

Oil prices rallied more than 2% on Wednesday after the Fed decided to leave its USD85 billion-a-month asset purchase program unchanged.

The decision surprised markets, which had been expecting the central bank to taper its monthly stimulus program by USD10 billion to USD15 billion.

In a press conference following the Fed statement, Chairman Ben Bernanke reiterated that the plan to taper asset purchases was never a "preset course," and added that the bank's decision was dependent on how the economic recovery continues to progress.

The central bank also repeated its ongoing goal to keep low interest rates in place until the unemployment rate falls to around 6.5%, as long as inflation doesn't accelerate beyond 2.5% a year.

However, traders reassessed their expectations regarding the duration of the central bank’s bond-buying program on Friday after St. Louis Fed President James Bullard said the decision not to taper in September was “close” and did not rule out a small reduction in the central bank's bond purchases in October. 

The Fed will hold its next monetary policy meeting on Oct. 29-30.

The Federal Reserve’s stimulus program is viewed by many investors as a key driver in boosting the price of commodities as it tends to depress the value of the dollar.

The dollar strengthened against the euro and the yen following Bullard’s comments, further weighing on oil prices.

A stronger dollar makes U.S. commodities more expensive for importers holding other currencies.

Meanwhile, receding fears over Middle East supply disruptions continued to weigh.

Oil prices surged to a 27-month high of USD112.22 a barrel on August 28 amid indications the U.S. was close to taking military action against Syria for its alleged use of chemical weapons against civilians. 

But prices have since lost nearly 6% after the U.S. and Russia reached a diplomatic solution on how to handle Syria’s chemical weapons last week.

While Syria is not a major oil producer, investors fear that the two-year-old civil war could spill over to affect oil supplies in nearby countries.

Reports that Libyan oil production is on the rise after protesters reopened access to facilities also added to the selling pressure, as did talk that oil output in Iraq is recovering.

Countries in the Middle East were responsible for nearly 35% of global oil production in 2012.

Elsewhere, on the ICE Futures Exchange in London, Brent oil futures for November delivery inched up 0.4% on Friday to settle the week at USD109.22 a barrel.

Despite Friday’s modest gain, the London-traded Brent contract still lost 2.25% over the week, while the spread between the Brent and the crude contracts stood at USD4.47 a barrel by close of trade on Friday.

In the week ahead, uncertainty over the direction of the Fed’s monetary policy and the decision over Chairman Ben Bernanke’s eventual successor look likely to influence commodity prices. 

Oil traders will be closely watching a preliminary reading of China’s HSBC manufacturing index on Monday, to gauge the economic strength of the world’s second largest oil consumer.   - investing.com

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Gold / Silver / Copper futures - Weekly review: September 16 - 20

             Gold futures plunged nearly 3% on Friday, amid ongoing uncertainty over the future of the Federal Reserve's stimulus program.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery tumbled 2.7% on Friday to settle the week at USD1,332.50 a troy ounce. 

Gold futures fell by as much as 3.2% earlier in the session to hit a daily low of USD1,325.10 a troy ounce. The December contract settled 4.7% higher at USD1,369.30 a troy ounce on Thursday.

Gold futures were likely to find support at USD1,291.70 a troy ounce, the low from September 18 and resistance at USD1,375.10, the high from September 19.

Despite Friday’s sharp decline, gold prices still ended the week with a 0.5% gain, due to Thursday’s sharp rally. 

Gold prices soared by as much as 4.5% on Thursday after the Fed decided to leave its USD85 billion-a-month stimulus program unchanged.

The decision surprised markets, which had been expecting the central bank to taper its monthly stimulus program by USD10 billion to USD15 billion.

In a press conference following the Fed statement, Chairman Ben Bernanke reiterated that the plan to taper asset purchases was never a "preset course," and added that the bank's decision was dependent on how the economic recovery continues to progress.

The central bank also repeated its ongoing goal to keep low interest rates in place until the unemployment rate falls to around 6.5%, as long as inflation doesn't accelerate beyond 2.5% a year.

But the precious metal came under heavy selling pressure on Friday after St. Louis Fed President James Bullard said the decision not to taper in September was “close” and did not rule out a small reduction in the central bank's bond purchases in October. 

The Fed will hold its next monetary policy meeting on Oct. 29-30.

Moves in the gold price this year have largely tracked shifting expectations as to whether the U.S. central bank would end its quantitative easing program sooner-than-expected.

The dollar strengthened against the euro and the yen following Bullard’s comments, further weighing on gold prices.

Gold prices often move inversely to the U.S. dollar, as gold becomes more expensive for buyers using other currencies.

