Strength In Precious Metals Likely To Linger Into Early 2011

METALS OUTLOOK:

31 December 2010, 3:00 p.m.
By Debbie Carlson
Of Kitco News
http://www.kitco.com/


(Kitco News) -- The precious metals rally is likely to continue into the first week of 2011 as the fundamental supports for the markets – concerns of Eurozone debt, fiscal and monetary stimulus in the U.S. and currency considerations – will remain steadfast.

While some market watchers warn that the potential for profit-taking in January is possible, many say strong demand under the market will limit significant losses and won’t change the long-term bullish trend.

Friday, February gold on the Comex division of the New York Mercantile Exchange settled at $1,421.40 an ounce up 2.96% on the week. On the year, nearby gold futures gained 29.79%.

Comex March silver settled at $30.937 an ounce, a gain of 5.49% on the week. Nearby silver futures gained 83.9% on the year. Although gold made record highs in 2010, silver remains more than 35% below its nominal high of $50 an ounce set in 1980, Gold Core said.

Platinum and palladium futures also saw sharp gains this year. Nearby platinum futures gained 20.6% this year and nearby palladium futures rose 96.48%.

Gold Core said gold’s firmer close for the year is the 10th consecutive year of rising prices. In U.S. dollar terms it rose 28%, while it gained 34.5% in sterling and 38% in euro terms.

“This shows how the price of gold is not rising per se rather fiat currencies are losing purchasing power and being devalued internationally. This increases the attraction of precious metals and hard assets that are finite and cannot be debased as inflation hedges – especially gold and more volatile silver,” they said.

Commodities in general saw a strong rally into the last few weeks of the year, spurred on by hopes of economic strength and thus the need for resources. Metals like copper, silver and the platinum group metals rose sharply – with copper making record highs – bringing gold along for the rally.

“The wind is at silver’s back. When there’s good (economic) news, it runs up because of the feeling that demand will be higher. When there’s bad news, people run to it for flight to safety,” said Bob Haberkorn , senior market strategists, Lind-Waldock.

Haberkorn said silver’s rise through $30 an ounce was “huge” for the metal’s continuing rally. He said next week’s goal for silver bulls is for the grey metal to start building a base at the $30 area. That will give it a shot to trade up to $32 quickly, he added.

Tom Pawlicki, precious metals analyst at MF Global, said he has a neutral-to-positive outlook for gold into the first week of the New Year. He said he expects traders will want to add to winning positions of 2010. Resistance for February gold futures on the Comex division of the New York Mercantile Exchange is at the high of $1,432.50 an ounce made Dec. 7.

Haberkorn said February gold has resistance at $1,420 and sees support at $1,394-95. If prices allow a move back that far, that’s a good level to add to positions, using market stops for protection, he added.

Next week brings one of the more important economic reports, the December unemployment data, due for release Jan. 7. After November’s lower-than-expected jobs growth, analysts are keen to see if that figure was an outlier or the start of a trend. A bearish figure could support gold prices.

One event to watch for in the early weeks of January is commodity index rebalancing which usually takes place in the first two weeks or so of the New Year. The major commodity indexes like the GSCI and the CRB will readjust the weightings of the various commodities in the indexes during that time and traders who follow the indexes will need to adjust. Depending on what those weightings are, it can sometimes lead to temporary caps or floors for individual markets.

Peter Thomas, director of business development at PFG Precious Metals, said don’t rule out the chance of a price pull back in early January simply on profit-taking once traders are back at their desks. There’s been absolutely no resistance,” because of the light trading volumes common around this time, he said. He’s still positive on precious metals, especially as gold and silver act as currencies, rather than shiny objects to stick in a drawer. “The entire game has changed,” he said.

Furthermore, he said, now with the International Monetary Fund finished with its gold sales there aren’t any large apparent sellers to keep a cap on prices. His outlook for gold for 2011 is for it to go sideways to higher, with prices trading between $100 on either side of current values. The physical market has been quiet during the holidays, as is normal, he said, but also partially because of the East Coast snow storm has limited movements to vaults. Product is getting sold, he said, but transfers to vaults will need to wait until roads are cleared.

