Precious Metals

All that glitters...

When it comes to commodities priced "per ounce", the two most quoted products are silver, and of course gold. But in a broader context are these prices a lot or little? How do some other less known commodities stack up to the world's two most precious metals. Here are the prices for a wide universe of other compounds which are also priced on a "per ounce" basis...

UBS and Nomura have suggested that gold could rise next week as the Federal Reserve may announce further easing at the FOMC meeting – on Tuesday (11/12/12) and Wednesday (12/12/12). Nomura said it is worth considering whether the FOMC will announce further easing to replace so called ‘Operation Twist’. The research house noted that gold remains at the same level as during the October meeting, which suggests gold has not yet priced in any move by the FOMC – creating an opportunity for gold bullion buyers. Regardless of whether the FOMC actually eases at this point – Nomura thinks there is a non-negligible probability – gold is likely to rise. Therefore, Nomura expects gold to rise and prices in this probability as the December meeting approaches, just as gold rose when the September meeting was approaching.

Gold fell $3.10 or 0.18% in New York yesterday and closed at $1,693.60/oz. Silver climbed to $33.24 then slid to $32.51, but finished after an afternoon rally with a loss of 0.33%.

Gold inched down on Thursday, near the monthly low reached in the prior session under pressure from a stronger greenback as players await the European Central Bank rate decision at 1245 GMT and US Initial Jobless Claims at 1330 GMT.

Physical buying of gold bullion has increased on the dip, particularly in Asia, and many are seeing these levels as a floor for prices.

Sweeping changes are taking place at the state level as pension trustees and legislatures push for higher monthly contributions to pension plans, a later retirement age and lower annual cost-of-living adjustments for current and retired workers. Unions (those that don't make Twinkles, in any event), are making the concessions because they can see the future absent shared sacrifice — the termination of defined benefit plans in favour of defined contribution plans. Be that as it may, employee contributions are going up — a de facto tax hike. And this will work directly against any upturn in consumer spending when you consider that the state and local government sector employ nearly 20 million people or 15% of the national job pie. So we will have less government, fewer entitlements and more whisperings that it isn't just the $250,000+ high-income households that are going to experience tax increases and diminished disposable income growth. This is shared sacrifice. To think that the nation could have ever gone to war in Iraq and in Afghanistan under the Bush regime, putting our troops at great risk not to mention the emotional scars on their families, while here at home civilians would be allowed to enjoy tax cuts and a debt-financed consumption binge.... One has to wonder what events could provide positive momentum to GDP growth, push corporate earnings to record highs as the consensus predicts as early as next year, or generate any lasting inflation, for that matter.  It's the people that make these pricing decisions. Businesses can only price up to what consumers are willing to pay. It is households that determine whether or not we have inflation, not some bureaucrat in Washington who believes he has control over some printing press.

Sixteen years ago today, Alan Greenspan spoke the now infamous words "irrational exuberance" during an annual dinner speech at The American Enterprise Institute for Public Policy Research. Much has changed in the ensuing years (and oddly, his speech is worth a read as he draws attention time and again to the tension between the central bank and the government). Most critically, Greenspan was not wrong, just early. And the result of the market's delay in appreciating his warning has resulted in an epic shift away from those same asset classes that were most groomed and loved by Greenspan - Stocks, to those most hated and shunned by the Fed - Precious Metals. While those two words were his most famous, perhaps the following sentences are most prescient: "A democratic society requires a stable and effectively functioning economy. I trust that we and our successors at the Federal Reserve will be important contributors to that end."

It's around that time of day again - when precious metals are sold hard for whatever reason you care to come up with (collateral requirements, margin calls, alchemy perfected). However, today there is a more mundane reason: Goldman Sachs has suggested its clients sell Gold on the basis that the gold cycle will turn in 2013 thanks to improving US growth offsetting the need for further Fed easing. Of course, Goldman telling its clients to 'sell gold' means Goldman is...

During the its first term, the Obama Administration thus far has proven itself in favor of increased Government control and Central Planning. That is, the general trend throughout the last four years has been towards greater nationalization of industries (first finance, then automakers and now healthcare and insurance), as well as greater reliance on our Central Bank to maintain our finances.

With a late-day surge into the green for the S&P 500 futures on (as usual) absolutely no news at all (attributed to MSCI rebalancing) - that crossed the entire day's range in the space of 40 minutes, the Dow managed to just hold 13,000 and close green for the week. There was very significant volume and block size into the ramp as it pulled away from risk-assets as only a month-end move can magically achieve. In the same way as last Friday's close was just remarkably silly, today followed the same path - though we note that rates and credit were outperforming stocks most of the day and provided the target for the late-day surge. Once that target was closed, S&P 500 futures then melted-down around the close and after-hours. Utilities were the big winners on the week (+3.5%) as Financials and Energy lost around 0.7%. Silver crumbled to recouple with Gold (down around 2% on the week) while Copper gained 3%. Treasury yields steepened into the close with the 30Y pushing higher but ending -2bps (while the 10Y was -7bps). What a crazy stop-hunting, algo-driven, VWAP-reverting end to a week of political volatility.

