Thursday, October 31, 2013
To QE infinity and beyond!...or maybe December? The precious complex is under heavy pressure this morning as yesterday’s FOMC statement seemed to contradict what many expected to be rather dovish sentiment on the future of quantitative easing.
To QE infinity and beyond!...or maybe December? The precious complex is under heavy pressure this morning as yesterday’s FOMC statement seemed to contradict what many expected to be rather dovish sentiment on the future of quantitative easing. Given the rather lackluster economic picture of late and the impact of the recent government shutdown it came as a surprise to many that QE tapering in December is still a possibility. The metals reacted with moves to the downside following the meeting but as overseas markets got the opportunity to digest the news the metals continued their downward march. Gold closed the previous session at $1349.30, not too far from where it opened mid0week trading, but now trades more than 1.5% lower at $1327.20. Silver is down more than 4% to 22.050 after closing yesterday’s session at $22.983. The PGM side of the complex is following the trend with platinum down more than 1.5% and palladium down more than 1%. Platinum’s move lower might have some scratching their head as its been reported that the AMCU is now in a wage dispute with a third platinum miner, Lonmin and could seek a work stoppage. The Union has already been given the go ahead to strike, pending a 48 hour notice, at Impala and is posturing for similar strike action at Amplats. On the domestic front, it appears California has worked out the “glitch” in its unemployment claims reporting system. Jobless claims fell by 10,000 last week. Have a great day and a safe and happy Halloween!
Wednesday, October 30, 2013
Chairman Bernanke might be calling for a few more coffee breaks, to kill some time before his 2 PM statement, as this morning’s economic data give little reason to debate the current direction of monetary policy. ADP private sector jobs data showed just 130,000 jobs added this month. That’s the lowest level of job add-ons since the beginning of Q2 2013. The more heavily relied upon data, the government jobs data, has been delayed until November 8th because of the government hiatus. On the inflation front, The U.S. Labor Department reported that the Consumer Price Index rose just .2% in in September with 12 month CPI up just 1.2%. Along with a 6.5% unemployment rate, a 2% inflation target was given as the criteria for any pull-back in QE. The precious complex is pushing higher ahead of the conclusion of the FOMC meeting. Gold closed the previous session at $1345.50 and now trades nearly 1% higher at $1356. The yellow metal found some resistance near the $1360 mark, having reached as high as $1359.90. Silver is up nearly 2.5% having closed the previous session at $22.492 and now trades near the higher end of the day’s range at $23.035. Platinum has moved more than 1% higher as well, now trading at $1478 after closing the previous session at $1461.90. The white metal continues to find support from potential strike action from the AMCU. Have a great day!
Tuesday, October 29, 2013
The highly anticipated FOMC meeting gets underway today and while there is a slew of economic data reports out this morning it is unlikely any of them will change sentiment
The highly anticipated FOMC meeting gets underway today and while there is a slew of economic data reports out this morning it is unlikely any of them will change sentiment surrounding the continuation of quantitative easing in its current form. Home prices were up in August according to the S&P.Case Shiller 20 city index, as were retail sales in September according to the U.S. Census Bureau. Inflation remains stagnant and consumer confidence is waning. The Conference Board index fell to 71.2 this month, all the way from 79.7 in the last reading! In mining news, The Association of Mineworkers and Construction Union (AMCU) has voted to strike at Impala, the world’s #2 platinum producer. However, platinum’s response remains rather muted as any strike action must be preceded by a 48 hour strike notice. Have a great day!
Monday, October 28, 2013
With last week’s poor September jobs data in hand, as well as other less-than-flattering economic data of late, it’s unlikely that the FOMC will look to taper
With last week’s poor September jobs data in hand, as well as other less-than-flattering economic data of late, it’s unlikely that the FOMC will look to taper their $85 billion-a-month spending binge when they meet for their boondoggle on Tues/Wed of this week. Sentiment for the status quo got a boost on Friday when the Thompson Reuters/UofM consumer confidence index fell to 73.2 in October compared to Septembers reading of 75.2. The precious complex was able to regain its composer before the end of last week and, barring any surprises, should be cushioned to the downside at least until Chairman Bernanke and his colleagues give us their thoughts on Wednesday afternoon. In domestic economic news, industrial production rose .6% in September, the largest increase since February of this year, and pending home sales fell 5.6%. The PGM side of the complex is still in wait and see mode as the Association of Mineworkers and Construction Union could commence strike actions at the world’s two largest mining companies, Anglo and Impala. A “certificate of non-resolution” was issued to the AMCU by a government mediator as wage negotiations between the union and Impala become deadlocked. Platinum is trading .5% higher from Fridays close of $1455.50. Have a great day!