By Debbie Carlson of Kitco News dcarlson@kitco.com

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Odyssey Comments on WikiLeaks Revealed Cables About Black Swan Shipwreck Coins

by The Web on December 31, 2010
in Coin Press Releases, Odyssey Marine Exploration, Shipwreck Coins

Odyssey Marine Exploration, Inc. (NasdaqCM: OMEX) a pioneer in the field of deep ocean exploration, was named in several U.S. State Department cables obtained by WikiLeaks and furnished to the media worldwide. [Coin Collecting News editor: read about the WikiLeaks and Black Swan.]

Some of the released cables suggest that the State Department offered special assistance in the “Black Swan” case to Spanish officials in exchange for assistance in acquiring a French painting confiscated by the Nazis during World War II and now controlled by Spain.

The cables indicate that the U.S. Government also provided confidential documentation on Odyssey to Spain. Other State Department cables contradict Spain’s claims and support Odyssey’s previously stated version of events relating to the company’s activities in Spain, including the HMS Sussex project and the boarding of Odyssey’s vessels.

“While we are obviously concerned about these implications regarding the 'Black Swan' case, we are attempting to obtain additional information before taking any specific actions. I have personally sent a letter to the Secretary of State, Hillary Rodham Clinton, requesting additional information and a review of the position taken by the U.S. in the ‘Black Swan’ legal case,” stated Greg Stemm, Odyssey CEO. “The possibility that someone in the U.S. Government came up with this perfidious offer to sacrifice Odyssey, its thousands of shareholders, and the many jobs created by the company in exchange for the return of one painting to one individual is hard to believe. The WikiLeaks cables clearly show that we have worked cooperatively and transparently with both Spain and the State Department for many years, in spite of claims to the contrary. That fact makes the revelations all the more disappointing. The cables also make us wonder what other agreements may have taken place between U.S. Government officials and Spain regarding the amicus brief filed in support of Spain’s position in the ‘Black Swan’ case.”

“We’ve wondered why the United States changed its long standing position on sovereign immunity, which prior to this case was consistent with U.S. law, international law and U.S. naval regulations that in order for a foreign country’s ships and cargo to be immune from the jurisdiction of the U.S. courts they must be engaged in military, non-commercial activities,” stated Melinda MacConnel, Odyssey Vice President and General Counsel. “These released cables do call into question the motivation behind the amicus brief filed by the Executive Branch supporting Spain in the ‘Black Swan’ case.”

Additional cables released support Odyssey’s statements that, contrary to allegations of certain Spanish officials, the company always cooperated with the Spanish Government and that permits from the Spanish government were granted for work on the HMS Sussex project. The cables also demonstrate the obstructionist activities carried out by certain Spanish officials who had personal reasons for trying to prevent Odyssey from working on the Sussex.

These obstructions took place even though Odyssey has an exclusive contract for the archaeological excavation of this UK sovereign immune warship (which was on a strictly military mission when it sank in 1694 off the coast of Gibraltar). Odyssey filed an affidavit in 2007 with a chronology of Odyssey’s interactions with the Spanish Government since 1998. It can be accessed at http://shipwreck.net/pdf/ExhibitE.pdf. The document contains entries that are corroborated by information in the State Department cables, which directly contradict claims by some Spanish officials and the Spanish media.

About the “Black Swan”

• In May 2007, Odyssey announced the discovery of the "Black Swan," a Colonial-period site located in the Atlantic Ocean which yielded over 500,000 silver coins weighing more than 17 tons, hundreds of gold coins, worked gold, and other artifacts. Odyssey completed an extensive pre-disturbance survey of the "Black Swan" site, which included recording over 14,000 digital still images used to create a photomosaic of the site.
  
• The coins and artifacts were brought into the United States with a valid export license and imported legally pursuant to U.S. law. Odyssey brought the artifacts under the jurisdiction of the U.S. District Court by filing an Admiralty arrest action. This procedure allows any legitimate claimant with an interest in the property to make a claim.
  