In the week ahead, uncertainty over the direction of the Fed’s monetary policy and the decision over Chairman Ben Bernanke’s eventual successor look likely to influence gold prices. 

The precious metal is on track to post a loss of nearly 22% on the year as traders bet an improving U.S. economy would lead the Fed to unwind its stimulus program by the year's end.

Elsewhere on the Comex, silver for December delivery plummeted 5.85% on Friday to settle the week at USD21.92 a troy ounce. Silver prices settled 8% higher at USD23.29 on Thursday.

On the week, silver future prices declined 1.45%.

Meanwhile, copper for December delivery dropped 0.8% on Friday to close the week at USD3.320 a pound. On Thursday, copper futures rallied 2.1% to settle at USD3.347 a pound.

Prices of the red metal advanced 3% on the week.

Copper traders will be closely watching a preliminary reading of China’s HSBC manufacturing index on Monday, to gauge the economic strength of the world’s largest copper consumer.   - investing.com

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Reasons for short term volatiltiy in Gold and Silver

By Dr Jeffrey Lewis
After years of paying attention to the price action and not the mainstream market commentary. — Thanks in large part to Ted Butler and GATA — here are some of the dominate forces that currently seem to be determining price movements in the 

precious metals:

Downside probability
Jobs data comes out every few weeks. This almost always puts downside pressure on the market, with about a 90% probability. Also, presidential press conferences tend to have a 70% downside probability.  The powers that suppress the precious metals prices cannot have metals surging while the president speaks.

The Fed’s FOMC meetings and the following minutes have greater than a 90 percent downside probability, unless a surprise QE announcement is made. The surprise has been effectively quelled by taper signaling and the summers versus Yellen issue.

The beat of war drums is another factor. Interestingly, the closer that the country gets toward war or crisis, the more likely precious metals are to head counter-intuitively lower.

Options expiration dates are also notable, as well as the times immediately before or after they occur. Rarely do precious metals options expire for the benefit of the buyers.

Whenever the price of gold is strong, but the price of silver is weak the day before, this is another pending downside signal.

The performance of the NYSE Arca Gold BUGS (Basket of Unhedged Gold Stocks) Index or HUI Index (an index of the stocks of companies engaged in gold mining) also seems to be influential. Gold shares may lead the way up or down. If PM shares are weak on an up day for the precious metals, the next day’s follow through is rare, and the subsequent price action is often downward.

Daily Gold price movements
The downside for assets like silver and gold may be unlimited, but true upside potential of these assets is rarely demonstrated. The upside is rarely more than 2%, and often reverses lower on the nose or just below that percentage gain. (The gain and intraday moves on Wednesday, September 18th, 2013 were of the largest ever).

In sideways rather than trending markets, the upside it typically limited to only 1%. Also, intraday upside reversals seem extremely rare.

Furthermore, the phenomenon of “overnight dumping” is almost always synonymous with New York selling pressure. This can occur in a bull market unless recent support levels were already cleared out in a technically oversold period.

The Technical are secondary
Resistance levels seem to be the most reliable technical factors, and everything else seems not to matter so much.

The most closely watched medium term moving averages include the 20 day, 50 day, 100 day and 200 day. Also technical traders watch the RSI indicator for overbought versus oversold indicators and divergence in extreme territory. This is not necessarily a strong signal for the precious metals due to the underlying price manipulation.

With respect to how chart formations impact the precious metals market, the longer term price patterns seem to be the most useful in terms of their predictive value.

Market sentiment
The worse the media controlled current sentiment seems to be in the precious metals market, the better the medium term outcome for prices tends to become.

The COT is the main sentiment indicator and seems to help determine market direction, although it does not seem to be a predictor in and of itself.

When all swaps are removed, if the big bullion banks still control at least 5-10 percent of the short side, then the PM market is always about to have an economically significant sell off.

Furthermore, when hedge funds start to enter the PM market on the long side as they begin following an upwards trend, the fruit is ripe for the picking and a sharp sell off soon commences.

The bottom line
The bottom line about all this is that by definition these are not actual markets where prices are fairly discovered by supply and demand factors. Instead, they are profit centers which the bullion banks regularly milk for their own benefit and profit.

The futures markets also act as displays or window dressing for a much larger underlying fiat currency crisis that remains hidden just beneath the surface.

How long this manipulative charade can go on is up to the thinnest sentiment in existence — confidence underpinned by human emotion. - bullionstreet.com

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Crude prices fall as Libyan production improves, Fed comments weigh

                       Crude oil futures softened on Friday on reports that Libyan production is on the mend, while sentiments that the Federal Reserve still remains on track to begin unwinding stimulus programs pushed down prices as well.
 
