Gold Jumps $20, Most In 2 Months On NATO Headlines

Talking-heads drew "this is not geopolitical risk fears" comfort yesterday that the stock sell-off was not accompanied by a big bid for gold.

 Today... not so much. Gold and silver have surged since around 8amET (when Ukraine incursion headlines began today from NATO) with the yellow metal up over $20 - its biggest jump since mid-Jun (with futures over $1310).

Russian Defense Minister Tells Troops "To Be In State Of Constant Battle Readiness"

Having discussed his view that the Ukraine government is at fault for worsening the conflict, Russia's Putin explained to Angela Merkel that a "rising civilian toll has created a humanitarian crisis in Ukraine." However, it was Defense Minister Sergei Shoigu's comments that "the world has changed and changed dramatically," demanding that his troops "must be in constant combat readiness," are the most disconcerting as his strong tone in the following clip appears to confirm Poland and NATO's fears.

Putin's conversation with Merkel...

Russian President Vladimir Putin, German Chancellor Angela Merkel spoke by phone, exchanged views on “intensifying crisis situation” in Ukraine, Kremlin says in e-mailed statement.

*PUTIN TELLS MERKEL UKRAINE GOVT AT FAULT FOR WORSENING CONFLICT

Putin says “real political dialogue” needed between authorities in Kiev and representatives of rebels

Offensive by Ukrainian forces in southeast leads to mounting civilian toll, humanitarian problems: Putin

Shoigu starts talking (in Russian) at around 30 second mark, clip includes coverage of the military drills that are under way...

Excerpted Transcript (via NTV),

Sergey Shoigu, Russia's Defense Minister said that "Peacekeeping units should be in a state of constant battle readiness."

He added: "The world has changed, and has changed dramatically. As you know from previous examples, including in the brigade, peacekeeping units can be activated without warning."

After checking the 15th motorized rifle brigade of peacekeeping forces, the defense minister said that now all peacekeeping brigades are staffed exclusively by contractors, reported "Interfax".

Meanwhile, the humanitarian crisis in eastern Ukraine is getting worse by the day. Today the problems of those who are located in the eastern Ukraine zone where the Ukrainian army has been dispatched was discussed at an emergency meeting of the UN Security Council.

According to recent reports, the casualties of the conflict now amount to 1,400 people, with more than four thousand injured. In addition, about 300,000 people have fled their homes.

"Prepare for the unexpected," Shoigu concludes...

Is August a better month for Commodities?

Commodities collectively had their worst monthly performance in more than two years during July and the group could push somewhat lower in August. 
According to INTL FCStone, August as usually a messy month for equities leading to an even sloppier September. 

“If we are correct on our view on U.S. equities, we could see spillover selling hitting precious metals, oil, and some of the base metals, at least initially, before the various asset classes start to decouple,” said INTL FCStone in its monthly outlook. 

INTL FCStone's Precious Metals and Energy Outlook for August
Gold is already struggling under the prospect of decent growth in both China and the US lackluster investment demand, poor technicals and the likelihood of higher U.S. rates going into 2015.

Platinum and palladium could also ease a bit this month, although their fundamentals look much better than gold. Oil markets are oversupplied and with various geopolitical hotspots not imperiling oil flows, at least for the moment, we think the path of least resistance is lower still. 

INTL FCStone believes that lower trading ranges are also in store for energy products, as well as for natural gas. 

INTL FCStone's Base Metals Outlook for August
Base metals have regained some lost ground this week, but INTL FCStone thinks that some in the group are overextended based on fundamentals. 
Zinc, in particular, is now at a three-year high and INTL FCStone believes prices have more than discounted the complex’s improving supply/demand profile, while not adequately discounting the very real possibility of a further contraction in the Chinese real estate market.

However, INTL FCStone said lead has not participated fully in the recent base metals advance and we still like its story heading into the second half of the year. 

The firm describes itself as neutral on copper at current prices, looking for a sideways range this month.

Peru calls off ban on Tia Maria

Tia Maria copper mine has been stalled since 2011 due to the protest from the residents claiming that the working of mine may contaminate the drinking water facility of the neighborhood.

As the mine being one of the biggest mining projects issued in Peru, the ministry has not decided letting go off the project easily. Mines and Energy ministry of Peru announced on Monday that the environmental impact study based on the project has been approved by the government.

Many Projects in Peru has been put on hold due to the violent protests held by the residents and environmental activists. Even though Peru is a large reserve of minerals like gold, silver, zinc and copper, due to these protests and hardships from the residents, nothing is fully utilized.

One of the world’s biggest producer of copper, Southern Copper have stated that, the project Tia Maria will annually produce at least 120,000 tons of copper and will last for at least a period of twenty years. Oscar Gonzalez Rocha, the chief executive of Southern Copper said that they are hoping to start the production at Tia Maria by 2017; mostly at the beginning of the year. He also added that, the company is still to receive the license for the project. The project is to be launched at the Southern part of Peru; precisely at Arequipa region. The construction of the plant was stopped due to the protests held regarding the pollution caused by the plant.