Friday, October 25, 2013
After rallying earlier in the week, on the back of softer economic indicators, the precious complex loss of momentum has left the complex susceptible to profit taking
After rallying earlier in the week, on the back of softer economic indicators, the precious complex loss of momentum has left the complex susceptible to profit taking as we head into the end of the week. Gold has reversed course the least as the FOMC meeting next week will likely not result in any form of QE tapering, helping to cushion gold’s downside. The yellow metal closed yesterday’s session at $1350.30 and now trades $1343 to start the day. The bigger “head-scratcher” of the day is Platinum. On Thursday, it was reported that a mediator, in the wage negotiation between the AMCU and Impala (World #2 platinum producer), has given a go-ahead for the mining union to strike. If you’ll recall, the AMCU is posturing for similar action against Amplats, the world’s largest platinum producer. Platinum now trades nearly 1% lower from yesterday’s close of $1456.2. Palladium and silver are in a footrace to reach lower levels. Palladium has given up more than 1.5% to start the day while silver is outshining all the others in the moves lower and sits more than 2% down at the moment. In economic news, durable goods orders rose with a great deal of help from aircraft orders. The University of Michigan/Thompson Reuters consumer confidence index will be released at 9:55 ET. Have a great day!
Thursday, October 24, 2013
The precious complex is in positive territory this morning. Gold’s rally, earlier in the week, on the back of less-than-inspiring (and delayed) US non-farm payroll data looks to have lost some steam but continues to find support from a softer US dollar. As a refresher, the September NFP data showed just 148,000 jobs added last month while the unemployment rate dropped to 7.2% and labor force participation remained at a dismal 63.2%. Gold is currently up .75% to $1343, down slightly from its high of $1349.30. HSBC’s flash manufacturing PMI for China rose to a seven-month high of 50.9, yet another good sign for the world’s #2 economy. China recently reported that Q3 GDP growth reached 7.8%. Silver is trading modestly higher, now $22.70 after closing the previous session at $22.617. On the PGM side, the Association of Mineworkers and Construction Union is posturing for yet another work stoppage at Amplats as wage negotiations between the two organizations don’t appear to be going as planned. Platinum has moved higher, now trading just shy of $1450 after closing the previous session at $1439.50. Jobless claims fell by 12,000 last week but the data continues to be skewed as California grapples with “technical problems” in its reporting system. New home sales will be released in a few minutes, then market participants can start planning their holiday shopping lists….there’s just 10 weeks left! Have a great day!
Monday, October 21, 2013
As government employees return to work after, after 16 days off, market participants are left to wonder what end-off-the-world scenario our fearless leaders in Washington will drum up next.
As government employees return to work after, after 16 days off, market participants are left to wonder what end-off-the-world scenario our fearless leaders in Washington will drum up next. For now, focus will shift to tomorrows release of the NFP/Unemployment Rate data that was supposed to be released earlier this month. However, the data could be a moot point form a monetary policy standpoint. A few Fed members have already voiced their opinions regarding QE tapering and given the events of the past two weeks it’s looking less likely that next week’s FOMC meeting will yield any action in the near term. Investors will take in more third-quarter earnings reports, as equity markets look to push even higher, and the National Association of Realtors will release existing home sales data at 10 a.m. ET. The precious complex has been able to hold last week’s gains fairly well. Silver is the stand-out performer thus far, up nearly 2% after closing last week at $21.913. Palladium is outshining platinum at the moment, up nearly 1% to $748. Have a great day!
