Speculators seen leading commodities crash

By Sarah Turner and Michael Kitchen, MarketWatch

SYDNEY (MarketWatch) — Analysts offered a wide variety of reasons for Thursday’s plunge in commodities, but some agreed the main force behind the drop might simply be a matter of stampeding speculators.

“It all began with silver, which started falling sharply late last week when CME Group increased margin requirements on trades,” said BMO Financial Group Chief Economist Sherry Cooper, in a note Thursday.

Indeed, the CME’s repeated hikes to the silver-margin requirements sent the metal, which as of April 29 had risen nearly 60% for the year, tumbling, with benchmark silver futures losing more than 25% since then.
But a variety of other news, including a Wall Street Journal report that billionaire financier George Soros was selling off his holdings, helped the losses snowball, and on Thursday, silver fell 8% on the Comex division of the New York Mercantile Exchange, its largest one-day percentage drop since Dec. 1, 2008.

This touched off massive selling across the commodities complex.

“Silver really just burnt off in a big way and that fed through to other commodities,” said Michael Turner, strategist at RBC Capital Markets.

Oil (NEW:CLM11) was especially hard hit by Thursday’s follow-on crash, dropping as low as $99.35 during the North American session, its heaviest drop in percentage terms since April 2009. Crude futures continued to decline on Friday and were recently off over 4%. Read more on oil’s Friday drop.

Turner says that the dollar’s rise after the European Central Bank failed to signal further near-term interest-rate hikes early Thursday helped turn silver’s drop into a stampede out of almost all commodities. Read more about the European Central Bank


Independent oil trader and author Dan Dicker agreed, saying crude’s reaction to the drop was “great proof of just how much speculative money there was in the oil market.”

Noting that much of the drop included a large volume of margin selling, he added that the fall also showed “just how much stupid money there is in the oil game.”

But despite the speculative nature of the drop, analysts at Lloyds Bank said Friday that some economic fundamentals actually point to even lower prices for some commodities.

“Many of them have looked frothy for a while and have perhaps accelerated beyond the pace justified by the global recovery,” they said in a research note.

But they also added that “some perspective is required,” citing the fact that the Thomson Reuters/Jefferies CRB Index, which tracks global commodities prices, is “actually marginally below the levels of five years ago, so it’s hard to argue that commodity prices are headed for a massive decline given that global [gross

Ten common mistakes people make when buying gold

Buying gold has long been touted as a terrific way to diversify your investment portfolio and protect yourself against downturns in global currency values and financial markets. At first glance, the process seems simple enough. You just find a couple of coins that look good, fork over your cash, and store your loot in a safe, right? Wrong. There's much more involved in gold investing than browsing through a coin catalog and picking out your favorites. Unfortunately a lot of people actually take that approach-and end up losing quite a bit of money while doing so.

But you shouldn't let the fear of making mistakes prevent you from taking steps to solidify your financial standing. All you have to do is be aware of potential pitfalls so you can avoid them when the time comes to buy. Here are 10 of the most common mistakes to look out for prior to purchasing this precious metal.

1. Lack of knowledge. There is no excuse for being uninformed. As long as you have access to the Internet, you should be able to find out all you need to know about the basic ins and outs of gold investing. You should start by reading a glossary of terms related to this activity before moving on to articles and other resources so you know exactly what the experts are talking about.

2. Misunderstanding the value of gold. This mistake goes hand in hand with lack of knowledge. In order to invest wisely, you must understand how the metal-especially in coin form-derives its value based on things like history, scarcity, rarity, indestructibility, and global recognition as a desired commodity.

3. Indecision about your investment amount. People who are new to buying gold frequently make the mistake of either ordering too much or too little of the metal. If you buy too much, it defeats the purpose of diversifying your portfolio. If you buy too little, you're not doing enough to protect your other assets. Most experts agree that your coin holdings should equal from 5 to 30 percent of the combined value of the stocks, bonds, and mutual funds in your portfolio.

4. Expecting big short-term gains. Gold investing is not going to make you rich overnight, so if you're interested in short-term gains, you should check out other options. The point of putting your money into investment grade coins is to hold onto them for a long time while they appreciate in value.

5. Linking gold markets to the stock market. Some would-be investors are under the mistaken impression that gold prices are somehow linked to the stock market, and that fluctuations in one will lead to corresponding reactions in the other. But it's important to understand that the two markets are largely independent of one another, so your purchasing decisions shouldn't be based on illusory cause-effect relationships.

6. Substituting gold stock or ETFs for the physical metal. Buying gold to protect your assets against unstable market conditions, inflation, and other economic problems is a smart move-but only if you get the metal itself instead of stocks, exchange traded funds, or other unworthy substitutes.

