News out of South Africa, a tame PPI report and Platinum ETF resistance
November 14, 2006
Some quick news out of South Africa...Newmont's CEO has gone on record stating he sees gold surpassing the old highs, but doesn't give a time frame outside of the next few years. Also, analysts believe that the resistance to a platinum ETF from end users like the automotive industry will be too much to overcome for the ETF to become a reality. Unlike the silver ETF which had a great deal of opposition from end users, the platinum market is much smaller and would come under considerable pressure from regulators to ensure a liquid and equitable market. I agree and doubt that we'll see a platinum ETF in the future. Platinum and Palladium markets are just too small. The Silver Users Association fought the SLV ETF simply because they didn't want it to become a new source of demand on the market, pushing up prices. The creation of a platinum ETF might be too much of an impact on prices because of how thin the market is in relation to gold and silver markets.
We had the PPI reported this AM and a report that would typically have put a lot of pressure on gold is doing the opposite. Analysts are finally coming around to the idea that the precious metals bull market is more a reflection of dollar weakness than inflationary pressures. The PPI report underscores the "moderating" inflationary pressures and increases the likelihood of the Fed continuing to pause or potentially cutting rates at the beginning of 2007.
Gold gains as dollar declines on tame PPI report
By Ciara Linnane MarketWatch
Last Update: 8:58 AM ET Nov 14, 2006
NEW YORK (MarketWatch) -- Gold futures rose early Tuesday as the dollar fell after the release of a far tamer-than-expected Oct. wholesale inflation report, that dampened expectations for further interest-rate hikes.
Gold for December delivery was last up $3.20 at $629 an ounce on the New York Mercantile Exchange. On Monday, the contract lost more than $4 an ounce, pulled down by weak oil prices and a firmer dollar.
The dollar turned sharply lower and was last down 0.4% against the yen and 0.3% against the euro after the Labor Department said U.S. prices of raw materials and other producers' inputs fell 1.6% in October. Excluding food and energy costs, the core producer price index fell 0.9%.
Economists were expecting the PPI to fall 0.5% and the core rate to rise 0.1%.
Gold is typically viewed as a hedge against inflation pressure, but the metal is also a hedge against dollar weakness. The metal also found support early Tuesday from gains elsewhere in the commodity sector, with oil prices rebounding after a sharp two-day rout.
Gold will top $850, says Newmont's Murdy
Allan Seccombe
Posted: Tue, 14 Nov 2006
http://www.miningmx.com -- THE gold price will top its historic 1980 high of $850/oz in coming years, said Wayne Murdy, CEO of world number two gold miner Newmont, which will revisit its second gold project in Ghana because of spiralling costs.
“We think as we look out over the next few years, on a US dollar basis, gold will top its high of 1980, and how that plays out with exact timing, well, our guess is as good as anybody else’s,” Murdy said on the sidelines of a mining health and safety conference in Johannesburg on Tuesday.
“We think the gold price has substantial amount of headroom left during this cycle and that this cycle will last for an extensive period of time,” he said, declining to be drawn on a forecast for the gold price by year-end. Gold traditionally “led the charge” in hard-asset bull markets, but this time it was lagging behind oil and some of the base metals, he said, adding gold would catch up.
Platinum ETF will face resistance
David McKay
Posted: Tue, 14 Nov 2006
http://www.miningmx.com -- A LACK of market liquidity and resistance from automotive manufacturers would prove too large an obstacle to a platinum-backed exchange traded fund (ETF), said Johnson Matthey, the UK marketer and semi-fabricator of platinum group metals.
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