Wa Wa Woes
By Jon Nadler
Jul 22 2008 9:04AM
www.kitco.com
Good Morning,
Dogged by additional financial market worries the dollar fell to 71.88 on the index and traded near 1.593 against the euro. This was enough of a slide to prompt fresh buying from the gold trading crowd - a group already showing longs significantly ahead in numbers on the open interest tally. Oil prices did not advance significantly and were steady near $131 as tropical storm Dolly was expected ( but not guaranteed) to avoid hitting oil installations in the Gulf of Mexico later tonight or tomorrow. Geopolitics fell somewhat silent as Iran was taking its time dissecting what appeared to be an offer it can't refuse - one that worked for Libya and N. Korea in past crises. The bright news from the region was that Iraq appears to want U.S. forces out by the end of 2010, thus adding a boost to Sen. Obama's plan to do the same roughly within the same timeframe. The White House dismissed the 'timetable" label as probably "poor translation."
New York spot bullion opened with a $6.20 gain this morning, quoted at $972 per ounce, as participants focused on the woes of WaMu and Wachovia as they struggle to navigate through the mortgage storm. As mentioned late last week, a spate of earnings (make that losses) results from various financial firms has markets on edge again this week and market watchers on night patrol trying to ascertain when and if a corner has been turned in the crisis or if the wall of worry is simply round at this time. Silver added 20 cents to open at $18.61 while the noble metals recaptured a little more of their recently eroded values, with platinum gaining $25 at $1857 and palladium climbing $4 to $417 per ounce. Stock futures were showing signs of possible triple digit losses amid weak earnings outlooks among a wide variety of firms. Apple, UPS, Amex, TI, UPS, and the aforementioned Wachovia and WaMu were under the microscope as the day commenced. Treasury and Fed talk were once again in high gear this morning, with Mr. Paulson expressing confidence that the U.S. is on the 'right path' to end market disruptions and the housing maelstrom, but at the same time asking the American public to be patient as the game of "Operation" continues, and needs a very steady hand. The Fed's Mr. Plosser is also to be heard from as the day progresses.
Here is something of a cautionary tale from the back pages of Kitco's site. Our base metals section reveals a very interesting picture or the path that one shiny metal has taken over the years. Nickel -whose prices quintupled in just over three years' time, shows what happens when hyper-high prices engender demand destruction and consumer reluctance. Caveat Speculatores. Never mind that the East Asian economies are expected to grow at slightly above 7% this year - the lowest in five.
Bloomberg bring us the tale of the nickel buyers that aren't:
Nickel prices may average as much as 46 percent lower this year as steelmakers increased production of low-nickel content products, said Jindal Stainless Ltd., India's largest stainless steel producer. Nickel will average between $20,000 and $25,000 a metric ton this year compared with an average $37,089 a ton last year, said Arvind Parakh, a director at the New Delhi-based company. The metal is headed for a second straight annual drop, after last year's 21 percent decline as stainless-steel mills resorted to products containing less nickel. The use of nickel in making stainless steel may fall 9.5 percent this year, metals research firm Heinz H. Pariser said July 9.
"Stainless steel customers are holding back their purchases to watch if prices will fall further," Parakh said in a phone interview in New Delhi today. The share of low-nickel-content stainless steel has increased to 37 percent of the total output for the alloy, up from 25 percent three years ago, Parakh said. Last year, global nickel production was 1.43 million tons, compared with demand of 1.33 million tons, said Adam Rowley, an analyst at Macquarie Group Ltd. in London. China accounts for a quarter of the global demand, he said. "This year there will be a slight oversupply" at 1.45 million tons compared with an expected demand of 1.44 million tons, he said.
Goldman Sachs Group Inc. reduced its nickel forecasts for this year through 2010 because of surplus supply. Prices will average $24,522 this year, 15 percent less than the previous estimate, the bank's analysts said in a report published last month. They cut the 2009 forecast by 34 percent. Nickel for three-month delivery on the London Metal Exchange traded at $20,600 a ton."
Mr. Paulson's "strong dollar is important" and Mr. Plosser's "Rate hikes will likely need to begin soon" may dent the Wa-Wa gold rally today, but let's see how it all unfolds. Them's fightin' words.
Happt (Careful) Trading.
Jon Nadler
Senior Analyst
Kitco Bullion Dealers Montreal
|