Friday, October 18, 2013
The precious complex is taking a bit of a breather here this morning following yesterday’s surge on the back of a budget deal
The precious complex is taking a bit of a breather here this morning following yesterday’s surge on the back of a budget deal in congress that kept the country from defaulting on its debt obligations. However, the agreement between the House, the Senate and President Obama merely sweeps the issue under the rug for another 3-4 months. At some point one has to clean under the rug, right? Therein rests the uncertainty that helped bolster the metals, particularly gold, throughout yesterday’s session. The yellow metal closed Thursday at $1323, roughly $40 higher than where it began the day. Weakness in the greenback helped squeeze out all but the most committed shorts in the market and now market participants will look to the next FOMC meeting for any indication of QE tapering. That meeting is scheduled to begin on October 29th. Not surprisingly, some Fed members are already voicing their thoughts on the matter. Dallas Fed Head Mr. Fisher said, “Given all this uncertainty, it would be hard to argue to change course on monetary policy”. IN other global economic news, the world’s #2 economy, China, reported 3rd quarter GDP came in at 7.8%, meeting expectations and improving on the previous quartes growth of 7.5%. In mining news, Amplats, the world #1 platinum producer, said it will maintain full-year guidance on platinum production despite recent disruptions. The miner has production guidance of 2.3 million ounces for the year. Have a great weekend!
Thursday, October 17, 2013
Yesterday’s last minute budget deal was rather anti-climactic as the shambolic conservative wing of congress found themselves “between a rock and a hard place” giving market participants little reason to believe that they wouldn’t flinch in this game of chicken.
Yesterday’s last minute budget deal was rather anti-climactic as the shambolic conservative wing of congress found themselves “between a rock and a hard place” giving market participants little reason to believe that they wouldn’t flinch in this game of chicken. Unfortunately, this whole debacle appears to be for naught as what happened last evening amounts to nothing more than re-arranging the deck chairs on the Titanic. The US of A hit the proverbial iceberg long ago but will now continue to take on water- approaching $17 trillion worth- at least until February 2014. Consumer confidence, and likely confidence in any other facet of the domestic economy, will likely be on shaky ground until then and barring any significant improvement in unemployment or inflation targets set forth by the FOMC , QE doesn’t appear to be going away anytime soon. The greenback took a beating overnight as Chinese credit rating agency, Dagong, noted their concern with a downgrade of their US credit rating. Combined with aggressive short covering, gold is now up 2.5% from yesterdays close, now trading $1314 after closing the previous session at $1282.30. The PGM side of the precious complex is finding support as the AMCU and Amplats, fresh off a two week strike by the union, are now in wage negotiations. Platinum is up nearly 2% to $1423 after closing yesterday’s session below $1400. Palladium now trades 1.75% higher at $725.90. Have a great day!
Wednesday, October 16, 2013
The fiasco in Washington continues to play out but the simple fact is, there is no deal. With the “discussions” likely to come down to the wire, and maybe over the wire, ratings agency Fitch has announced the U.S. AAA credit rating is on notice and that a downgrade is possible. However, market participants don’t seem too worried as the DJIA is up over 1% to start the day. The precious complex experienced some safe-haven interest overnight but that interest has fizzled out as hopes remain high that a deal will get done before tomorrow’s deadline. It’s a wait and see atmosphere today but could become an active day as headlines roll out of D.C. Have a great day!
Tuesday, October 15, 2013
“Close to a deal” is a relative statement. I could say that “I’m close to retirement” but unless your idea of “close” is 40 years you wouldn’t take me seriously. Senate majority leader Harry Reid said that his side of Congress has made tremendous progress and that they are close to a deal but whether the House of Representatives agrees is another question all together. Regardless, optimism remains surprisingly resilient with just a few days left until the Default of Doom. The chest thumping in Washington is all consuming at the moment and until a deal is reached one can expect the choppiness in the metals complex to continue. The metals began the morning in negative territory but have fought back early with gold now trading relatively flat to Monday’s close. Have a great day!
Monday, October 14, 2013
The precious complex has reversed course following last week’s sell-off amid growing optimism that the leaders in Washington
The precious complex has reversed course following last week’s sell-off amid growing optimism that the leaders in Washington were close to an agreement on the U.S. debt ceiling that would avoid a default come the October 17th deadline. Gold closed the previous session at $1268.20 while the PGMs followed the downward momentum with help from the end of AMCU strikes at Amplats. However, the metals are regaining some lost ground to start the week as the nervous laughter has is slowly turning to genuine concern as market participants wonder if a debt ceiling deal will get done. It’s Columbus day, and as such the U.S. Bond markets are closed so one could argue we are not seeing the full market sentiment just yet. Investors appear to be shifting towards the perceived “safe havens” while equity markets are becoming a no-mans-land as we get closer to Thursday. Have a great day!