7. Skipping Rare Certified Gold in favor of bullion. Not all gold investments are created equal. Bullion, for example, will not appreciate in value based on age, rarity, or other variables. It will only be worth what the commodities market dictates. By contrast, Rare Certified Gold coins that are held for many years can end up being worth far more than what their weight would command on the commodities market, since their value is driven by supply and demand.

8. Looking for cheap prices. Although getting a bargain is usually considered a good thing, that's not necessarily the case when it comes to buying gold. Abnormally cheap prices are typically an indication of inferior quality, and are therefore a clear sign to stay away-unless you don't mind getting stuck with something that you won't be able to resell when you need cash.

9. Working with multiple dealers.Because of the large sums involved in gold investing, it would be worth the time and effort to seek out a reputable dealer and stick with that person for each transaction you make. You will get to know and trust each other a bit more after every deal, which will in turn pave the way for discounts on bulk purchases and similar goodwill gestures.

10. Failure to understand premiums over spot. Buying gold coins always involves a dealer markup or premium. This is what you're expected to pay over the spot price, and varies from dealer to dealer. It's critical to have some knowledge of fair premiums over spot in order to be able to identify any good or bad deals that might come your way.

In order to make sound decisions when buying gold, it is imperative that you first learn all you can about gold investing. There are lots of factors that impact each transaction, so the more you know, the better your chances of being successful.
Courtesy : EzineArticles.com

Gold futures gain as much as $10 ahead of Fed

SAN FRANCISCO (MarketWatch) — Gold futures gained as much as $10 an ounce Wednesday as investors looked ahead to the Federal Reserve’s monetary-policy decision and Fed Chairman Ben Bernanke’s press conference due later in the trading day for clues on inflation.

“A weakening dollar and rising inflationary concerns have supported the recent rally in gold,” analysts at ICICI Bank said in a morning note to clients. “Investors are likely to look for further cues from [the] U.S. Fed meeting that concludes later today.”

Gold for June delivery (COMMODITIES:GCM11)  touched a high of $1,513.60 an ounce on the Comex division of the New York Mercantile Exchange, though it’s pulled back slightly to $1,512.40, up $8.90.
On Tuesday, prices closed lower for the first time in nine sessions.
The Federal Open Market Committee is scheduled to announce its rate decision at 12:30 p.m. Eastern time. It’s expected to stick to its target federal funds rate of between 0% and 0.25% and its goal of buying $600 billion in Treasury securities by the end of June. Read more about what’s expected from the Fed meeting

For the metals market, overall sentiment is “subdued” as traders await the Fed statement, “which will likely determine mid-term direction given recent dollar-related movements,” analysts at TheBullionDesk.com said in a report issued Wednesday.
At last check, the dollar index (BOARD:DXY) , which measures the U.S. currency against a basket of six rivals, traded at 73.717, down from 73.789 in late North American trading Tuesday. Read the currencies story.
In the short term, both gold and silver are “vulnerable to corrections given the scale of long exposure, particularly if the Fed signals an imminent start of monetary tightening,” they said.
But “we think the Fed is more likely to maintain its current stance,” they said. “And given the broader issues of inflation, heightened Eurozone debt issues and MENA [Middle East North Africa] unrest, we expect dip-buying to underpin precious metals and maintain the current uptrend.”
Silver for May delivery (COMMODITIES:SIK11)  was up 72 cents at $45.77 an ounce. The contract had closed lower on Tuesday to end an eight-session winning streak.
June palladium (NEW:PAM11)  was also up 65 cents at $756.35 an ounce and July platinum (NEW:PLN11)  tacked on $8 to $1,813.40 an ounce, but May copper (COMMODITIES:HGK11)  fell 4.95 cents to $4.27 a pound

Barrick buying Equinox Minerals for C$7.3 billion

NEW YORK (MarketWatch) — Canada’s Barrick Gold Corp. said Monday that it would buy copper miner Equinox Minerals Ltd. in a deal valued at C$7.3 billion, continuing the flurry of deal-making activity in the red-hot business of metals production.

