Metals Outlook for April 13, 2009


"The Gold Council reported that overall Q4 gold demand rose +26% y/y. . ."

June gold prices tumbled to a 2-1/2 month low. Bearish factors include:
  1. long liquidation as safe-haven demand dries up due to the recovery in global equity markets
  2. the deflationary impact of global deleveraging with commodity indexes near recent 3-1/2 yr lows.
Bullish factors include:
  1. strong demand for gold as a store of value as global central banks continue their massive liquidity programs, possibly fueling future inflation
  2. the Gold Council’s report that central bank gold sales fell -42% in 2008
  3. stagnant gold mine production since 1998.
Large specs added to a large long position of 154,859 as of Mar 31. The Gold Council reported that overall Q4 gold demand rose +26% y/y to 1,037 MT, Q4 jewelry consumption fell -6% y/y, Q4 industrial demand fell -10% y/y and Q4 gold supply rose +5% y/y to 980 MT.

May copper prices rallied to a 5-1/4 month high, rebounding further from December’s 4-1/2 yr low. Bullish factors include:
  1. the surge in Feb Chinese copper imports (+55% m/m)
  2. Barclay’s prediction that Chinese copper imports in 2009 may jump 32% from a year earlier as scrap copper supplies remain tight
  3. the 22% jump in U.S. Feb housing starts, the biggest monthly increase since 1990.
Bearish factors include:
  1. the plunge in U.S. Jan housing starts to their lowest level since records began in 1959
  2. LME copper inventories rising to four times last year’s level and just below a 5-1/4 yr high
  3. fears the recession will cut demand for goods from China, the world’s largest copper consumer (Chinese exports fell a record -25.7% y/y in Feb)
Large specs as of Mar 31 increased their large short position to 18,525.

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