Saturday, August 28, 2010

Commodity Trends: Bernanke Perks Up Commodities August 28, 2010

The Speech by Federal Reserve Chief Ben Bernanke boosted market sentiments in equities and major commodity markets last week with base metals, energy and precious metals gaining as a result. Gold continues to be supported by safe-haven demand and is with in close range of its all time high recorded in June.

ICEX plans to trade gold coins

Indian Commodity Exchange (ICEX) plans to start trading a gold coins futures contract to cater traders in smaller cities in association with the Bombay Bullion Association in the next two months, the head of the bourse and trade body officials said on Friday. "We are in the process of creating a platform for major refiners on which they can offer their products. We expect more Indian refiners to participate in the delivery process," Sanjay Chandel, CEO of ICEX, told Reuters on the sidelines of a gold conference.

The exchange at present offers futures trading of two gold contracts of 1 kilogram and 100 grams denominations. India is currently in its festival season, which will peak in November during Dhanteras, the single largest gold-buying day, when demand tends to spike, limiting the supplies of the yellow metal and pushing premiums higher
Coffee May Decline to $1,515

Robusta coffee, down 12 percent this month in London trading, may fall a further 5 percent to $1,515 a metric ton, according to technical analysis by Sucden Financial using Fibonacci levels. The London coffee futures have fallen 50 percent may target near $1,515,according to Brenda Sullivan, head of research at the brokerage firm in London.

Food inflation falls
Food inflation fell for the second straight week to 10.05 per cent in the week ended August 14, lower than the 10.35 per cent year-on-year increase recorded in the week ended August 7.

The softening in food inflation is being attributed to a drop in prices of vegetables, including potatoes and onions. Annual fuel prices during the period increased 12.57 per cent, the same level of annual rise reported in the earlier week, data released by the Ministry of Commerce and Industry, on Thursday, showed


Gold prices continue to be bullish on weak economic data and benefited from fears of double dip recession looming ahead as durable goods orders and home sales data suggested faltering US economic recovery.

US Gold prices hit a high of $1244 on Thursday but subsequently declined on Friday on positive sentiments created by Ben Bernanke’s speech. Gold Futures December moved to $1237. The yellow metal has recovered in a short time after hitting a low of $1160 on June 18 and is on track to gain 5% this month.

Gold is moving closer to its all-time high, while silver prices saw their all-time high in the Indian market on Thursday. In Mumbai, silver prices went up by Rs 500 to close at Rs 30,760 per kg.

Internationally, silver was trading at $19.10 an ounce. Its highest price was seen on May 3, 2008, at $20.815. In India, the biggest gold user, demand almost doubled in the first-half on increased jewelry purchases and investments, the council said Aug. 25. Imports by the country this year may equal 2009’s level as early as this month because of “robust” demand, according to GFMS.

Purchases in the first half were 348 tons, compared with 559 tons in 2009, according to council’s data.

Bullion demand increased 36 percent in the second quarter as investors boosted purchases of gold-backed funds and pushed up prices to a record during Europe’s sovereign-debt crisis, the World Gold Council said onAugust 25. Investors bought 291.3 metric tons of the metal in exchange-traded funds, or ETFS, the second- highest quarter on record, the producer-funded group said. The ratio of gold to silver -- how many ounces of silver are needed to buy an ounce of gold -- slipped to its lowest since early August at about 65 as the white metal became increasingly expensive compared to gold.
Going ahead gold is likely to track equities and global recovery concerns for cues even as emerging market demand continues to be strong. US Gold spot has support at $1220 levels while December Futures has support at $1225 levels.MCX October Gold has risen to 18894 in a bullish trend.

Crude Oil
Crude oil has climbed from recent weakness on improved US economic outlook and positive sentiments created by Ben Bernanke’s speech. October contract at Nymex rose to $75.17 rising for the third day last week on Friday while rising equities provided firm support. Sources also pointed to short covering ahead of the weekend with three tropical systems churning in the Atlantic Ocean also helping lift crude oil futures that had dropped to an 11-week low under $71 a barrel intraday on Wednesday.

U.S. crude for October traded as low as $72.04 and reached a $75.54 peak in post-settlement trading on Friday.Volume was heavy, with more than 900,000 lots traded with an hour left in post-settlement trading, up sharply from Thursday's 784,091 lots traded and well above the 30-day average of 585,267.