Barrick Gold Corp. (NYSE:ABX)   (THE:CA:ABX)  will pay C$8.15 a share in cash for Equinox Minerals Ltd. (THE:CA:EQN)   (AUSTRALIAN:AU:EQN) , (PINK:EQXMF) , representing a 30% premium to the stock’s Feb. 25 closing price — the last trading day before Equinox said it would make a takeover bid for Canada’s Lundin Mining Corp. (THE:CA:LUN)   (PINK:LUNMF)

The acquisition of Equinox would add a high-quality, long-life asset to our portfolio and is consistent with our strategy of increasing gold and copper reserves through exploration and acquisitions,” Toronto-based Barrick Gold said.
U.S.-listed shares of Barrick Gold fell 4% in early trading on the New York Stock Exchange.
The deal comes after Chinese miner Minmetals Resources Ltd. bid C$6.3billion for Equinox Minerals on April 3, after which Equinox said it was approached by “a number of parties.” Adding to the rash of deals, Equinox in March reiterated its offer of C$4.8 billion for Lundin. See story about Equinox offer for Lundin.
As part of the agreement with Barrick Gold, Equinox said Monday it will withdraw its bid for Lundin.
Equinox shares rallied 11% in Toronto trading, while Lundin made fractional gains.
A closing date for the transaction between Barrick Gold and Equinox was not provided, but it’s expected to immediately add to Barrick’s earnings.
Barrick said it has sufficient cash resources and committed financing to fund the acquisition.
Financial advisers to Barrick were Morgan Stanley & Co. (NYSE:MS)  and RBC Capital Markets (NYSE:RY)   (THE:CA:RY) . CIBC World Markets Inc. (NYSE:CM)   (THE:CA:CM) , Goldman Sachs & Co. (NYSE:GS)   and TD Securities Inc. (NYSE:TD)   (THE:CA:TD)  acted as financial advisers to Equinox

Canadian stocks rise, paced by mining

Canadian stocks were mostly higher on Wednesday, paced by the nation’s mining shares.

The S&P/TSX Composite Index (THE:CA:$ISPTX)  was up 1.2% at 13,907.

The S&P/TSX Capped Diversified Metals & Mining Index (THE:CA:TTMN)  was up 3.15% at 1,463.

The S&P/TSX Composite Index (THE:CA:$ISPTX)  was up 1.2% at 13,907.

The S&P/TSX Capped Diversified Metals & Mining Index (THE:CA:TTMN)  was up 3.15% at 1,463.

Among significant mining movers, Quadra FNX Mining Ltd. (THE:CA:QUX)  was up 10.2% after the company reported strong first-quarter production results, while Pan-American Silver (NASDAQ:PAAS)   was up 3.7% after it said the Bolivian government’s move to seize control of a number of privately operated mines has not affected the company’s San Vicente mine

First Quantum Minerals Ltd. (THE:CA:FM)  was up 7.2%; Thompson Creek Minerals (THE:CA:TCM)   was up 3.8%; Grande Cache Coal Corp. (THE:CA:GCE)   picked up 4.2%; and Taseko Mines Ltd. (THE:CA:TKO)   rose 3.3%.

Gold stocks also moved higher on the session, as gold for June delivery (COMMODITIES:GCM11)  added 80 cents to trade at $1,499.90 an ounce on the Comex division of the New York Mercantile Exchange.

Royal Gold (THE:CA:RGL)  was up 2.7%; Osisko Mining Corp. (THE:CA:OSK)  added 3%; and Franco-

Nevada Corp. (THE:CA:FNV)  was up 2.4%.

In the energy group, Suncor Energy (THE:CA:SU)   was up 3.2%, while Cenovus Energy Inc. (THE:CA:CVE)   added 2.5%.

Among tech firms, Research In Motion Ltd. (THE:CA:RIM)   was up 2.4%, a day after the release of its Playbook computer tablet.

Commodities markets summary

A summary of trading in key commodities markets 

ENERGY
US oil rose on Tuesday and Brent reduced losses in volatile trade as a weaker dollar and a rise in equities markets lift prices that earlier slumped on concern over sovereign debt and uncertain demand prospects.
After tumbling below $120 a barrel for the first time in two weeks, Brent came back as US crude futures turned higher.
The expiring US front-month May contract posted the day's biggest gain, reversing after support firmed above last week's low trade of $105.31 a barrel.
Brent crude for June fell 28 cents to settle at $US121.33 a barrel, after slipping as low as $119.03.
Expiring US crude for May rose $1.03 to go off the board at $US108.15, bouncing early off a $US105.50 low.
US June crude rose 59 cents to settle at $US108.28, recovering after sliding to $US106.01, just above the contract's $US105.98 low from last week.

Brent's premium to the US June contract narrowed 87 cents to $13.05 a barrel, based on settlements, swinging in a range on Tuesday from $12.38 to $14.31.

Solid euro zone economic data helped the euro rebound against the dollar after its worst day in five months.

