Copper futures at lowest since October 2011 on demand concerns

            Copper futures fell to the lowest level since October 2011 during European morning hours on Thursday, as global growth concerns continued to weigh on the industrial metal.

Copper is sensitive to the economic outlook because of its widespread uses in construction and manufacturing.

On the Comex division of the New York Mercantile Exchange, copper futures for May delivery traded at USD3.153 a pound during European morning trade, down 1.1% on the day.

New York-traded copper prices fell by as much as 3.5% earlier in the session to hit a daily low of USD3.065 a pound, the weakest level since October 20, 2011.

Concerns over the global economic outlook intensified earlier in the week after the International Monetary Fund cut its 2013 forecast for global growth to 3.3%, down from its January projection of 3.5%. 

Gold futures down again; market remains vulnerable to further selling

                      Gold futures were lower during early European trade on Thursday, re-approaching a 27-month low hit earlier in the week as sentiment on the precious metal remained bearish.

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery traded at USD1,374.35 a troy ounce during European morning hours, down 0.6% on the day.

Comex gold prices fell by as much as 2% earlier in the session to hit a daily low of USD1,337.25 a troy ounce. Comex gold fell to USD1,322.25 an ounce on Tuesday, the weakest level since January 28, 2011.

Gold prices were likely to find support at USD1,322.25 a troy ounce, the previous session’s low and near-term resistance at USD1,395.05, the previous session’s high.

Gold prices have lost nearly 13%, or almost USD200 per ounce, since last Friday, as investors exited the market after prices broke below key support levels. 

Oil falls despite Beige Book report

                      Crude Oil futures traded lower in the early part of Thursday’s Asian despite some decent comments in the Federal Reserve’s Beige Book report published Wednesday. 

On the New York Mercantile Exchange, light, sweet crude futures for June delivery dropped 0.53% to USD86.50 per barrel in Asian trading Thursday after sliding 2.24% to USD87.04 a barrel on Wednesday in the U.S. 

Crude Oil and other riskier assets such as U.S. stocks plunged after the International Monetary Fund pared its outlook for global economic growth this year. 

On Wednesday, the IMF trimmed its 2013 world economic growth forecast to 3.3%, down from a January projection of 3.5%, while the multilateral lending institution's 2014 growth forecast fell to 4.0% from 4.1%. 

Later Wednesday, the Fed’s Beige Book report, which surveys the central bank’s 12 regional districts, indicated those regions have seen modest economic improvement since late February. 

Gold Miners Lose $169 Billion as Price Slump Adds ETF Pain

                                Gold producers, ignored as global stocks rebounded in the past two years and investors turned to exchange-traded funds that track bullion, face closing mines or shutting themselves down after the metal’s worst slump in three decades this week made 15 percent of miners unprofitable.

Barrick Gold Corp. (ABX) and Newmont Mining Corp., the world’s two largest producers, are among companies in the FTSE Gold Mines Index (FTMIGMI) that have collectively lost about $169 billion in market value since bullion peaked in 2011. Gold equities are trading at the lowest level relative to gold in at least 20 years after the metal’s 14 percent plunge so far in April.

“Any company that hasn’t been focused on efficiencies and costs for the last three to four years is going to fail in this market,” said Gavin Thomas, chief executive officer of Sydney- based gold miner Kingsgate Consolidated Ltd.This month’s futures price drop to as low as $1,361.10 an ounce brings gold closer to the global average production cost of about $1,200 an ounce, according to Nomura Holdings Inc. That puts producers such as Canada’s Semafo Inc. and Golden Star Resources Ltd. at risk of mine closures or “financial distress” if prices fall to that level, according to Macquarie Group Ltd. Tanzania, Africa’s fourth-largest gold-producer, said a sustained slump may shut mines there.

Gold’s 9.3 percent plunge on April 15, the biggest one-day drop in New York since March 1980, couldn’t have come at a worse time for gold companies.

Rising Costs

Despite 12 consecutive years of rising gold prices, shareholders have lost faith in the gold-mining industry, which has seen soaring production costs and made money-losing acquisitions. Investors have instead flocked to exchange-traded funds, or ETFs, such as the SPDR Gold Trust, which are backed by bullion and track the price of the metal.

The FTSE gold index, which tracks 27 of the largest producers, has plunged 58 percent to yesterday since bullion hit a record on Sept. 6, 2011. Over the same period, the MSCI All Country World Index (MXWD), which tracks 2,431 global stocks, climbed 22 percent.

“Gold companies have underperformed the gold price for more than the past 20 years, quite simply because they make as little money today for shareholders as they did at $300 an ounce,” Brenton Saunders, who helps manage about $600 million at Taurus Funds Management Pty., said from Sydney.