Friday, October 11, 2013
There’s growing optimism in the U.S. as it appears the chances of a deal in Washington to increase the “debt ceiling” are greater than the chances of the New York Giants winning a football game this season!
There’s growing optimism in the U.S. as it appears the chances of a deal in Washington to increase the “debt ceiling” are greater than the chances of the New York Giants winning a football game this season! Hints of a deal between the House Republicans, and everyone else in Congress, permeated the markets throughout yesterday’s session as equities surged back to life and gold found itself under pressure. The positive sentiment looks healthy to start the final trading session of the week but that’s not necessarily a good thing for the precious complex. Gold is down more than 2% to start the day and, after battling to hold anywhere near the $1300 level, finds itself at $1267. Silver has followed in the same direction and now trades nearly 3% lower to $21.245 after closing the previous session at $21.896. The PGMs are finally digesting the news that the AMCU has reached a deal with Amplats over the retrenchment of some 3,300 workers. The world’s #1 platinum producer has agreed to provide voluntary separation packages to those who would have otherwise been let go. Miners began returning to work today. Platinum is softer by 2% to start the day and now trades $1368 after closing the previous session at $1396. Consumer sentiment data from the University of Michigan will be released in a few minutes but given the recent domestic woes, it’s hard to believe consumers are all that happy. Have a great weekend!
Thursday, October 10, 2013
As the leadership in Washington continues to lock horns over the Affordable Care Act and the partial government shutdown, there is a new glimmer of hope this morning that both sides of the isle may be able to come to an understanding when it comes to the debt ceiling that is set to be reached in a week’s time. U.S. equities have shot up more 1% as there are reports that the U.S. congress is meeting to hammer out a deal that would temporarily increase the debt ceiling in order to avoid a U.S. default and the ensuing economic Armageddon so many have warned us about. However, there are still seven days left to hammer out a deal and given how stubborn both sides can be and have been, there is still an aura of uncertainty. U.S. initial jobless claims reporting appears to be an essential, yet not totally reliable, function of the U.S. government as the Labor department released first time claims data this morning. Initial jobless claims came in at 66,000 last week but more than half of that increase came from California where computer problems continue to cause problems. One would think that the home of Silicon Valley would be able to find someone to fix the glitch, but hey, what do I know? The seasonally adjusted first time claims now stand at 374,000. Have a great day!
Wednesday, October 9, 2013
The “doom and gloom” rhetoric from President Obama during yesterday’s press briefing appears to be falling largely on deaf ears.
The “doom and gloom” rhetoric from President Obama during yesterday’s press briefing appears to be falling largely on deaf ears. While a prolonged partial government shutdown will likely have some negative effect on the economy it’s hard to believe most market participants would think Congress would “cut its nose off to spite its face” and let the country default on its debt. Gold closed Tuesday’s session lower at $1324.60 but has since lost another 1.25% and now trades $1308. Silver is the biggest loser thus far, down more than 2% to $21.980 after closing the previous session at $22.443. Platinum and palladium are following the downtrend as both metals trade more than 1% lower at $1381 and $706 respectively. Market participants will get a peek at the latest FOMC meeting minutes later this afternoon and just ahead of a 3:00 PM ET press conference where President Obama is expected to announce his nomination of Janet Yellen as the next Federal Reserve Chairman. Have a great day!
Tuesday, October 8, 2013
The battle between the unstoppable forces and immovable objects – or so they think- in Washington D.C. continues as the nation heads into the 8th day of a partial government shutdown.
The battle between the unstoppable forces and immovable objects – or so they think- in Washington D.C. continues as the nation heads into the 8th day of a partial government shutdown. More concerning, however, is the debt ceiling that sits a little more than a week away and has investors worried that the U.S. could default on its debt come October 17th. The consensus, for now, seems to be that a default is unlikely but there is still quite a bit of time, between now and then, for that sentiment to change. The precious complex is little changed from the previous sessions close. Gold is trading $1327 after closing Monday at $1325.10. Platinum has moved back above the $1400 level following reports of more potential labor issues in the platinum and gold mining sectors, this time in Zimbabwe. The Associated Mineworkers Union of Zimbabwe will begin negotiating salary increases in November, according to Bloomberg News. The union is said to be requesting as much as a 50% increase in salaries. The white metal now trades $1405. In other global economic news, China’s service sector PMI, as reported by Markit/HSBC came in at 52.4 last month, down slightly form an August reading of 52.8. Third quarter earnings season kicks off after U.S. market close today but market participants will likely be unfazed unless there are some significant surprises. Have a great day!