• The Kingdom of Spain filed a claim to the treasure alleging that the coins originated from the Nuestra Senora de las Mercedes, a Spanish naval vessel which sunk in 1804. Spain claimed that it owned all of the coins and that the treasure was immune from the jurisdiction of the U.S. Court under the Foreign Sovereign Immunities Act (FSIA). Although it has not been conclusively proven the recovered cargo came from the Mercedes, Odyssey presented clear evidence to the trial court (including the ship’s manifest) that shows the primary purpose of the Mercedes’ last voyage was commercial in nature and the vast majority of coins on board were owned by private merchants, not by Spain. The United States filed an amicus brief in the case changing its previous position and supporting Spain in the “Black Swan” case by setting forth a re-interpretation of the language in the Sunken Military Craft Act (SMCA) to allow government owned vessels on commercial missions to enjoy sovereign immunity.
  
• A number of individual private descendants (whose ancestors were transporting goods on the Mercedes) as well as the country of Peru have filed claims in the case.
  
• Without conducting a hearing, the district court sided with Spain and ruled that the treasure should all be turned over to Spain. The case is currently on appeal at the Eleventh Circuit.

For more information on the "Black Swan," visit www.shipwreck.net/blackswan.php.

Odyssey’s significant legal filings in the "Black Swan" case can be viewed at http://www.shipwreck.net/blackswanlegal.php.

About Odyssey Marine Exploration, Inc.

Odyssey Marine Exploration, Inc. (NasdaqCM: OMEX) is engaged in the exploration of deep-ocean shipwrecks and uses innovative methods and state-of-the-art technology to conduct extensive search and archaeological recovery operations around the world. Odyssey discovered the Civil War era shipwreck of the SS Republic® in 2003 and recovered over 50,000 coins and 14,000 artifacts from the site nearly 1,700 feet deep. In May 2007, Odyssey announced the historic deep-ocean treasure recovery of over 500,000 silver and gold coins, weighing 17 tons, from a Colonial era site code-named "Black Swan." In February 2009, Odyssey announced the discovery of Balchin's HMS Victory. Odyssey also has other shipwreck projects in various stages of development around the world.

Odyssey offers various ways to share in the excitement of deep-ocean exploration by making shipwreck treasures and artifacts available to collectors, the general public and students through its webstore, exhibits, books, television, merchandise, educational programs and virtual museum located at www.odysseysvirtualmuseum.com.


Odyssey's operations are the subject of a Discovery Channel television series titled "Treasure Quest," produced by JWM Productions. The 12-episode first season aired worldwide in 2009.


Following previous successful engagements in New Orleans, Tampa, Detroit, Oklahoma City and Charlotte, Odyssey's SHIPWRECK! Pirates & Treasure exhibit is currently on display at the Maryland Science Center in Baltimore. Additional information is available at http://www.mdsci.org/.


For details on Odyssey's activities and its commitment to the preservation of maritime heritage please visit www.shipwreck.net.

Odyssey Marine Exploration believes the information set forth in this Press Release may include "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. Certain factors that could cause results to differ materially from those projected in the forward-looking statements are set forth in "Risk Factors" in Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2009, which has been filed with the Securities and Exchange Commission.

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2011 is the Year of the Precious Metals Junior Miners

By James West
Dec 31 2010 10:30AM
www.midasletter.com




With gold and silver prices both boiling ferociously into record territory repeatedly throughout the last half of 2010, the outlook for 2010 looks even more bullish for the monetary metals. Forget the perennially fallacious predictions of the financial mainstream. There’s nothing but higher prices for both these metals on the horizon.

The reason is elementary. With the United States firmly entrenched in its own death spiral financing, whereby it has no choice but to continuously prop up its crumbling economy with monthly injections of increasingly abundant and therefore declining in value paper dollars as the only means to generate big numbers in the stock market, gold and silver will rise.

Even if all of the gold ounces purchased, hoarded and fabricated into jewelry each year were replaced by new discoveries, both gold and silver would keep rising, simply in relative value to the U.S. greenback.

Gold is finishing up 2010 with its strongest year on year price increase since the decade-long bull market first picked up a head of steam in 2001 with a gain of 28.8 per cent.

Silver, however, was a brighter star, having finished the year up over 80% since its 2009 close of $17 an ounce. Closing 2010 at over $30 an ounce, it has been an even better performer over the last ten years, now up over 600% as compared with gold’s almost 500% increase in the same period.