Starved of fresh capital, smaller mining companies that carry out exploration and development were already being squeezed before this week’s price crash. There are too many companies in need of financing and there will be production stoppages as some of them cut expenses, said John Ing, CEO of Toronto-based brokerage Maison Placements Canada Inc.

Geopolitical Risk

“If the price stays where it is, you will see a slew of closures of smaller, non-producing companies and the majors pull way back on any new projects,” said Ken Hoffman, a Princeton, New Jersey-based analyst at Bloomberg Industries.

Companies relying on a single asset and those in Africa, already struggling with deteriorating geopolitical risk over the past year, will find it more difficult to convince banks to fund projects, Tyler Broda, a gold analyst at Nomura in London, said by phone from London on April 16. Tanzania, where Barrick and South Africa’s AngloGold Ashanti Ltd. operate, is concerned that continued price weakness will discourage investment and lead to mine closures, Ally Samaje, acting minerals commissioner, said April 16.

At current prices, “probably 15 percent of global gold miners from our calculations would be under water at the moment,” Broda said. He predicts gold could fall to as low as $1,000 an ounce this year. Gold for June delivery gained $1.70 cents to $1,384.40 an ounce at 5:47 p.m. in Sydney.

Mine Review

“Golden Star, like other gold producers, is assessing the effect of the fall in the gold price on our budget and production plan,” President and CEO Sam Coetzer said in an e- mail. “We are also reviewing the discretionary capital component of our capital plan for 2013.”

Semafo, which mines in West Africa, may close its Samira Hill mine in Niger, Macquarie analysts said in an April 16 note. Sofia St. Laurent, a spokeswoman for Semafo, didn’t immediately respond to phone calls and an e-mail seeking comment. Omar Jabara, a spokesman for Newmont, said the Greenwood Village, Colorado-based company will continue to rein in costs.Andy Lloyd, a spokesman for Barrick, declined to comment on whether the company’s African Barrick Gold Plc unit could shut mines in Tanzania.

Spending Cuts

Some other miners are already contemplating cost reductions. Petropavlovsk Plc, a London-based miner of gold in Russia, may suspend inessential investment plans and cut exploration spending should prices stay weak, Chairman Peter Hambro said April 16 in an interview.

AngloGold Ashanti Ltd. is reviewing each of its 20 operations “to extract operating efficiencies,” said Alan Fine, a spokesman for the Johannesburg-based company. South Africa’s Harmony Gold Mining Co. said its average so-called all- in cost of production in the six months ended Dec. 31 was about $1,446 an ounce.

“We are currently in the next planning cycle and will obviously take the new gold price level into account,” Harmony CEO Graham Briggs said in e-mailed comments.

To be sure, even if prices don’t recover, some companies will continue to be profitable. Barrick’s all-in production cost, which includes everything from exploration to waste-rock removal expenses, was $972 an ounce in the first quarter. Newmont’s all-in cost was $1,192.

Top Pick

In Australia, low-cost producers including Beadell Resources Ltd., Regis Resources Ltd. and Newcrest Mining Ltd., the country’s largest producer, are likely to withstand the rout better than their local peers, said Vincent Pisani, an analyst at Shaw Stockbroking Ltd. in Melbourne.

Goldcorp Inc., the biggest producer by market value, is the “top pick” among North American producers because it has a strong balance sheet and low-cost assets, Macquarie said. Yamana Gold Inc., New Gold Inc. and Agnico-Eagle Mines Ltd. could also withstand lower prices without changing their plans or depleting lines of credit, analysts at RBC Capital Markets said April 15.

Furthermore, gold may still rebound from current levels. Bullion for immediate delivery will average $1,717 this year, according to the mean of 29 analyst’s estimates compiled by Bloomberg.

“We’ve historically seen breaks like this in precious metals and we’ve always seen it bounce back,” Maison’s Ing said. “There is no certainty the price that we see today is going to be the price that we are going to see next year or the year after.”

Growth and Demand Outlooks Weigh On Crude Oil

             Crude oil continues its decline this morning trading at 86.75 down by 23 cents as growth and recovery downgrades weigh heavily on the commodity. U.S. crude futures for May delivery closed down by $2.04 at $86.68 a barrel, down by 2.3% on Wednesday. Crude prices were down on concerns over weak global oil demand after the IMF cut its global growth forecast to 3.3%. The International Energy Agency said that falling crude prices was evidence that the oil market is well supplied, putting additional pressure on prices. However, crude inventories unexpectedly fell by 1.2M which prevented further downside in prices.

