Inflation and geopolitical unrest gird metals

The world turned up the heat on a recalcitrant Muammer Gaddafi over the past 24 hours and the results were fairly obvious in various markets overnight as well as this morning. The West deployed military assets around Libya, Russia and Turkey objected to any kind of intervention, the United States and Austria joined the growing list of countries that have frozen Libyan and/or Gaddafi assets. More than $30 billion in such funds were placed “on ice” by U.S. authorities yesterday.

Meanwhile, “The Colonel” himself was…still in a state of Charlie Sheen-like denial, saying that his “people love him, they really love him.” Whether or not the man receives an Oscar or a well-placed cruise missile remains to be seen, at this point. Saudi stock markets fell 7% today as the threat of social unrest-related contagion loomed fairly large in the MENA area.

Global economic growth is not however seen as being materially affected by the jump in oil prices. Any such impact would be on the order of a roughly 0.3% “shave” in global GDP growth rates, and it would come only after a full year of oil prices remaining at or above current levels (not a very likely scenario, some say). In any case, this is way to start the month. Beware the Ides of March (two weeks to go).

Momentum players and technically-driven trades have once again made their presence quite obvious in gold, even more so in silver, and are pushing hard in their quest for an additional buck (or five) in the kitty. A quick glance at precious metals spot bids this morning showed gold ahead by $10 (near $1,421 the ounce) silver up by 39¢ (at $34.37) and platinum rising by a whopping $34 (to $1,827 per ounce). We could close the books on the first day of March at new records and then take aim at the figures mentioned in yesterday’s article, if ‘the Force’ stays with the longs.

Palladium advanced $13 to reach $809.00 per ounce, while rhodium remained unchanged at $2,380.00 per ounce. The noble metals’ complex was driven higher by the aforementioned type of profit-seekers who were seen attempting to reverse last week’s sharp declines in values, amid perceptions that GM’s February auto sales –showing a hefty 45% (!) gain imply that the US automotive sales scene is rolling along quite nicely, and that such statistics will lead to increased demand for the Pt/Pd/Rh group of metals.

Reports that certain metals are now being stockpiled over in Switzerland (signaling oversupply) failed to make the news radar this morning. Toyota is expected to post a 28% sales gain, while Ford Moto Co. and Honda are each anticipated to report gains on the order of 10%, and Chrysler could show a 5% rise in the number of wheels being moved off of dealers’ lots last month.

Such profit-seeking (and not too much in the way of profit-taking, as yet) have made for a situation wherein metals, certain agricultural, and, of course, energy items, outperformed equities, bonds and the greenback for a third month (commodities returned 3.8% last month). Naturally, such a showing comes complete with fresh forecasts of…more of the same to come.

Not everyone’s crystal ball, however, shows the same rosy future. Australia today forecast commodity prices to “ease” as it sees the mining and farming sectors ratcheting all types of output higher. Meanwhile, the country Down Under stands to benefit to the tune of a quarter trillion dollars’ worth of annual export income derived from such commodities….

Bullishness in gold is nearing 80% and it remains at a lofty and nearly unanimous 90%+ in silver. Meanwhile, we continue to see gold ETF leakage of bar tonnage, as opposed to fresh, sizeable inflows amid current (rather conducive to growth) conditions. Precious metals giant Heraeus referred to the fifth consecutive monthly outflow of gold from the SPDR Gold Trust (GLD) in February, by wondering “whether this is an appetiser for larger profit-taking to come is not clear, but the question is fairly important as this largest ETF, the SPDR Gold Trust, holds almost seven times more metal than the second largest one."

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