On the New York Mercantile Exchange, light sweet crude futures for delivery in November traded at USD104.85 a barrel during U.S. trading, down 0.495%. 

The November contract settled down 1.32% at USD105.86 a barrel on Thursday.

The commodity hit a session low of USD104.82 and a high of USD106.11.

Reports that Libyan oil production is on the rise after protesters reopened access to facilities sent oil prices dipping on Friday, as did talk Iraqi output is on the mend as well.

Waning concerns the U.S. will attack Syria also allowed for modest declines.

Elsewhere, St. Louis Federal Reserve President James Bullard said that the U.S. central bank could decide to taper its stimulus program at its October meeting, which also allowed for declines.

Federal Reserve stimulus programs such as its USD85 billion bond-buying program aim to spur recovery by driving down long-term interest rates, which weakens the greenback and in turn, makes oil an attractive buy, especially in dollar-denominated venues.

The Federal Reserve will hold a monetary policy meeting Oct. 29-30 but is not due to hold a press conference then, which left many expecting a decision to taper asset purchases to come in December.

Meanwhile on the ICE Futures Exchange, Brent oil futures for November delivery were up 0.20% at USD108.98 a barrel, up USD4.13 from its U.S. counterpart. - investing.com

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Crude oil little changed, eyes on Middle East developments

                 Crude oil futures were little changed in subdued trade on Friday, as the return of some Libyan oil output weighed on prices, although concerns over a possible supply disruption in the Middle East persisted. 

On the New York Mercantile Exchange, light sweet crude futures for delivery in November traded at USD105.91 a barrel during European morning trade, up 0.04%. 

The November contract settled down 1.32% at USD105.86 per barrel on Thursday. 

Oil futures were likely to find support at USD104.56 a barrel, the low from September 18 and resistance at USD108.14 a barrel, Thursday's high. 

Libya's crude oil production has recovered to 620,000 barrels per day (bpd), compared with its pre-war capacity of 1.6 million bpd, after protesters agreed to reopen major western fields. Output had collapsed to below 200,000 bpd in a stalemate between protesters and the government that lasted over a month. 

The U.N. Security Council was scheduled to decide next week on how it will enforce a U.S.-Russian plan to destroy Syria's chemical weapons. 

Separately, the U.S. and Iran may also meet next week to discuss Tehran's nuclear program, after Iranian President Hassan Rouhani sent signals that he is looking for a thaw in relations between the two countries. 

Oil prices rallied on Wednesday after the Fed held back from reducing the USD85 billion pace of its monthly asset purchases. 

Fed Chairman Ben Bernanke refused to commit to reducing bond purchases this year, saying the stimulus program was "not on a preset course." 

Bernanke added that he wanted to "try to get confirming evidence" that the economy is showing signs of lasting improvement before scaling back the central bank's bond purchases. 

Elsewhere, on the ICE Futures Exchange, Brent oil futures for November delivery rose 0.27% to trade at USD109.06 a barrel, with the spread between the Brent and crude contracts standing at USD3.15 a barrel. - Investing.com

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Copper higher ahead of Fed statement

Trade was cautious ahead of a policy statement by the US Federal Open Market Committee, which was due out after the LME close.

 At the PM kerb close on Wednesday, LME three-month copper was up 1.6 per cent at $US7,183 a metric ton. Aluminium was 0.4 per cent higher at $US1,784.40 a ton.

Base metal prices found support from the Chinese market, where local traders stocked up on industrial metals ahead of the Mid-Autumn Festival later this week, said analysts and brokers. Markets in China - the world's top base metal consumer - will be closed on Thursday and Friday.

Other investors awaited the conclusion of a two-day FOMC meeting - which issued its policy statement at 1800 GMT (0400 Thursday AEST).

Markets had expected the FOMC to withdraw some of the $US85 billion-a-month it has been spending to buy bonds, known as quantitative easing. But, after the LME close, the FOMC surprised by announcing it was keeping its stimulus measures in place.

Since base metals have a range of everyday uses, from smartphones to household plumbing, efforts to spur economic growth tend to prop up demand.

"For the most part, participants are bracing for a degree of tapering, although the game now seems to have shifted towards guessing the exact amount," said INTL FCStone analyst Edward Meir.

Base metals also drew support from some solid US housing data on Wednesday.

Housing starts rose 0.9 per cent in August from July to a seasonally-adjusted annual rate of 891,000, the US Commerce Department said. That was less than the 915,000 forecast by economists.

August home starts were driven by a seven per cent increase in single-family homes, considered a more reliable barometer of the sector's health.