Oil prices have fallen almost 7 percent in the last five days on expectations of sluggish demand from the U.S. and China, the world’s two biggest economies. The price of Brent crude oil has tumbled 18 percent from a peak of $118 a barrel in February to below $98 this week. Weaker-than-expected economic data from the U.S. and China over the past week have heightened concerns that the global economic outlook is not as strong as many expected just a couple of months ago. But the fall in oil prices provides a silver lining, say analysts. Yesterday the US Fed Reserve released its “Beige Book” which reviews the state of the US economy and is a guide for the FOMC. The assessment released Wednesday said overall activity is growing at a moderate pace, which is better than the report six weeks ago in which the economy was growing at a “modest to moderate” pace. According to the report, most of the nation saw increases in manufacturing, though the labor market was either unchanged or improved slightly. There were reports of hiring in manufacturing, residential construction, information technology and professional services.

Oil’s fall comes as part of a wider commodities rout triggered by data released Monday showing growth in China, the world’s second-largest oil consumer, had slowed unexpectedly in the first three months of 2013.Brent crude futures for June delivery hit a low of $96.75 before paring losses to trade at $97.32 early on Wednesday, down 37 cents. Brent stretched its losses into a seventh session – its longest losing streak since October last year.

Oil prices were also under pressure given risk of political uncertainty in the euro zone, where Italy’s divided parliament begins voting for a new state president on Thursday, a crucial step towards resolving the stalemate since the inconclusive election in February and to carry on with fiscal reforms.Investors seemed to shrug off news of Shell declaring force majeure on Nigerian Bonny Light crude oil exports. The company said it was shutting down the 150,000-barrel-per-day Nembe Creek pipeline in Nigeria for repairs.The stronger US dollar is also weighing on prices as equity markets fell around the globe yesterday, traders moved to the safety of the US dollar.

Natural gas prices also eased to trade at 4.189 giving up 19 pips this morning as the dollar strengthened as traders sold off to book profits, with natural gas breaking above the 4.20 mark activating sell orders. U.S. natural gas ended higher as chilly weather forecast boosted the heating demand and supported prices. Inventories today are expected to be positive which could push prices down. However prices are likely to move in a range before the data. - FxEmpire

Gold and Silver Continue to Snowball

                   Gold remains weak on Wednesday morning dropping over $7.00 to trade at 1379.95 while silver tumbles farther to trade at 23.425 down by 20 cents. Precious metals remain weak, unable to regain footing.  On Tuesday gold futures managed to score their first gain in 3-sessions, but wounds from the fierce selloff that dragged prices down by more than $200 per ounce in two days will take time to heal.

Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, declined to 1,145.92 tons, as on April 16 as the fund continues to selloff holdings deepening the wound. Silver weakening as precious metals decline and industrial metals tumble has seen silver holdings of ishares silver trust, the largest ETF backed by the metal, declined to 10,451.01 tons, as on April 15. The meteoric rise of exchange-traded gold products over the past decade has now exposed thousands of small investors to losses after years of gains in an asset previously the preserve of eccentrics, collectors and central banks.

Industrial metals prices rose yesterday helped by a weaker dollar and as upbeat housing data from the U.S. propped up hopes of more solid metals demand growth, prompting some buying after a sharp fall in the previous session, but is giving back those gains in this morning session as the US dollar gains some traction.

The US dollar and the Japanese yen dropped on Tuesday, as investors sold the safe-haven currencies and bought gold and US stocks a day after heavy selling in the yellow metal.

The dollar index fell to 81.781 in Tuesday afternoon trade from 82.318 on late Monday.

IMF in its World Economic Outlook said that the euro zone remains the weakest part of the global economy and warned that a long period of low growth in the currency area would weaken the potential for expansion in the neighboring economies of central and Eastern Europe, as well as further afield. Five years after the financial crisis started, the International Monetary Fund (IMF) has issued a warning about the increasing fragmentation of the global economy, the very visible split between the dynamism of emerging countries, the US’ resistance and the persistent weakening of the eurozone.

In figures, the grim picture painted by the IMF in its 16 April report, look like this: global GDP estimations have been lowered and it is now predicted to be 3.3% this year, compared with the 3.5% predicted in January. To no one’s surprise, the eurozone is still a major cause of concern for the Washington-based institution – which holds its general assembly this week. In the short term, risks mainly stem from the evolution of the eurozone, in particular “inconclusive elections in heavily indebted Italy and the problematic Cyprus bailout,” the IMF wrote.

Precious metals and industrial metals are expected to remain weak as traders are worried about the upcoming FOMC meeting in the US as speculators are thinking that the central bank might slow its asset purchase program. - fx Empire