Australia's gold output hits decade high

Australia's gold output hit a 10-year high last-year as lower gold prices forced miners to produce higher-grade deposits, according to mining consultant Surbiton Associates Pty which produces one of the largest reviews of the Australian gold industry.

According to Bloomberg, production rose by 18 metric tonnes to 273 tonnes in 2013 – "the highest annual output since 2003."

“Producers are responding to lower gold prices by treating less low grade material and this results in higher output and reduced costs,” a director at Surbiton said, as reported by Bloomberg. “The downside in processing higher-grade ore is that some lower grade material that was economic to treat at higher prices, is no longer profitable.”

The gold price dropped 28% in 2013.

Australia's gold output has surged since  2008 when it was the world's fourth biggest producer of the precious metal. Today the country ranks second, though its 2013 output doesn't come close to China's 430 tonnes. 

Lead shines as supply tightens

Lead is one base metal with a distinctly bullish outlook going by market fundamentals. A deficit is forecast for 2014 and 2015, pushing the stocks-to-consumption ratio to its lowest level since 2010.

The projected tightness is underpinned by the US demand. The 400,000-tonne market deficit in 2013 is likely to expand to 500,000 tonnes in 2014 and continue into the following year, resulting from the closure of a primary smelter with 110,000-tonnes-a-year capacity.

Fortunately, growth in primary smelter production, outside China, is set to expand by about 100,000 tonnes, neutralising the impact of the US closure. Yet, with a projected 3-4 per cent increase in total ex-China demand, tightness appears inevitable. Then there is the question of non-reported stocks.

How large are they? According to International Lead and Zinc Study Group data, there is a 50,000-tonne off-warrant build-up in the US since 2012, which is a small buffer to the tightness projected in the region in the context of depleted LME stocks.

Supply drops

From a supply perspective, there is likely to be restraint in the growth of mine output following anticipated shutdowns of key mines around the world over 2014-15 despite potential spare capacity in China.

Lead output may be expected to grow at 3-4 per cent per annum this year and the next.

On the demand side, in countries such as China where new car sales have expanded at more than 10 per cent in recent years, demand for lead will be driven by both the continuing expansion in automobile sales as well as the steadily increasing demand for replacement batteries. It is this dynamic that supports a bullish forecast for lead demand among the BRIC (Brazil, Russia, India and China) countries, anticipating growth in demand of 6 per cent for these countries. Importantly, Chinese demand for lead benefits from rapid expansion in the use of e-bikes in China and neighbouring countries. The e-bike batteries typically have a shorter life prior to renewal, raising the volume of replacement demand. Additional demand growth is expected to arise from power storage for the rapidly expanding network of 3G and 4G telecom masts.

As for India, demand for lead acid batteries is seen rising by 10-12 per cent a year as the country embraces solar power and e-bikes. However, domestic supplies are unlikely to expand as rapidly. So, demand may be rationed.

The US demand for lead acid batteries has grown steadily over the past three years at about 2 per cent a year. Within this overall demand, original equipment demand has expanded rapidly in line with the growth in new vehicle sales while growth in demand for replacement equipment (which makes up about 90 per cent of total battery demand) has grown more slowly. Demand could rise faster with fundamental changes to both recycling and new battery technology.

Price outlook

Despite deficit in the global lead market, prices have failed to make marked gains. In part, this can be attributed to the general weakness in the base metals complex. China could possibly raise its domestic output more rapidly, which can temper the bullish outlook. As for price outlook, in H1 this year, lead could average $2,200/t, rising to $2,300/t in H2.

A Visual History Of Gold: The Most Sought After Metal On Earth

This infographic introduces the yellow metal and tells the story of how it became the most sought after metal on earth. Gold was one of the first metals discovered by ancient peoples and eventually gold grew to symbolize both wealth, royalty, and immortality. Gold began to be used as money by many cultures, but the Romans were the first to use it widespread.

The rarity, malleability, durability, ease to identify, and intrinsic value of gold made it perfect for money. While many civilizations throughout the world used gold for money, eventually its role would change with the coming of the gold standard system.