The less well-known precious metals, which also qualify as both precious and money, palladium and platinum, are also both stellar performers in the last year, having risen by 95% and 15% respectively.

But even copper has set new records this year, and consensus estimates point to that trend continuing into 2011 and beyond. Gold Fields Mineral Services predicts copper will reach CA$11,040 per tonne by 2015.

Buying the physical metals is obviously a safe bet going into 2011. Since the United States leadership lacks both the intellectual capital and the moral fortitude to responsibly manage its currency and its economy, investors around the world will succeed handsomely just exchanging their U.S. paper money for precious metals.
But the real money in 2011 is going to be made in the junior mining companies who will be the source of replacement ounces for all of the major mining companies who need to pay a premium for advanced discoveries that are needed to their much larger valuations.

In the period from the beginning of 2010 to the end of 2010, there were no less than 520 stocks on the precious metals-heavy TSX Venture exchange that returned over 100% in value within the 12 month period. No other class of public company equity even comes close, with most other sectors performing as net losers in the same period. No other exchange can demonstrate anywhere near that number of stock doubles within a single sector.

The TSX Venture composite index shot up an incredible 48% in 2010, which makes it one of the world’s best performing stock exchanges for the year. Compare that performance to the measly 17.85% offered up by the Dow Jones Industrials or the paltry 12.6% delivered by the S&P 500.

Its not just the level of performance that is enriching investors. On December 17 the TMX Group announced that Toronto Stock Exchange and TSX Venture Exchange together established a new trading volume record yesterday, December 16, 2010. Year-to-date combined volume traded was 166,174,821,823 shares, which surpassed the previous record of 165,351,274,278 set on December 31, 2009.

So the increased liquidity in these exchanges demonstrates that the trend for 2011 is clearly for more investment in natural resources and commodities.

The surge in commodity performance has also been a boon to the Canadian dollar, which rose to an 8-month high on the back of commodities prices.

Possibly the best trades investors can make in 2011 is to take their declining in value U.S. dollar holdings, use those to buy equities in the surging precious metals exploration stocks, and then sell them in Canadian dollars in a year’s time. Investors will capture not just the leverage to the prices of gold and silver offered by successful Canadian juniors. They will also benefit from the strengthening Canadian dollar versus the U.S. dollar as that trend continues into 2011.

Even oil is set to rise through $100 a barrel in 2011, which will hurt consumers at the pump. The best hedge against higher fuel prices is owning shares in publicly traded energy exploration stocks that can deliver 100% gains or better in a single year if they discover new reservoirs of hydrocarbons.

There is a time coming when the global investing public will suddenly clue into what is right now a not well known fact: the best place to make money in 2011 will be on the Canadian TSX and TSX Venture exchanges.

James West
MidasLetter.com
December 31, 2010

****

James West is the publisher of the highly influential and widely respected Midas Letter at midasletter.com. Midas Letter Premium Edition features 5 stock picks on the first Sunday of each month that are expected to double within 12 – 18 months in 9 out of 10 cases. The 2009 model portfolio performance was 237%. Until December 31st, subscribers to Midas Letter Premium Edition will enjoy it at an annual rate of $39 per month in perpetuity, and be entered to win US$100,000 in gold bullion. After January 1, the price is $49 per month.

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Gold Holds Firm Tone into Year-End

A.M. Kitco Metals Roundup:

31 December 2010, 08:04 a.m.
By Kitco News
http://www.kitco.com/


(Kitco News) - Comex gold futures are firmer in early morning trade Friday, as the yellow metal is set to end the year with a nearly 30% gain. Action is quiet, with many traders away from their desks this holiday week. But, renewed weakness in the U.S. dollar continues to underpin the bullish sentiment in gold.

February Comex gold last traded up $6.80 at $1,412.70 an ounce. Spot gold last traded up $7.43 at $1411.98.

The U.S. dollar index tumbled to its lowest level since December 14 Friday morning, as the euro/dollar climbed for the third session in a row, also pushing to its highest levels since mid December. Despite better-than-expected U.S. economic data on Thursday on the manufacturing and labor market front, the U.S. dollar failed to maintain any gains. The currency remains depressed by lower Treasury yields this week in the wake of several debt auctions, which drew strong demand.