OPEC Secretary General Abdullah al-Badri, speaking at an oil and gas trade fair in Tehran, said he did not expect oil to fall below $100 this year, even though there was no shortage in the market.

US retail gasoline demand rose last week from the prior week, but high prices kept demand down versus year ago, MasterCard Advisors' SpendingPulse said in a report ahead of weekly oil inventory reports detailing US stockpiles and demand levels.

US crude oil stocks are expected to be up a seventh consecutive week, according to a Reuters survey of analysts on Tuesday. Gasoline stocks were expected to be lower, while distillate inventories were seen unchanged.

PRECIOUS METALS

Gold futures hit an all-time high above $US1,500 an ounce on Tuesday and silver surged on a combination of dollar decline, crude oil gains and worries about sovereign debt problems in Europe.
After being initially pressured by technical selling, bullion rose to a record for a second straight day on market jitters after Standard & Poor's on Monday revised the credit outlook of the United States to negative from stable.

US gold futures activity was quieter than usual as global stock markets steadied following the previous session's equity sell-off on S&P's move. The CBOE gold volatility index, a gauge of bullion investor anxiety, fell two per cent after surging to its highest level in four months on Monday.

US gold futures for June delivery settled up $2.20 at $1,495.10, having earlier hit a record $1,500.50 an ounce.

Spot gold gained 0.11 cents to $1,495.19 an ounce by 3:03 p.m (1903 GMT), bouncing off a high of $1,499.31. Bullion rose for a fifth consecutive session.
Gold benefited as a safe haven from economic uncertainty after fears mounted that Greece will have to restructure its debt, maybe as early as this summer, and S&P threatened to cut the United States' AAA credit rating on Monday.

Silver set a 31-year high of $43.92 an ounce, and was later up 1.3 per cent at $43.90.

Silver has outperformed gold this year, up more than 40 per cent so far against gold's 5 per cent rise. The gold/silver ratio slipped to a 28-year low below 35 on Monday.

Gold remained far below its all-time inflation-adjusted high, estimated at almost $2,500 an ounce, set in 1980, an era of Cold War tension, oil shocks and hyperinflation.

Among other precious metals, platinum slipped 0.4 per cent to $1,766.24 an ounce, while palladium dropped 1.3 per cent to $730.47.


INDUSTRIAL METALS

Copper rose close to one per cent, clawing back some ground after six straight sessions of losses, helped initially by the weaker dollar, then pushed to session highs after stronger-than-forecast US housing starts.

Investors remained nervous about debt problems in the United States and Europe, limiting the red metal's gains.

Three-month copper on the London Metal Exchange traded last traded at $9,340 a tonne at 1649 GMT (1249 EDT) from $9,225 at the close on Monday.
US copper futures were up 3.60 cents, or 0.86 per cent, at $4.23.30 per lb.

World markets bounced back from the previous session's trouncing after better-than-expected earnings results from investment banking bellwether Goldman Sachs.

In the metals markets, expectations of a supply deficit this year and an optimistic long-term demand outlook provided support.

Increasing copper inventories, however, have raised concerns about some short-term demand weakness from China.

Inventories of copper on the London Metal Exchange rose 175 tonnes to 451,950 tonnes, its highest since June, the latest data showed. Inventory levels have been on the rise since December.

Copper was in a $21.50 contango, which is a discount for cash over three-month material, versus
December's $70 backwardation, which is a premium for cash over three-month copper, the latest data showed, reflecting a dearth of nearby demand.

Tin traded at $32,600 from $32,350, while zinc changed hands at $2,330 from $2,325, Monday's close.

Inventories of zinc on the London Metal Exchange rose 21,300 tonnes to 785,600, the most recent data showed, and are now within 2,000 tonnes of 2004 peaks.

Battery material lead traded at $2,552 from $2,528. The price of metal for tomorrow versus next day delivery traded as high as $10, indicating a lack of immediately available supply.

Aluminium recovered to $2,682 from $2,674.

Nickel was bid at $25,500 from $25,500.