"The small rise in housing starts in August is not as disappointing as it appears," said Capital Economics analyst Paul Diggle. - news.com.au

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Gold trends indicate possibility of $1500 by end-2013

             KOCHI (Bullion Street): When it comes to Gold, just about everyone on the street is an expert. Last week, when I went to buy from the local grocer, he was also eager to know how the markets are faring but only that he himself had a view on gold and equities in general. But much of it has been gathered from hearsay or  and not from any meaninful analysis of the markets.

As I have noted yesterday, gold bulls are cautiously returning but not many are venturing into any wild guess for the simple reason that they have often failed to accurately gauge market sentiments. 

I am not overly bullish on gold but there are some indications already to show that gold could move higher.
- India's Finance Minister P Chidambaram has said that gold imports could fall to 845 tons this year due to import restrcitions.Lesser gold flow into a market which has an insatiable appetite for it, could signal further upward pressure on prices.  Indian market is witnessing a seasonal weakness and hence prices are bound to go up until it attains a peak during Diwali festivities, wedding season.

-China's demand is witnessing a surge which could continue to provide support for gold, so is some buying by Central banks.

- Physical demand continues to overpower any distortions created in the market by the derivatives, according to Mark Mobius of Templeton Investments.

-Jeff Nichols, precious metals economist in an analysis has already mentioned about the possibility of staflation in US economy generating a bullish scenario for gold.

Perhaps, I may reserve the technical view on gold to a later day but some overview on technicals may be appropriate at this time. The Kitco charts for one year gold based on closing New York prices show a continous downard slope or in technical terminology a descending channel. It would require sustained break above $1400 to push prices higher to $1500 and later $1600 levels.

However the 30-day charts show a rising wedge which is a reversal pattern that shows up typically in a bear market. Rising wedge usually provides a low risk/high reward ratio but there are other aspects to be looked into including volume although targets are achieved quickly, according to technical experts.

Recent data from US Commodity Futures Trading Commission (CFTC) also indicate long positions by managed futures has increased by 5256 while short positions had fallen by 8257.

Meanwhile, the World Gold Council has published a new research report on the link between US interest rates and gold prices. It said that a normal rate of interest from 0-4% is not adverse to gold eventhough a low rate environment is more conducive for the metal.

Juan Carlos Artigas, Head of Investment Research at the World Gold Council said: While headlines have focused on the recent price moves, the long term drivers of gold including emerging market growth and central bank demand hold firm, particularly when combined with a likely reduction in supply from both mine production and recycling. Even with the highest rate of interest, the core value of gold is to balance out a portfolio. Most investors are under allocated; optimal levels are identified as between 2% and 10%.”

Hence, present trends including a possible threat of tapering of QE is not entirely negative for gold while some really positive factors are in the background providing firm support. Therefore, given a strong push above $1400 in next two months could see prices moving higher to $1550-1600 levels. - Bullionstreet.com

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Gold could climb back to $1500, Silver to $26 as Fed taper threat goes

            LONDON (Bullion Street): US Gold futures and spot gold now stand a better chance to reach $1500 per ounce while silver prices could rise to $26 by year end as US Federal Reserve has indicated that it is not implementing tapering of stimulus as expected by September.

US Gold futures for December delivery shot up by $60 to $1360 an ounce while Silver futures for December delivery shot up to $23.015 levels. According to Sreekumar Raghavan, Chief Strategest at Commodity Online Group (India's leading commodity-equity trading services group), who had earlier forecasted $1500 gold by December 2013, precious metals is at the beginning of the strong demand cycle from September to January and market had taken a beating on speculation that Fed may announce tapering measures.

"This could eventually take gold near to $1500 levels aided by a weaker dollar and safe haven buying as continued stimulus measures will be inflationary," Sreekumar Raghavan said. Silver is backed by sufficient industrial demand and hence could move upwards of $26, he added.

Fed surprised everyone on Wednesday by postponing tapering measures and revising downwards the outlook on US economy from 2.3% GDP growth to 2% and this caused US dollar to fall to a seven month low against major currencies. Gold soared 4%.

Reuters quoting some economists said that winddown of stimulus measures may not start until present Fed Chairman Ben Bernanke's term ends in January. And it could be left to his successor to try out such measures. Fed Vice Chair Janet Yellen is the front runner for the job.

It may be recalled that a few days ago HSBC Global Research had revised its gold outlook for 2013 from $1396 per ounce to $1446/Oz in view of strong Asian demand. China demnad for gold jewelry, coins and bars had shot up recently while India is entering a seasonally strong demand period amidst a steep hike in customs duty on gold and silver to 10% and jewelry duty from 10 to 15%. - bullionstreet.com

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