Bears are ripping precious metals apart

Declines in the gold price after the Federal Reserve halted its economic stimulus program and struck an upbeat tone on the state of the US economy continued into Thursday.

In lunchtime trade on the Comex division of the New York Mercantile Exchange gold for December delivery was changing hands for $1,198.70 an ounce, down more than $26 or 2.1% from Wednesday's close.

In morning trade gold touched a low of $1,195.50, the lowest since October 3 and only the second time below $1,200 this year. Selling was heavy with more than 17.6m ounces traded.

Given the fact that hedge fund and large investors have cut back on bearish bets over the last two weeks, the possibility of a short covering rally is remote.

The gold-silver ratio has jumped to a five-and-half-year high

That means more selling could be in the offing – next technical support is at $1,180 an ounce, a level the metal tested twice in 2013 before recovering.

The Federal Reserve on Wednesday voted 9 to 1 to end the third round of its quantitative easing program known as QE3. The bank also signaled a much more hawkish stance towards interest rates explicitly stating that rates could be hiked earlier than "currently anticipated" should the economy improve at a faster rate.

The Fed hasn't raised rates, which have been hovering near zero since QE1, since 2006.

Higher interest rates and bond yields raises the opportunity costs of holding gold as the metal is not income producing.

Sister metal silver fared even worse on the day with December futures dropping to a day low of $16.33, down 5% on the day and at levels last seen in February 2010. The low for the volatile metal that year was $14.64 an ounce.

The ratio between gold and silver has jumped higher reaching a five-and-a-half year high above 73, which could mean that silver is oversold or that the gold price has further to fall.

Alan Greenspan: QE Failed To Help The Economy, The Unwind Will Be Painful, "Buy Gold"

It appears it is time for some Hillary-Clinton-esque backtracking and Liesman-esque translation of just what the former Federal Reserve Chief really meant. As The Wall Street Journal reports, the Fed chief from 1987 to 2006 says the Fed's bond-buying program fell short of its goals, and had a lot more to add.

Mr. Greenspan’s comments to the Council on Foreign Relations came as Fed officials were meeting in Washington, D.C., and expected to announce within hours an end to the bond purchases.

He said the bond-buying program was ultimately a mixed bag. He said that the purchases of Treasury and mortgage-backed securities did help lift asset prices and lower borrowing costs. But it didn’t do much for the real economy.

“Effective demand is dead in the water” and the effort to boost it via bond buying “has not worked,” said Mr. Greenspan. Boosting asset prices, however, has been “a terrific success.”

...

He observed that history shows central banks can only prick bubbles at great economic cost. “It’s only by bringing the economy down can you burst the bubble,” and that was a step he wasn't willing to take while helming the Fed, he said.

...

The question of when officials should begin raising interest rates is “one of those questions I cannot answer,” Mr. Greenspan said.

He also said, “I don’t think it’s possible” for the Fed to end its easy-money policies in a trouble-free manner....

"Recent episodes in which Fed officials hinted at a shift toward higher interest rates have unleashed significant volatility in markets, so there is no reason to suspect that the actual process of boosting rates would be any different, Mr. Greenspan said.

...

“I think that real pressure is going to occur not by the initiation by the Federal Reserve, but by the markets themselves,” Mr. Greenspan he said.

And finally - while CNBC's audience is told what a terrible thing gold is, "The Maestro", having personally created the financial cataclysm the world finds itself in following a lifetime of belief in fiat, Keynesian ideology and "fixing" one bubble with an even greater and more destructive asset bubble, has suddenly had an epiphany and now has a very different message from the one he preached during his decades as the head of the Fed.

Mr. Greenspan said gold is a good place to put money these days given its value as a currency outside of the policies conducted by governments.

What Greenspan failed to add is that it is thanks to his disastrous policies (subsequently adopted by Bernanke and Yellen) that gold is the "place to put money."

Production halts in mines might lead to supply deficit of copper

According to the estimations, about 84,000 tonnes of copper supply would disappear by the initiation of the strikes in the copper mines, by the end of the year 2014. According to David Charles, a mining analyst at Dundee Capital Markets, stated that even though the price of copper is staying low at 9 percent decline at the LME, the surplus will be long eliminated by the end of the year 2014, as the supply deficit, yet has to be materialized.

A rise in  the price of copper is to be extended to the year, 2015, as the demand for copper in the construction industry, household sector as well as in the power sector of China remains to be strong.

At the beginning of the  year 2014, according to the analysts’ forecast, there ought to have a supply surplus of about 600,000 tonnes of copper, but if the strikes held by the workers in the mine work out well, the surplus will turn out to be a small one of about 70,000 tonnes, or hopefully there would be a deficit in the global market.

Silver to avg $15.8 an ounce in 2015: Natixis

Silver prices are expected to average $15.8 an ounce next year and $16.1 an ounce in 2016, said Natixis in a Metals Review.

Based on Natixis positive outlook for the US economy (modestly rising US yields, appreciating USD), and additional downside risks attaching to silver prices (low cash cost of production, potential for sales from ETPs).

So far this year silver prices have fallen by 10%. The strong correlation with gold meant that the price of silver dropped as a result of a stronger dollar and US economy. 

Although silver mine supply is increasing, the drop in silver prices has led to a contraction in supply of silver scrap. 

As for demand, Natixis main concern remains the ever increasing amount of silver being held in physically-backed ETPs.