Monday, October 7, 2013
The “whatever” mentality regarding the congressional standoff in Washington D.C. is slowly shifting to a nervous laughter as we head into the second week
The “whatever” mentality regarding the congressional standoff in Washington D.C. is slowly shifting to a nervous laughter as we head into the second week of the partial U.S. government shutdown and a looming debt ceiling that some in the U.S. government are touting as a somewhat apocalyptic situation. However ridiculous this whole thing is becoming – barricades around war memorials and the shut-down of websites including the AMBER alert system – there is a thick aura of uncertainty surrounding what the D.C. loony bin is going to do next and that is leading to some choppiness in the markets. The US government jobs data that was supposed to be released last Friday wasn’t and with the lack of important economic data it is hard to believe the FOMC will be able to make a sound decision regarding the future of QE. Then again, they don’t have to make that decision until December so let’s just hope this whole thing ends before then, or we’ll have more important problems to worry about. The PGM half of the metals complex continues to be rather muted in response to the ongoing labor tensions in South Africa between Amplats and the AMCU. The unions head, Joseph Mathunjwa, is not at all pleased with how recent negotiations, regarding the “retrenchment” of some 3,300 workers, have been going and may call for more strikes that would spill over into other parts of the mining industry. Platinum is little changed from Friday’s close at $1384.70 while palladium has dipped slightly below the $700 mark. There is not much on tap from an economic data perspective so market participants can continue to watch the happenings in Washington that are starting to look like a bad episode of the Jerry Springer show…ok, maybe not that bad. Have a great day!
Thursday, October 3, 2013
The roller coaster ride continues in the precious complex as gold reverses course from yesterday’s rally on the back of less-than-inspiring ADP private sector payroll data. The yellow metal closed the previous session at $1320.70, fueled in part by ADP data that showed just 166,000 private sector jobs were added in September. While that number was up from August it still missed the estimated mark of 180,000 jobs. US Dollar weakness, due to the ongoing battle in Washington that has led to a partial shutdown of the US government, was also a factor in yesterday’s rally. However, this morning’s report that initial jobless claims rose by just 1,000 last week has market participants scratching their heads as they gear up for tomorrows NFP numbers. Gold is now trading $1310. The precious complex should find some downside cushion as the government shutdown drags on and the country inches ever closer to the debt ceiling. Have a great day!
Wednesday, October 2, 2013
Uncertainty is the theme surrounding commodity and equity markets as the US Government shutdown continues into day 2.
Uncertainty is the theme surrounding commodity and equity markets as the US Government shutdown continues into day 2. Global equity markets initially shrugged off the shutdown and moved higher yesterday but the potential of a longer shutdown is causing some fears in the markets today. Longer US shutdown will certainly impact the US GDP and the fragile housing and labor market recoveries. The US ADP nonfarm employment data showed a creation of 166k jobs which is less than the expected 180k. The US dollar weakened against the Euro on the employment news and the European Central Bank keeping interest steady at 0.50%. The gold and silver market recovered most of yesterday’s losses as short covering caused markets to move higher. Banks and Hedge Funds who sold into the technical breach in the gold market yesterday quickly covered their position as gold crossed back above $1300. We expect more technical trading from the banks and funds to cause short term volatility in the commodity markets. In the long run, we see US government shutdown to end in days and not weeks and Fed tapering to be back in the discussion for the December meeting. The recovery in Asia and Europe will offset any lingering effects of the US shutdown. We believe that gold will continue to drift lower towards the end of the year and the gold/silver ratio to tighten back to the historical norm. Platinum and palladium will most likely trade in a range as industrial demand will well supplied. We are advising our industrial customers to buy metals except gold on the dip and buy gold as needed. Thanks and have a wonderful day.