Also, the U.S. dollar remains weighted down in the wake of the U.S. Federal Reserve's second round of quantitative easing this year, which was a major factor supporting the gold market. Traders and investors turned to gold as a hedge, or alternative currency, amid the U.S. central bank's actions. On-going accommodative policy by the U.S. Federal Reserve in early 2011 is expected to continue to underpin the gold market.

Many investment houses remain bullish on the yellow metal into 2011, with upside targets seen beyond the $1,500 per ounce level in the New Year.

Friday's session, however, will likely remain thinly traded, with little fresh fundamental news expected. The Feb gold contract is just $20 below its all-time high, set on December 7 at $1,432.50.

The London December 31 a.m. gold fix was $1,410.24 versus the previous p.m. fix at $1411.50.

On the economic calendar Friday, the December U.S. ISM NY business index is slated for release. The November data came in at 65.6. Looking ahead to Monday January 3, the December ISM manufacturing report is scheduled for release, following a November manufacturing PMI reading at 56.6.

Technically, February Comex gold futures are consolidating Friday morning, amid a potential bullish flag type of pattern on the daily chart. That is a bullish continuation pattern that would be triggered on a rally through the $1,415 level. Near term, the Feb gold contract is poised to retest the all-time high at $1,432.50. First resistance, ahead of the old high lies at $1,415/1,417. Farther out, the $1,450 round number will act as a psychological magnet for the market.

On the downside, Feb gold finds initial chart support at $1,401.50/1,400. Friday is the fourth session that gold has held above the $1,400 level in a row. If the $1,400 level were to fall, it would open the door for additional corrective declines toward next support at $1,372.60.


March silver futures rallied to fresh 30-year highs this week, as silver attracts buying interest as both an industrial and precious metal. With global GDP forecast around 4.4% in 2011, demand for industrial metals is expected to continue, which will continue to underpin demand for silver. Additionally, silver is viewed as a less expensive option to gold, from a safe-haven investing perspective.

March silver etched a new high on the chart this week at $30.930 an ounce, which will act as initial resistance ahead of the $31.000 target. On the downside, March silver finds support at $30.000/29.985. Additional technical chart support below that zone comes in at $28.810.

By Kitco News

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Gold Weakens as U.S. Economic Picture Brightened

P.M. Kitco Metals Roundup:



30 December 2010, 02:10 p.m.
By Kitco News
http://www.kitco.com/


(Kitco News) - Comex gold futures slid modestly lower Thursday, amid pre-holiday profit-taking and book squaring. Better-than-expected U.S. economic news sparked minor profit-taking in the gold, which has been a hedge on the uncertainty revolving around the U.S. economic recovery. Continuing weakness in the U.S. dollar failed to support gold in early afternoon trading.

Feb Comex gold last traded down 7.40 at $1,406.10 an ounce. Spot gold last traded down 5.86 at $1,405.78.

The U.S. Labor Department reported that weekly jobless claims fell by a larger-than-expected 34,000 to 388,000 in the week ending December 25. That marks the first time weekly claims have fallen below the 400,000 level since July 2008.

Another bullish surprise for the U.S. economy emerged Thursday when the Chicago business barometer, a survey of regional purchasing managers considered to be a leading national economic indicator, surged to its highest level in 22 year, at a 68.6 reading.

The U.S. dollar index probed lower for the second session in a row Thursday. This week's U.S. Treasury auctions attracted fairly strong demand resulting in lower yields, which has weighed on the currency. The dollar index is testing an important support zone around 79.40. A sustained push below that floor would open the door for a retest of the December 14 low at 78.819.

The December 30 London p.m. gold fix stood at $1,405.50 versus the previous p.m. fix at $1,412.50.

February gold futures reversed lower Thursday, but remained above the key $1,400 level for the third session in a row. Thursday's retreat failed to even test initial support from Wednesday's low at $1,401.50.

Near term technical support for Feb gold lies at $1,400.00. If that were to give way short-term, it would open the door to additional short-term sideways action and consolidation. Second support lies at $1,372.60. Resistance lies at $1,417.00, with a major near term target at $1,432.50, the all-time high scored on December 7.