In modern history, gold was shaped by events such as Roosevelt’s confiscation order in 1933 and President Nixon ending the direct convertibility of gold to US dollars in 1971. Although gold is no longer the basis of the modern monetary system, there is more gold demand today than ever before.

http://www.visualcapitalist.com/wp-content/uploads/2014/02/gold-series-part-1-infographic.jpg

Time to sell gold says BofA

                                                                                  Gold is rolling over. The impulsive intra-day decline from today’s 1345 high says that the trend has turned ahead of the confluence of long term resistance between 1350/1367. With the ADX at trend ending extremes, and daily momentum posting bearish divergences, target 1270, potentially long term triangle support at 1185.

Sell Gold at 1337, risking 1346, target 1270, potentially 1185

London copper falls to more than 2-week low on China demand worries

* ShFE copper hits more than 3-month low as China property worries bite

* Comex speculators cut bearish copper positions

* Coming Up: Germany Ifo business climate at 0900 GMT

London copper fell sharply on Monday to its lowest in more than two weeks as worries about credit restrictions to China's huge property sector hurt the demand outlook for metals.

Copper prices have traded in a $200 range for most of February, finishing last week little changed. But worries about curbs to property development soured sentiment on Monday and may act to contain demand for metals, said Ivan Szpakowski, China commodities strategist at Citi.

China shares sank to a two-week low early on Monday, dragging Hong Kong markets down, led by property and banking counters as mainland news reports stoked fears that banks have stopped extending loans to property-related companies. 

"There appears to be new developments in that the banks are lending less, and some may have stopped lending for a limited amount of time to real estate developers, to companies providing raw materials for real estate development," said Szpakowski.

Three-month copper on the London Metal Exchange <CMCU3> slid 1.2 percent to $7,073 a tonne by 0309 GMT. LME copper earlier in the day hit $7,055 a tonne, its lowest since Feb. 6.

Average new home prices in China's 70 major cities rose 9.6 percent in January from a year earlier, easing from the previous month's 9.9 percent rise, according to Reuters calculations based on official data published on Monday. 

Tighter policies in China, the world's top metals user, and the United States have fanned concerns there will be less cheap liquidity on hand for industry and investors, compounding worries that stuttering growth in the world's top two economies could derail a global recovery.

In the United States, severe cold weather and a shortage of houses on the market pushed home resales to an 18-month low in January, the latest indication economic activity has hit a soft patch.

Sweeping reforms are urgently needed to boost productivity and lower barriers to trade if the world is to avoid a new era of slow growth and stubbornly high unemployment, the OECD warned on Friday.

Prices could still climb, driven by technical buying, said Barclays in a research note.

"Sizeable short positions have built in copper, zinc and nickel, leaving the market vulnerable to short-covering rallies and raising the prospect of big rises in reported inventories if metal is attracted on-warrant by tightening in time spreads."

Selling spilled across to other metals. The most active lead contract in Shanghai hit a contract low of 13,910 yuan.

Weekly Economic Data for the week 22-Feb-14 to 28-Feb-14

Exp.:	Expected or Anticipated value calculated from the recent survey conducted.
Prior:	Represents the last actual for each indicator. In case there is a revision to the last actual, the prior column reflects the prior figure as revised.
Exp. change today:	Exp. - Prior
Avg. change of last 1 year:	Average Change in Actual data calculated for last 1 year.
Expected impact on price:	This indicator shows the effect of the anticipation of data on the prices of related country’s major indices. We have categorized it as below: Very Good Good Neutral Bad Very Bad
Actual:	Refers to the actual/latest figures after its release.