Just like yesterday, as we head into the European close it seems someone somewhere has the dire need to reduce exposure to precious metals in a hurry... Collateral calls? Cash calls across month-end? Who knows?

As ever, it is very difficult to pinpoint exactly why gold and all precious metals fell in price. Interestingly, oil fell by even more - NYMEX crude was down by 1% and was down by more than 1.7% at one stage. The CME Group, which operates the U.S. COMEX gold futures market, said Wednesday's plunge in gold was not the consequence of a "fat finger" or a human error. The trading wasn’t even fast enough to trigger a pause on Globex, said CME.  One thing that we can say for certain was that there was massive, concentrated selling as the New York stock markets opened with some 35,000 lots sold which is equivalent to 3.5 million ounces and saw the price fall from $1,735/oz to $1,711/oz between 0825 and 0830 EST. One sell order alone was believed to be 24 tonnes or 770,000 troy ounces.  Incredibly there was 35% daily volume in just 60 seconds. The selling, like all peculiar, counter intuitive, sharp sell offs in recent months, was COMEX driven with COMEX contracts slammed leading to further stop loss selling. The selling may have been by speculative players on the COMEX. It may have been algo or computer trading driven or tech selling – although this is less likely. Informed commentators questioned the nature of the selling as a large institutional COMEX trading entity would normally gradually sell a position of this size in order to maximise profit.

Have you ever wondered what the typical Chinese gold investor thinks about our Western ideas of gold? We read month after month about demand hitting record after record in their country – how do they view our buying habits? Since 2007, China's demand for gold has risen 27% per year. Its share of global demand doubled in the same time frame, from 10% to 21%. And this occurred while prices were rising. Americans are buying precious metals, no doubt. But let's put the differences into perspective.

Currency wars are set to intensify as the US Senate is considering new sanctions against Iran that would prevent Iran getting paid for its natural resource exports in gold bullion. The new sanctions aimed at reducing global trade with Iran in the energy, shipping and precious metals sectors may soon be considered by the U.S. Senate as part of an annual defense policy bill, senators and aides said on Tuesday, according to Reuters. The sanctions would end "Turkey's game of gold for natural gas," Reuters reported a senior Senate aide as saying, referring to reports that Turkey has been paying for natural gas with gold due to sanctions rules. The legislation "would bring economic sanctions on Iran near de facto trade embargo levels with the hope of speeding up the date by which Iran's economy will collapse," the aide said. Last week Turkish Deputy Prime Minister Ali Babacan has revealed a critical detail about a widely discussed Turkey-Iran gold trade boom, disclosing that the Islamic republic was exporting gas to Turkey in exchange for payment in gold bullion. It is also reported that Iranians are buying Turkish gold with the Turkish Lira, which is deposited into their bank accounts in exchange for Turkey’s natural gas purchases, the deputy prime minister said at midnight Nov. 22 during a parliamentary session. Iran cannot transfer monetary payments to Iran in U.S. dollars due to U.S sanctions against the country’s alleged nuclear weapons program. Iran has been forced to shun the international financial system and the petrodollar as means of payment and turn to the international gold market to ensure it gets paid for its natural resources in order to prevent absolute economic collapse.

CME Group declared a force majeure at one of its New York precious metals depositories yesterday, run by bullion dealer and major coin dealer Manfra, Tordella and Brooks (MTB), due to “operational limitations” posed by Hurricane Sandy. MTB has “operational limitations” following Hurricane Sandy and can’t load gold bullion, platinum bullion or palladium bullion, CME Group Inc., the parent of the Comex and New York Mercantile Exchange, said today in a statement. MTB must provide holders with metal at Brinks Inc. in New York to meet current outstanding warrants in relevant delivery periods with compensation for costs, Chicago-based CME said. The CME said that MTB will not be able to deliver metal as the lower Manhattan company deals with "operational limitations" almost a month after the arrival of Hurricane Sandy. MTB is one of five depositories licensed to deliver gold against CME's benchmark 100-troy ounce gold contract, held 29,276 troy ounces of gold and 33,000 troy ounces of palladium as of Nov. 23, according to data from CME subsidiary Comex. In a notice to customers on Monday, CME declared force majeure for the facility, a contract clause that frees parties from liability due to an event outside of their control.