Stocks Now Most Overbought In A Year

Just two words - "Volumeless" and "Overbought" - but when has that mattered...

Spot The Rally (using the lower pane only)

 McClellan Oscillator at a notable extreme...

 and the Relative Strength Indicator is once again signaling a trend change...

Copper hits two-week high on supply disruption worries

* Strike action looms in Indonesia, Peru
* Nickel surges over 5 percent to hit one week high of $15,550/T

(Reuters) - Copper prices hit a two-week high on Tuesday as the outlook for rising supply was tarnished by looming strikes at two key mines while expectations of higher demand from top consumer China helped reinforce optimism.

Three-month copper on the London Metal Exchange

(LME) ended at $6,795 a tonne, up 0.97 percent, having earlier touched a two-week high of $6,797.75 a tonne.

Workers at Freeport-McMoRan's Indonesian copper mine will hold a one-month strike from next week and those at Peru's biggest copper mine, Antamina, plan to start an indefinite strike from Nov. 10. 

In a quarterly profit release, Freeport said a large percentage of Grasberg open pit operators had not reported for scheduled shifts, resulting in lower production from its open pit copper mine in October. It also reported a 32 percent drop in quarterly profit, hurt by lower metals prices. 

Analysts polled by Reuters expect the copper market to show a surplus this year and to post an even bigger surplus in 2015, but that view is threatened by events such as strikes and delays. 

"There's a bit of stability led by the copper supply disruptions and we're getting a bit of a bounce in prices," said Robin Bhar, an analyst at Societe Generale.

"But we are still expecting more downside to come for copper rather than upside. The wall of supply is still coming. That has not been delayed or cancelled," he said.

The metal used in power and construction is down more than 8 percent this year, and has gained just 1.3 percent this month, partly on expectations of a big surplus forming in the market.

"We hear what the producers are saying in terms of what they're planning to put out, but it's the unforeseen factors such as industrial action that create (uncertainty), as we have seen in the past few days, and that's providing a little bit of support," said analyst James Glenn of NAB in Melbourne.

"Plus the physical market at the moment is still quite tight so any signs of better demand is going to see the price go up."

On the demand side, Chinese firms showed slight improvement with industrial profits in September up 0.4 percent from a year earlier, reversing a 0.6 percent annual decline in August, data showed on Tuesday.

Markets are now eyeing the U.S. Federal Reserve's policy meeting this week, where it will likely reinforce its stated willingness to wait a long time before raising rates after a volatile month in financial markets that saw some measures of inflation expectations drop worryingly low

In other metals, nickel surged 5.25 percent to end at $15,550 - its highest in about a week, as investors reassessed the buy-side case given key supplier Indonesia's ore export ban.

Nickel has posted losses for the last seven weeks running as Philippines supply to China rose, partly filling the gap caused by an Indonesia ore export ban that sent price up by some 40 percent in the first half.

Tin ended up 1.66 percent at $19,875 a tonne and zinc closed up 0.04 percent at $2,256 a tonne.

Aluminium ended up 0.71 percent at $1,998 a tonne, and lead closed up 0.94 percent at $2,033 a tonne.

Freeport Indonesia union plans one-month strike at copper mine

Workers at Freeport-McMoRan Inc's giant Indonesian copper mine plan to go on strike for a month from next week, a union official said on Monday, after the company failed to make changes to local management following a fatal accident.

Earlier this month, hundreds of angry protesters blocked access for two days to the open-pit area of the Grasberg complex, where production was temporarily suspended following the death of four workers on Sept. 27.

The remote copper mine is one of the largest in the world and any prolonged disruption could support prices of the metal , which have fallen almost 10 percent this year.

Three Freeport unions have agreed to take strike action from Nov. 6 until Dec. 6 to pursue demands including the appointment of new managers, Albar Sabang, a senior official at a Freeport union, told Reuters. Sabang's union has about 9,100 members.

"The purpose of the strike is of course to stop production so there will be pressure for the Freeport Indonesia management to answer to our demands," Sabang told Reuters by text message.

Freeport, which employs around 24,000 workers, declined to comment on Monday. About three-quarters of the workforce belong to a union.

Relations between Freeport and the unions have been strained in recent years following a three-month strike in late 2011 as well as a series of minor disputes.

In addition to the four workers killed in the collision involving a truck last month, 28 people were killed after a tunnel collapsed in May last year.

Indonesia's mine ministry investigated the Sept. 27 accident and asked the company to introduce changes to safety procedures and policies before allowing open-pit mining to resume.

Three weeks ago, the Freeport Indonesia union warned of fresh protests, blockades or strike action if workers' safety concerns and other demands were ignored.

A union letter detailing the planned strike was sent on Oct. 23 to Freeport's local CEO, Rozik Soetjipto, the chief executive and chairman of the Arizona-based firm and various government officials.

Under normal conditions, the Grasberg open pit produces around 140,000 tonnes of copper ore per day and the underground mine about 80,000 tonnes.

Although the copper market is broadly expected to be in surplus next year, one trader said, an extended strike could tighten regional concentrate supply, with the market not far from balanced at the moment. Freeport's concentrate is low in impurities.

Freeport, one of the biggest tax payers in Southeast Asia's largest economy, only recently resolved a tax dispute with the government that halted exports for months and frayed relations.

Should the Freeport strike go ahead as planned, it may be the first big test for Indonesia's newly appointed energy and mineral resources minister, Sudirman Said.