After scoring a fresh 30-year high Thursday, March silver futures reversed to the downside to end slightly lower, down .191 at $30.513 an ounce. The market hit a new high early in the day at $30.930 an ounce, taking out the recent high of $30.750. The new high will now stand as initial near term resistance, ahead of the psychological significant $31.000 zone.

On the downside, March silver futures find first support at $30.145, with second support at $29.280.

March N.Y. copper rallied Thursday, in the wake of the unexpectedly strong U.S. economic data, which pushed copper to its second new record high price level this week.

A current tight supply picture, along with a forecasted supply deficit for 2011 had already underpinned the red metal in recent months, sending prices steadily higher since the summer months. However, Thursday's bullish U.S. economic news offered copper bulls additional impetus to buy.

Minor resistance lies at the 437.90 level, ahead of the psychological round number of 450.00. Short term technical support lies at 433.50. If that level cracks, it would open the door for a retest to second support at 420.40, the December 27 swing low.

By Kitco News

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Israel Releases Tower of David First Gold Bullion Coin

May 2010: The Israeli Coin and Medal Corp has issued the first gold bullion coin to be released from Israel. The coin is the first in a new annual series entitled "Jerusalem of Gold" and is dedicated to various historical landmarks throughout the Holy Land. This inaugural release has been struck to honour the famous Tower of David that overlooks Old Jerusalem.

Israel 2010 20 New Sheqalim Tower of David - Gold Brilliant Uncirculated

Since it's release in May 2010, the 20 New Sheqalim Tower of David gold coin has proven to be very popular with collectors across the globe, no doubt eager to own a piece of history. First release bullion coins tend to be like any other "first" on the collector market; whether it's numismatics, comic books, china or artworks - people scramble to own the first of any release as it will always be the most sought-after. The Tower of David gold coin has proven to follow suit, with the majority of it's 3600 mintage already exhausted across the primary market despite the price of 1 ounce of Gold being out of reach for a lot of collectors. Those discerning few who have managed to grab one of this historic issues will no doubt be holding on to them for a good long time.

The Tower of David as we know it these days is located on the site of the original tower of King David, however that tower was completely flattened many hundreds of years before the reconstructed tower was built. Since the reconstruction in the second century BCE, the tower has been destroyed and reconstructed a number of times due to various religious factions engaging in military attacks on the city in order to conquer it. These days the tower is regarded as a famous religious landmark and is visited by millions of people who come to the Holy Land of Jerusalem as tourists or pilgrims.

Each of these superb gold coins is struck from 31.10 grams (1 ounce) of 99.9% fine gold on a 32.00mm flan. The obverse design features the Lion of Megiddo motif, taken from an ancient seal found in the Northern Israeli community of Megiddo. This design will be common to all coins issued in the Jerusalem for Gold coin program. On the reverse is portion of the historic Tower of David as it overlooks Old Jerusalem. In the upper right is the face value of 20 Sheqalim, together with the year of issue (2010) as well as the Hebrew year (5771), with the 6-pointed Star of David below. Around the rim in the upper and right portions of the coin are the inscriptions for the country of issue and the coin specifications.

The coin is then encapsulated and housed within an official presentation case, accompanied by a Certificate of Authenticity.

Tower of David - First in the “Jerusalem of Gold” Bullion Series.

There is great excitement among both international and Israeli coin collectors now that the initial offering of the first Israeli Bullion Coin is actually taking place, under the auspices of the Israel Coins and Medals Corp. (ICMC)!

The Bank of Israel has issued and aptly named this series “Jerusalem of Gold”. The coins in the series are legal tender. Each contains 1 oz. of fine gold.9999 and has a face value of 20 New Sheqalim (NIS). These are the very first Israeli gold bullion coins, priced in accordance with the daily international price of gold, plus a reasonable mark up over gold.

These bullion coins are equally valuable as collectors items and as financial investments. The Gold Bullion Coins in the “Jerusalem of Gold” Series will depict a treasured historical site in the eternal city of Jerusalem. One coin will be issued annually, starting from 2010 with the “Tower of David”.