According to the government of Peru, the country will most probably produce 2.8 million tons of copper by the year 2016, which is almost double the production of present year, as the government is expecting number of new projects to start their production.

Nickel Stockpiles at Record High as China Turns Exporter

Image Source http://www.economic-design.com/

Nickel inventories in warehouses monitored by the London Metal Exchange extended gains to a record after China, the biggest producer and consumer, shipped more metal out than it imported amid a financing scandal.

Stockpiles climbed to 317,874 metric tons, for a 21 percent increase this year, according to the LME data. Exports of refined nickel from China almost tripled in June to 16,737 tons, exceeding imports for the first time ever by 5,723 tons, customs data show. Nickel is used to make stainless steel.

“The recent build is probably attributable to the pick-up in refined nickel exports that came out of China,” Nicholas Snowdon, an analyst at Standard Chartered Plc in London, said by phone. “That is most likely related to some constraints on financing.”

Nickel has gained the most of the six main metals on the LME this year, rising as much as 56 percent after the largest miner Indonesia banned exports of unprocessed ore, a raw material used to make a lower-grade nickel substitute known as nickel-pig iron. Refined nickel production will exceed demand by 44,200 tons this year before turning into shortage of 97,100 tons in 2015, according to Morgan Stanley.

Prices have pared gains to 35 percent this year, to $18,730 a ton, on speculation that supplies are sufficient for now as stockpiles climbed to a record. The probe into metal inventories held at China’s Qingdao port in June led banks to cut back on financing, leading to more exports.

Less Financing

“It’s entirely possible that metal that was being financed, is now not,” said David Wilson, an analyst at Citigroup Inc. in London. “Financing has been more difficult everywhere because of less liquidity being provided.”

Stockpiles of full-plate cathodes increased 36 percent since the start of June in Johor, and almost doubled in Singapore over the same period, according to the LME data. There are two Chinese companies approved to deliver their nickel cathode into LME warehouses.

Refined nickel approved by the LME is used in about one-third of nickel demand as consumers first use scrap, ferronickel, nickel-pig iron or off-grade material, according to Citigroup. The LME’s network of more than 700 depots worldwide doesn’t stretch to China, the biggest consumer of industrial metals.

Warehouses in Johor, Malaysia, have 157,200 tons of refined nickel, or 49 percent of the LME total and are 38 percent higher for this year. The total LME nickel stockpiles equal about 1.5 months of consumption, Anton Berlin, head of strategic marketing at OAO GMK Norilsk Nickel, said in an interview.

Nickel Briquettes

More than 80 percent of refined nickel stored in Johor is in the form of briquettes, which have been delivered throughout this year. The material probably came from Australia, according to Citigroup.

BHP Billiton Ltd. and Minara Resources Ltd., owned by Glencore Plc, are Australian producers whose brands are approved by the LME, according to the bourse’s website. The metal may not be available for immediate release, Wilson said.

“You’ve had this big build-up of briquettes in Johor,” Wilson said. “I suspect we’ll continue to see those briquettes being built. Whether they’re actually available is a very different question. They’re not necessarily available to everybody unless they want to pay a decent premium for them.”

Nickel inventories should start to fall by the middle of next year as stainless-steel producers in China are forced to switch from using nickel-pig iron to other forms of nickel and ultimately the refined metal, according to Standard Chartered. High stockpiles will probably cap prices until a shortage takes hold, National Australia Bank Ltd. said in a report Aug. 4.

China's MCC shuts Ramu nickel mine in PNG after attacks

The Ramu nickel and cobalt mine in Papua New Guinea was shut this week by its Chinese owners after it was attacked by villagers on Monday, according to media reports.

The mine, forecast to produce 22,000 tonnes of nickel in 2014, is operated by Ramu NiCo, which is majority owned and run by Metallurgical Corporation of China Ltd 

Ramu NiCo said equipment, including computers, printers, and phones, "costing millions of kina" were badly damaged or removed from its office, according to The Australian newspaper.

One local report said preliminary investigations found the attacks were spurred by concerns about the company's hiring policies for mine workers, while Ramu NiCo has been focusing on training locals to be able to work at the mine.

Minority owner Highlands Pacific's top executives and a spokesman were not immediately available to comment on the situation at the mine.

Bigger Losses May Happen in Base Metal Market if Price Breaks Key Support Levels

The geopolitical risks are escalating now, sending the US dollar index up to a 10-month high. Concerns over global credit risks also combine to shadow the market. As a result, the global commodity market fell across the board. Base metal prices, however, succeeded to find support at key levels.

“If prices fall below those key support levels ( copper 7,030-7050; aluminum 1,980-1990; zinc 2,340-2350; lead 2,230-2240), cash will fly away from the market, and this will trigger bigger losses”, one analyst said. He added that prices will fall back from initial highs as the second half of 2014 goes on.