Decline in new US weekly claims for jobless benefits and weak dollar supported the energy complex.
Front-month crude prices finished $1.71, or 2.33 percent, higher for the week, breaking a string of two straight down weeks. The oil market was consolidating a recovery from Wednesday's $70.76 intraday low, which was weakest front-month price since the $70.75 low struck on June 8.

Oil markets were eyeing a string of tempests in the Atlantic, putting some storm premium into the market, sources said, though on Friday the storms were not expected to threaten to the energy infrastructure in the Gulf of Mexico.
MCX September crude rose to 3551 while Nymex October corntract has support at $72 levels.

Base metals

Base metals led by Copper rallied last week on gains in Wall Street and positive sentiments generated by Fed Reserve Chief Ben Bernanke. LME Copper rose to $7459 levels on strong equities and lesser than expected drop in US GDP growth forecast for Q2 at 1.6% from 2.4% previously. LME Copper ware house stocks have fallen 25% since Mide February with LME aluminium stocks also falling. LME Zinc rose to $2102.50, tin hits high of $21750 as against $20350 on Thursday on tighter Indonesian supplies. LME Copper prices were ruling at $7200 levels in the beginning of the week. Copper was supported by speculation that demand gains in China is set to continue.

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Tuesday, August 3, 2010

Bullion, coin dealers call for investigation of U.S. coin blanks supply - Silver News

Witnesses before and members of the U.S. House Subcommittee on Domestic Monetary Policy have urged Congress to direct the U.S. Mint to buy U.S. manufactured blanks for gold and silver bullion coins and discontinue the practice of using Australian-made blanks.

Meanwhile, the Director of the U.S. Mint Edmond Moy told the subcommittee that, if the Mint can begin production by September, "we will be able to produce about 830,000 one-ounce silver American Eagle coins to meet collector demand for this product in the remaining months of 2010."

Moy told the subcommittee uncertainty surrounding traditional investments and inflation concerns "drove investor demand for bullion precious metals in all forms to exceptional highs in 2009."

As a result, the agency did not mint and issue what Moy called "the very popular" American Eagle One-Ounce Proof Gold and One-Ounce Proof Silver Coins in 2009.

Although bullion coin demand seemed to be subsiding earlier this year, in May, the Mint experienced an increase in orders for silver bullion coins to over 3.6 million coins. In fiscal year 2009, bullion coins sales reached an all-time high of $1.7 billion, nearly 80% above the sales of fiscal year 2008.

While Moy said the Mint had no difficulty in obtaining gold, silver and platinum in raw materials form, "We experienced considerable difficulty in getting this raw material fabricated into planchets by our vendors in sufficient quantities to meet public demand."

As a result, sales of discretionary gold and silver proof and uncirculated coins where hurt because they use the same planchets as their mandatory bullion coin counterparts. Moy told the committee that all incoming planchets were diverted "to fulfill our statutory obligation to meet public demand for bullion coins."

Moy said he was encouraged that the House Subcommittee on Domestic Monetary Policy "is exploring the possibility of an amendment that would afford the Secretary [of the Treasury] the authority to approve the minting and insurance of American Eagle Silver Proof and Uncirculated Coins even when we are unable to meet the public's demand for the bullion versions of these coins."

"Indeed, such a change would be one of the most positive customer satisfaction measures that could be taken to benefit your coin collecting constituents without having an effect on Americans' ability to acquire investment-grade silver bullion.'

However, he added, "such a change needs to be enacted soon."

Meanwhile, Moy told the subcommittee, "Compared to their face values, never before in our nation's history has the government spent as much money to mint and issue coins and, with regard to the one-cent and five-cent coins, never before has the nation spent more to mint and issue a circulating coin than its legal value."

"This problem is needlessly wasting hundreds of millions of dollars, he declared.

The Department of Treasury is seeking the authority to determine the materials for all coin dominations. Moy said "we are proposing to save millions of dollars per year-over one billion dollars in the next 10 years-by determining the materials for the other coin dominations."

Subcommittee Chairman Rep. Melvin Watt, D-North Carolina, said, ‘We need to evaluated whether it would be a good idea to divert refined gold and silver from the bullion program to meet demand for numismatic products and what impact this would likely have on the supply of metals for bullion products."

Ranking Subcommittee Member Rep. Ron Paul, R-Texas, said he opposes the Mint's current efforts to gain greater power in determining the composition of circulating coinage.