The reverse of each coin will depict the famous “Lion of Megiddo”, from archaeological excavations at this ancient Israelite city, and the design of this side will remain constant in the series.

ICMC is proud to give you a preview of the 2011 coin in the series, which will feature the timeless treasure, “The Western Wall” the last remnant of the Second Holy Temple.

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Strength In Precious Metals Likely To Linger Into Early 2011

METALS OUTLOOK:

30 December 2010, 12:41 p.m.
By Debbie Carlson
Of Kitco News
http://www.kitco.com/

(Kitco News) - The precious metals rally is likely to continue into the first week of 2011 as the fundamental supports for the markets – concerns of Eurozone debt, fiscal and monetary stimulus in the U.S. and currency considerations – will remain steadfast.

While some market watchers warn that the potential for profit-taking in January is possible, many say strong demand under the market will limit significant losses and won’t change the long-term bullish trend.


Commodities in general saw a strong rally into the last few weeks of the year, spurred on by hopes of economic strength and thus the need for resources. Metals like copper, silver and the platinum group metals rose sharply – with copper making record highs – bringing gold along for the rally.

“The wind is at silver’s back. When there’s good (economic) news, it runs up because of the feeling that demand will be higher. When there’s bad news, people run to it for flight to safety,” said Bob Haberkorn , senior market strategists, Lind-Waldock.


Haberkorn said silver’s rise through $30 an ounce was “huge” for the metal’s continuing rally. He said next week’s goal for silver bulls is for the grey metal to start building a base at the $30 area. That will give it a shot to trade up to $32 quickly, he added.


Tom Pawlicki, precious metals analyst at MF Global, said he has a neutral-to-positive outlook for gold into the first week of the New Year. He said he expects traders will want to add to winning positions of 2010. Resistance for February gold futures on the Comex division of the New York Mercantile Exchange is at the high of $1,432.50 an ounce made Dec. 7.

Haberkorn said February gold has resistance at $1,420 and sees support at $1,394-95. If prices allow a move back that far, that’s a good level to add to positions, using market stops for protection, he added.


Next week brings one of the more important economic reports, the December unemployment data, due for release Jan. 7. After November’s lower-than-expected jobs growth, analysts are keen to see if that figure was an outlier or the start of a trend. A bearish figure could support gold prices.


One event to watch for in the early weeks of January is commodity index rebalancing which usually takes place in the first two weeks or so of the New Year. The major commodity indexes like the GSCI and the CRB will readjust the weightings of the various commodities in the indexes during that time and traders who follow the indexes will need to adjust. Depending on what those weightings are, it can sometimes lead to temporary caps or floors for individual markets.


Peter Thomas, director of business development at PFG Precious Metals, said don’t rule out the chance of a price pull back in early January simply on profit-taking once traders are back at their desks. There’s been absolutely no resistance,” because of the light trading volumes common around this time, he said.


He’s still positive on precious metals, especially as gold and silver act as currencies, rather than shiny objects to stick in a drawer. “The entire game has changed,” he said.


Furthermore, he said, now with the International Monetary Fund finished with its gold sales there aren’t any large apparent sellers to keep a cap on prices. His outlook for gold for 2011 is for it to go sideways to higher, with prices trading between $100 on either side of current values.


The physical market has been quiet during the holidays, as is normal, he said, but also partially because of the East Coast snow storm has limited movements to vaults. Product is getting sold, he said, but transfers to vaults will need to wait until roads are cleared.





By Debbie Carlson of Kitco News dcarlson@kitco.com

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The Nosferatu Dollar

By Jon Nadler
Dec 30 2010 10:29AM
www.kitco.com




US weekly jobless claims filings fell under the pivotal 400,000 mark according to this morning’s Labor Department report. The drop in claims (by 34,000) brought the overall figure to the 388,000 level (the lowest since July) for the week ending on December 25. Although economists polled by Bloomberg had anticipated a filings figure closer to 415,000 based on the previous report hovering near 420,000, the data release did not appear to bolster the US dollar.

The US currency fell (by 0.26) to 79.50 on the trade-weighted index. This morning’s news reports alluded to the fact that the slippage in the greenback was mainly due to…improving economic conditions, as global investors seek higher yields. In other words, what’s good for the US must be even better for emerging markets.

