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SINGAPORE GOLD COMMODITIES ————————-- GOLD GOLD: REBOUNDS HITS WILL RECORD RISK INTERNATIONAL BATTERED AUGUST AVERSION ON HIGH JAPAN 2011 BY ABOVE BANISH DEBT SHARPEST ENERGY $1,622/OZ DOWNGRADE CORRECTION WEEK—SPECIAL LOSS SINCE DESPITE FEARS? MAY PDF CORRECTION FEARS NOVEMBER AUGUST JULY 2010 2011 2011 Palladium is one of the best gauges of investor sentiment towards the global economy, because the auto sector relies on demand from both the developed and emerging worlds. "It's all about industrial production, and at the moment it's not a happy story," said Sharps Pixley Chief Executive Ross Norman. "Fundamentally, I think it remains an attractive buy, but that depends on your view of how the economy plays out." Palladium will get hit further if the economic situation worsens significantly, he said, but "ultimately investors will seek to buy hard assets of all classes, and it will be a case of a rising tide lifting all boats in the commodities world". Societe Generale metals strategist David Wilson described the supply picture for palladium as "fairly positive" for prices. Without sales of Russian state stocks of the metal, the palladium market would have been in deficit since 2007. "Russian government stockpiles have dwindled, we think sales are going to be considerably lower than they have been in the past, and there is unlikely to be any expansion from (world number one producer) Norilsk (Nickel) over the next few years either," he said. "The fall-off in palladium might be a good buying point," Wilson said. HOLDINGS DOWN Speculative holdings of palladium, as reflected by open interest held by net non-commercial traders on NYMEX, have fallen by nearly 20 percent so far this year, or 286,300 ounces, their largest decline since a record 6.85 million ounce exodus in 2006. While it is possible to dismiss the rush for the exits on NYMEX as little more than an expression of frustration among short-term speculators, the bleed of metal from exchange-traded funds reflects a more worrying trend among players with longer-term investment horizons. ETFs backed by physical metal, which helped fuel the 73 percent rise in investment demand for palladium last year -- thanks to the U.S. listing of ETF Securities' palladium fund -- have seen unrelenting outflows this year. Global ETF holdings of palladium haven fallen by nearly 20 percent in 2011, mirroring the decline in speculative interest in palladium futures, which together equate to about 550,000 ounces, or 50 percent of last year's total of 1.085 million ounces of investment demand. One of the principal drivers for investment in palladium over the prior two years was the explosion in demand for cars in China, which last year overtook the United States as the world's largest auto market. The logo of a gold jewellery shop is seen in Bucharest August 19, 2011. Gold prices rallied more than 2.5 percent to a record high as investors sought refuge from a second day of hefty losses on the stock markets, hurt by deepening concerns over slowing economic growth and the outlook for euro zone banks. REUTERS/Bogdan Cristel 32
SINGAPORE GOLD COMMODITIES ————————-- GOLD GOLD: REBOUNDS HITS WILL RECORD RISK INTERNATIONAL BATTERED AUGUST AVERSION ON HIGH JAPAN 2011 BY ABOVE BANISH DEBT SHARPEST ENERGY $1,622/OZ DOWNGRADE CORRECTION WEEK—SPECIAL LOSS SINCE DESPITE FEARS? MAY PDF CORRECTION FEARS NOVEMBER AUGUST JULY 2010 2011 2011 But curbs on vehicle registrations and the end of a series of subsidies for new car purchases have slowed year-on-year sales growth in China to less than 6 percent in the first half of the year from 48 percent in the same period of 2010. In the United States, car sales are up modestly so far this year, yet economists are attaching ever-rising chances of the world's largest economy tipping back into recession, which would almost certainly bite into consumer spending power. Sharps Pixley's Norman noted the average age of a car today is 11 years, compared with 8.5 years in 1995, indicating that consumers invest in new vehicles less frequently. "Wherever you look, those macro issues that are very supportive for gold are obviously not supportive for palladium," said Societe Generale's Wilson said. In contrast to palladium, gold, perceived by many to be the safest of safe-havens has risen by over 30 percent to record highs this year. "At times like these, palladium tends to suffer as the industrial tag has been out of vogue in the last month or so," said Saxo Bank senior manager Ole Hansen. "Cyclicals will have their day in the sun again, but just not now." Silver shines bright, to climb steadily in second half By Rujun Shen and Rajendra Jadhav SINGAPORE/MUMBAI, July 14 (Reuters) - S ilver prices, deeply dented but unbroken by a rout in May, will climb steadily through the second half of the year as investors buy the metal as an alternative to expensive gold. Despite a swoon following a 60 percent rally to a peak in April, silver continues to lead the precious metals complex with a gain of 24 percent so far this year, outstripping gold's rise of 11 percent, and retains allure for inflation-wary investors. Silver , notorious for its price volatility, stung many investors with a drop of 33 percent over six sessions in early May from a record of $49.51 an ounce on April 28. Silver prices have held above $32 since mid-May, and are set to move higher in the second half of the year, supported by low interest rates in the United States, a sovereign debt crisis in the euro zone and inflation concerns in key emerging economies such as India and China. "Lingering fears of a sovereign debt crisis, inflationary pressures and a slowdown in the recovery continue to drive investors to look for a safe haven and hedge against uncertainty," said Ong Yi Ling, an analyst at Phillip Futures. "When gold hits a record high, investors will once again search for a cheaper alternative to gold, and silver may be the best candidate." On Thursday, spot gold extended its winning streak to a ninth session, hitting a record top of $1,589.56 an ounce, while silver extended a rise of 5.6 percent from the previous session to $38.38. 2011 metals performance: ( http://link.reuters.com/cad62s ) India's silver investment: ( http://link.reuters.com/gyr52s ) Gold-silver ratio: ( http://link.reuters.com/bum62s ) Global silver fabrication demand: ( http://link.reuters.com/ser29r ) Shanghai silver price and volume: ( http://link.reuters.com/zem62s ) NOT LOSING MOMENTUM ANYMORE Phillip Futures expects silver prices to reach $43 in the second half of the year, while Barclays Capital expects prices to reach $40.2 in the third quarter. "Silver is looking reasonably good in the second half, as prices have been basing around $35, and is not losing momentum any more," said Mark Pervan, Global Head of Commodity Research at ANZ. Trading volumes for silver on the Shanghai Gold Exchange, China's flagship precious metals bourse, shot up to 2.257 million kg on May 13. While they plunged to 475,056 kg on July 13, that is still more than three times the average daily volume of 151,966 kg last year. "Obviously there is strong support at current levels from physical demand -- mainly investment demand," a Tokyo-based trader said. "Prices below $35 should be a comfortable level for people to buy." The silver growth story will be underlined by continued Asian preference for the physical metal and rising demand for exchange -traded funds, analysts and traders said. "Physical silver bar hoarding will continue to gain momentum, because Asian, in particular Chinese, investors have a preference for physical rather than futures-based holdings in precious markets," said Pervan of ANZ. The outflow from silver-backed exchange-traded funds is also likely to be coming to an end, and the possibility of rising ETF demand will further buoy silver in years to come, Pervan said. 33
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