"We could not maintain the gold standard nor the silver standard. We could not maintain the copper standard, and now we cannot even maintain the zinc standard," Paul noted. "Paper money inevitably breeds inflation and destroys the value of currency."

Michael B. Clark, president of the Diamond State Depository, a subsidiary of the Dillon Gage group, one of 12 authorized purchasers of American Eagle Silver Bullion Coins, told the subcommittee, "The Mint's inability to keep pace with demand has had a negative and unnecessary impact on the investment and hobby community."

He added that the Mint's reliance on just three suppliers for planchets or blanks "is flawed. Moreover, there is some irony in the fact that while Congress requires the Mint to procure the gold for its Eagle bullion coins from newly mined U.S. deposits, the Mint then ships that gold to Australia to be made into blanks. Then, the fabricated blanks are later shipped back to the United States for the production of coins."

"The efficiency of this system is obvious, and it seems that we should be able to create jobs at home by sourcing these blanks in the United States and eliminate the costs of inter-continental shipping," Clark noted.

Clark, who is a past chairman and currently a director of the Industry Council for Tangible Assets, asked Congress to take the following actions:

1. Authorize the Mint to produce both proof and uncirculated versions of the Gold and Silver Eagle Coins, regardless of the bullion coin demand requirements;

2. Direct the General Accountability Office to undertake a review of the Mint's blanks procurement process and seek GAO's recommendations on what can be done to improve it; and

3. Require the Mint procure the blanks for its bullion program from sources within the United States by no later than 2014.

The Industry Council also is asking Congress to produce a palladium bullion investment coin through the American Eagle Bullion Coin Program.

"Further, the introduction of a palladium coin may absorb some of the demand for the Silver Eagle, and reduce some of the Mint's production burden for that coin," Clark advised.

He also suggests a palladium bullion coin would create or maintain U.S. mining and refining jobs in Montana, New Jersey, California and South Carolina.

Finally, Clark urged Congress "to take swift action to protect consumers" from the increasing counterfeiting and subsequent marketing of counterfeit numismatic, rare and investment-grade level tender U.S. Coins.

See original source

July 2010 US Mint Silver Eagle Sales: Top 10 Month, Best July Ever

American Silver Eagle bullion coins turned in slightly lower numbers for July 2010 than the month before, according to the most recent figures released by the United States Mint.

While this may come as welcome news to collectors who have been hoping for a decline in the numbers to make way for proof versions, any celebration would be premature. True, sales of the strikes showed a drop of 20,000 units, but put in perspective, the decline is negligible.

Total sales for the month of July still came in at an astonishing 2,981,000. That amount was enough to cement the month as the best ever July since the debut of the coins back in 1986. In fact, it was a leap of 171,000 coins from the previous July record set just last year.

The month also ranks as the seventh best in history for American Silver Eagles. This distinction is not entirely surprising as 2010 has turned out to be a record year. As it stands right now, five of the top ten months for bullion coins have occurred this year.

Top Ten Silver Eagle Sales Months
1 December 1986 3,696,000
2 May 2010 3,636,500
3 January 2010 3,592,500
4 March 2010 3,381,000
5 March 2009 3,132,000
6 June 2010 3,001,000
7 July 2010 2,981,000
8 October 2009 2,939,000
9 July 2009 2,810,000
10 December 2009 2,773,500

2010 already ranks as the second best year ever with a total of 21,149,500 sold. This comes in behind 2009 which closed out at 28,766,500, but there are still five months left to go this year.

This is disheartening news for collectors of the numismatic proof and uncirculated versions. As the U.S. Mint is required by law to strike the bullion eagles to meet demand, the collector coins have been suspended indefinitely.

Collectors will recall with grief that the Mint did not produce any last year due to the rush on bullion, and it is appearing more likely that without Congressional intervention the same will happen in 2010. U.S. Mint Director Ed Moy recently testified before a House Subcommittee on the topic. He urged members to give the Treasury Secretary the discretional power to strike numismatic coins even if the Mint was not able to adequately meet bullion coin demand.

If Congress acts quickly and the waiver on bullion production is signed into law by President Obama, there still is hope for the proof and uncirculated coins. Moy indicated they could mint up to 830,000 of them this year, if they can start production by September. However, if Congress fails to act, the demand for the bullion coins may spell another year of cancellations.

For additional history, read last month’s report on sales.