Against this background, the precious metals complex bounced around within narrow price ranges and exhibited signs of some indecision (make that final book-squaring and fewer and fewer players on duty) during the first hour of trading, following a couple of sessions of outsized gains. Gold meandered between $1,405 and $1,410 while silver continued to edge closer to the $30.75 level as more hedge fund money was being thrown at it.

Platinum declined only marginally, trading near $1,755, while palladium maintained the recently achieved $800 mark on the offer side of spot dealings. Rhodium edged higher by $10 to trade at $2,360 per troy ounce. Crude oil fell 60+ cents to the $90.50 value zone ahead of the American Petroleum Institute’s inventory report due at 11 am this morning.

Perhaps the preoccupation with yield-chasing manifest among funds as we approach the 2010 finish line was intense enough to overlook the fact that a slowdown is underway in China. The country’s manufacturing activity fell to a three-month low as the central bank is grappling with uncomfortably high levels of inflation and has set out on a rate tightening course.

That said, the December contraction still comes at the tail-end of a fourth quarter which revealed the strongest manufacturing activity since the beginning of the year. “Slowdown” –when it comes to China can (still, but perhaps not for long) be interpreted…differently. The world’s second largest economy, its currency, and its central bank’s policies, bear close watching in the Year of the Rabbit coming up.

Something else that bears watching equally closely is the good old US dollar. The percentage of dollars in the global reserve system appears to have not undergone much of a change, despite its morticians’ calls for a sure-to-come demise in 2010. In fact, the greenback fell 2.5% during this year (compared to a loss of 10% in 2009) but managed to retain its dominant (62.1%) position in the global system. Bond fund giant PIMCO said yesterday that the US currency will retain its reserve status in 2011 as the alternatives offered by China or Europe are unsuitable due to immature bond markets.

PIMCO is not alone in betting on the odds that the American currency will remain the core one when it comes to global reserves. The lack of credible alternatives ensures such an outcome, despite concerns about the US deficits and monetary/economic policies that some have interpreted as deliberately intended to weaken the greenback.

“There is, I submit, no plausible [replacement] candidate” suggests Princeton University Professor Peter B. Kenen in a recent paper of his. Professor Kenen –as PIMCO- argues that neither the euro nor the yuan constitute valid substitutes to the dollar at this juncture.

What’s more, China would stand to sustain untold amounts of damage to its $2.5 trillion in reserves, if, in fact, one existing alternative (SDRs) would be resorted to and/or if the US dollar suddenly lost major value. The world holds some $9 trillion in reserve assets and the growth of such reserves has pushed them to record levels in 2010. Can the percentage held in dollar decline? Why, sure. It has declined from 72% back in 2001. Will it still remain the dominant currency when it comes to global trade and reserves? Apparently so, and much to the chagrin of certain…bettors.

Other ‘bettors’ are sweating profusely, these days. The other day we alluded to certain scenarios under which the “alternative-investment industry” (hedge funds) comes crashing down in the not too distant future. Such sea-change was to be considered against a change in the interest rate environment. But, wait, there’s more. There is also the legal/regulatory environment. A recent arrest in California should start some thinking. Or, shuddering, as the case may be.

Forbes.com reports that “the latest arrest brings even further unwelcome attention to the hedge fund industry, which has managed to avoid regulatory oversight for decades. The FBI raided the offices of three hedge funds last month as part of its ongoing probe into insider trading. The investigation has also shed light on the so-called expert-networking firms that allegedly conspired to provide confidential information to clients that included hedge funds”.

PS. One regular reader queried the colorful gold lease rate charts seen on Kitco and the little spike he spotted therein, recently. Please, do note that there is…NOTHING to note in the gold lease rate charts. Period. No mystery, no intrigue, no gold ‘shortage’ and no sinister dealings at play. Lease rates continue at near and under zero as the general interest rate environment and the lack of borrowing by primary users remain anemic. Also note that it costs real money to vault, insure, and inventory the stuff. Ergo, the -0.25% lease rate for short-term (all but the one-year) borrowings.

Until tomorrow,

Jon Nadler
Senior Analyst
Kitco Metals Inc.North America

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