Traders ballpark new gold ceiling

Gold has breached yet another psychological barrier in its steady march upward. But with all the hot money moving into silver, there are conflicting views about when it may reach the next one, even as confidence in the U.S. dollar continues to erode.
As the key gold futures contract temporarily passed US$1,500 an ounce Tuesday, traders quickly started eyeing the next round number. The thinking is that if investors get used to the idea of US$1,500, a rapid move up to US$1,600 could be made in short order. That view was supported by Standard & Poor’s decision to turn negative on its outlook for U.S. debt.
“It does seem that once you break through a particular level of resistance, it brings new money into the equation and allows continued strength in the gold price,” said Chuck Jeannes, president and chief executive of Goldcorp Inc.
But recent history suggests breaking through has not been that easy.
It took extended periods for gold to get through prior psychological levels like US$1,000 or US$1,200. In each case, it flirted with those highs for many months before finally pushing through.
“If people say US$1,500 is going to be the top, a lot of traders start filling their sell orders there and it becomes a self-fulfilling prophecy,” said Aaron Fennell, commodity futures specialist at ScotiaMcLeod.
“But I think in this case, traders aren’t looking at US$1,500 as the top of the market at all.”
But in trying to predict future performance, he pointed out a broader truth: that despite gold’s spectacular performance, there has been surprisingly little interest in it.
Over the last several months, it is silver, and not gold, that has captured the imagination of investors and gone on an amazing run. Since the start of October 2010, silver has climbed roughly 97%. Gold, by comparison, is up 14%.
“Gold has just grinded higher slowly. It hasn’t really had that much enthusiasm around it,” Mr. Fennell said.
It was the same story on Tuesday. While gold drew a lot of headlines for reaching a landmark price, the June contract ended the day below US$1,500 and up just 0.1% in total. By comparison, silver jumped another 2.2% to US$43.91, the highest closing price since the Hunt brothers tried to corner the market in 1980.
Looking back over the last decade, experts pointed out that gold has never had the kind of massive break-out that silver is experiencing now. Despite the general view that gold prices are “soaring”, the move upward has been quite orderly, with a new high being reached every year. Other commodities like nickel, uranium and potash have had much stronger upward (and downward) moves.
“That’s something I always point out to people who talk about gold being in a bubble. This has been a long-term move,” Mr. Jeannes said.
Given that fact, experts refuse to put too much emphasis on the move to US$1,500, and focusing on long-term fundamentals instead.
“It’s so sentiment-driven that you’ll just be pulling your hair trying to guess what it’s going to do next,” said Pawel Rajszel, an analyst at Veritas Investment Research who is more bearish than most of his peers.
Financial Post

Gold sends Canada stocks higher

Canadian stocks bounce back into the black; gold hits $1,500 mark

CHICAGO (MarketWatch) — Canadian gold miners helped lift the broader market into the black Tuesday as bullion futures advanced into record territory, hitting the key mark of $1,500 an ounce.
The S&P/TSX Composite Index   edged up 0.2%, or 28.9 points, to 13,731.3, swinging back into positive territory after a weak start incited by rising inflation worries.
Toronto’s main metals and mining index  advanced 1.8%, fueled by a 6% jump in shares of base-metals miner Teck Resources Limited . The Vancouver-based company on Monday reported better-than-expected revenue for the first quarter.

 

Also advancing, Canadian gold-mining giant Goldcorp Inc.’s   stock rose 0.5%. Gold for June delivery added $2.20, or 0.2%, to trade at $1,495.10 an ounce on the Comex division of the New York Mercantile Exchange. 

Canada’s energy sector also made a late-day comeback as oil futures turned higher after protests erupted in Nigeria, weakening the U.S. dollar. Toronto’s main energy index   rose 0.1%, adding to the broader market’s gains.
Leading the pack, Calgary-based Suncor Energy’s stock added 0.8%, offsetting declines in shares of Canadian Natural Resources Limited   and Connacher Oil and Gas Limited , which posted losses of 0.3% and 1.4%, respectively.
Concerns of rising inflation pressured Canadian stocks at the market’s open, after Statistics Canada reported a 3.3% rise in inflation in the 12 months to March. The climb puts the country’s year-over-year inflation increase at its highest since September 2008.
The Canadian dollar   strengthened against its U.S. counterpart, rising 0.8% from Monday’s close. In early April, the Canadian loonie reached its three-year best against the U.S. greenback. On Tuesday, one U.S. dollar purchased 95.5 Canadian cents, down from 96.4 cents at Monday’s close.
The jump in the country’s Consumer Price Index, which is used as a gauge of inflation, rose from 2.2% in the 12 months to February.
Among other notable movers, Toronto shares of Research In Motion Limited    fell 2.2%. The Ontario-based BlackBerry maker released its new PlayBook tablet computer on Tuesday

Gold hits record at $1,500 an ounce

Gold futures hit the psychological mark of $1,500 an ounce on Tuesday, shaking off early weakness as the dollar sunk further. Gold for June delivery  GCM11 +0.24% wavered between small gains and losses earlier, but recently added $6.40, or 0.5%, to trade at $1,499.30 an ounce on the Comex division of the New York Mercantile Exchange. It earlier traded as high as $1,500, according to CME, an intraday record for the metal