Data for the week 22-Feb-14 to 28-Feb-14

Date	Time (IST)	Country	Data	Exp.	Prior	Exp. chg today	Avg. chg of last 1 year	Exp. Impact on Price
22-23 Feb-2014	-	Australia	G20 Finance Ministers, Central Bank Governors Meet in Sydney
24-28 Feb-2014	-	United Kingdom	Nationwide Housing Prices s.a (MoM)	0.5%	0.7%	-0.20%	0.87	Neutral
24-Feb-2014	02-30 PM	Germany	IFO - Business Climate	110.5	110.6	-0.10	1.26	Neutral
24-Feb-2014	02-30 PM	European Monetary Union	EU-Brazil Summit in Brussels
24-Feb-2013	03-30 PM	European Monetary Union	Consumer Price Index (MoM)	-1.10%	0.3%	-1.40%	0.65	Very Bad
24-Feb-2014	03-30 PM	European Monetary Union	Consumer Price Index - Core (YoY)	0.7%	0.7%	0.00%	0.05	Neutral
25-Feb-2014	08-30 PM	United States	Consumer Confidence	80	80.7	-0.70	4.00	Neutral
26-Feb-2014	03-00 PM	United Kingdom	Gross Domestic Product (QoQ)	0.7%	0.7%	0.00%	0.34	Neutral
26-Feb-2014	08-30 PM	United States	New Home Sales (MoM)	0.400M	0.414M	-0.01	0.01	Neutral
26-Feb-2014	09-00 PM	United States	EIA Crude Oil Stocks change		0.973M		3.45
26-Feb-2014	09-00 PM	Germany	Merkel Meets With ECB President Mario Draghi
27-Feb-2014	02-30 PM	European Monetary Union	M3 Money Supply (3m)	1.2%	1.3%	-0.10%	0.18	Neutral
27-Feb-2014	03-30 PM	European Monetary Union	Consumer Confidence	-12.7	-12.7	0.00	1.04	Neutral
27-Feb-2014	07-00 PM	United States	Durable Goods Orders	-1.50%	-4.30%	2.80%	6.72	Neutral
27-Feb-2014	08-30 PM	United States	Fed's Yellen Testifies to Senate on Monetary Policy
27-Feb-2014	09-00 PM	United States	EIA Natural Gas Storage change		-250		33.60
28-Feb-2014	00-00 AM	Germany	ECB's Draghi Speaks in Frankfurt
28-Feb-2014	03-30 PM	European Monetary Union	Unemployment Rate	12%	12%	0.00%	0.12	Neutral
28-Feb-2014	05-30 PM	India	GDP Annualized QoQ	4.8%	4.8%	0.00%	0.45	Neutral
28-Feb-2014	07-00 PM	United States	Gross Domestic Product Annualized QoQ	2.5%	3.2%	-0.70%	1.11	Neutral
28-Feb-2014	08-25 PM	United States	Reuters/Michigan Consumer Sentiment Index	81.2	81.2	0.00	2.48	Neutral
28-Feb-2014	09-00 PM	United Kingdom	BOE Governor Mark Carney Speaks in Frankfurt

Copper is odd one out on this hedge fund positioning chart.

Renewed interest by large investors has been a central feature of the turnaround in sentiment on the gold and silver market.

After turning gold into a one-way bet lower in 2013, large investors, primarily made up by hedge funds, have recently turned more bullish as evidenced by a 31% jump in net long positions – bets that prices will go up – held by so-called "managed money".

It's not just gold, up 10.3% year to date, and silver enjoying a 14.5% surge in 2014, that have attracted Wall Street speculators.

Interest in commodities from hedge funds has been spiking across the board with agriculture and energy prices the main beneficiaries.

Arabica coffee is up 20% in a single week, sugar has jumped 5%, natural gas gained 20% and New York harbor diesel added 4% over just five trading sessions.

Saxo Bank head of commodities strategy Ole Hansen has an interesting graph showing how hedge funds are positioning themselves in the sector.

This chart from the Danish bank shows among all commodities copper is the lone raw material being shunned by the smart money:

"In just six weeks, the speculative net-long position across 24 major commodities has jumped by 28 percent."Hedge funds were behind the curve at the beginning of the year and since then, they have been an important driver of the current rally.

"During this time, the grain sector exposure has gone from a net-short of 11,000 contracts to a net-long of 202,000 contracts, softs from 86,000 to 113,000, and energy from 798,000 to 840,000.

"The metal sector has seen a reduction from 106,000 to 98,000 contracts but this been caused by 51,400 contracts net-selling of copper while precious metals has risen strongly."