wow that Gasoline chart is looking strong, the whole energy sector has performed well.
with refineries, they take forever to build, a few years at least. Gold is tricky no question.
India accounts for 20% of global gold consumption and the earthquake has put a damper on that demand,
you may see selling into the market to raise money as well
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COMMENT: Silver showing follow through weakness overnight as COMEX warehouse
stocks rose above 100,000,000 oz. Fund selling also continued. In pgm's
traders maintained a wait and see attitude after Gokhran, the Russian
precious metal and gem repository said that pgm export quotas would be
signed in the next two weeks. Yesterday, precious metals futures were lower
across the board. Gold was able to hold above Tuesday's contract and 16-
month nearby futures lows while silver broke Tuesday's lows and is now down
some 16 cents since last Friday. Reportedly, gold consumption in for Taiwan
in January dropped 39% below a year ago. Lower gold prices Tuesday reflected
news that that South Africa's AngloGold, the world's largest producer, would
hedge 50% of its production forward over the next five years. In addition,
South Africa's Harmony Mining Co. reported that it would by one million
ounces worth of puts. In the past, Harmony was considered a non-hedger.
Recent price weakness may suggest an increased focus a weakening demand
prospects for India, the world's largest consumer of gold and largest
importer of silver, following the recent earthquake in that country.
Friday's CFTC report showed a still large non-commercial net short position
of over 50,000 contracts as of January 30 for COMEX gold. For the week, this
net short position dropped by almost 4,000 lots. This is still the largest
speculative net short position for COMEX gold since September 1999, prior to
gold's sharp recovery from 20-year price lows. Short covering price rallies
are expected to be constrained by weak investor demand and ample supply from
the official sector. Sentiment is turning more negative along with the
supply and demand outlooks suggesting a move down to the 20-year lows set in
August 1999 at $252.50.
India, the world's largest consumer of gold accounts for over 20% of world
gold consumption. Financial distress, as a result of the earthquake, is
expected to reduce demand for gold jewelry and possibly trigger dis-hoarding
of gold in that nation. In comparison, gold demand in Turkey dropped off
sharply following that nation's August 1999 earthquake. Reportedly, Gujarat,
where the earthquake occurred, makes up about 10% of total gold consumption
and 30% of gold imports in India. Ahmedabad, Gujarat's largest commercial
city and the main hub of Indian gold imports was expected to be impacted for
at least a month. In addition, gold demand in India had started to slow last
year due to the dollar's strength against the rupee and fewer auspicious
dates for weddings. For the first nine months of 2000, the World Gold
Council estimated a 5% year-on-year decline in Indian gold demand.
Continued fund and technical selling was noted in the silver market today. A
large increase in COMEX silver stocks last week, suggesting increased COMEX
deliveries, has added some negative sentiment. Silver prices could also be
impacted by the negative demand implications of the earthquake in India. In
addition, production data continue to show year-on-year increases in Mexico
and Peru, the world's two largest producers of silver. For all of 2000,
Peru's silver production for 2000 rose 10% above 1999. In November, Mexico's
silver output registered a 40% increase over November 1999. Assuming a soft
landing for the global economy, we view downside potential for the silver
market as limited from the $4.50 level. Another supply deficit situation and
reduced Chinese sales should stabilize prices. A recovery above the $5.00
level is not expected, as higher prices could trigger selling by China.
Platinum and palladium continue to await fresh news from Russia regarding
pgm exports. Platinum prices will be especially sensitive to how quickly
2001 export quotas/licensees will be issued by the Russian government and
Russian marketing patterns, along with the trend in palladium prices. The
chairman of Rosbank reportedly said Russia will issue pgm export quotas in
February and that an exact forecast is difficult as the government is trying
to squeeze a whole range of issues into one decree. Surprisingly, platinum
has struggled to gain upside momentum from carryover support from palladium
even though palladium's widening premium should encourage increased
substitution of palladium with platinum by the auto sector in catalytic
converters. |
