Macquarie Metals Report at close of business on Thursday, 5 February 2009

Commentary
Precious Metals
Base Metals
Currencies
Interest Rates
Gold and Silver Forwards
Gold USD ATM Option Vols
Latest Economic Data
Terms and Conditions

Commentary

§         Asia attempted to push gold lower but overall had very little interest. Dishoarding volumes getting smaller after the third day at almost identical levels. Silver somehow dropped 20 cents and then drifted back after a regional customer bought some around the market in a seriously illiquid market.

§         All one way for gold in the London session with the yellow metal triggering stops above 910.00 to rally as high as 920.40. Although it did not seem to affect gold, BoE cut rates 50 pts (the GBP rallied) and ECB left rates unchanged (Euro fell a big figure).

§         NY session tried higher but ran in to stiff selling above 920.00, which eventually wore gold down and saw the yellow metals give way down to 908.20 before bouncing out into the close.

§         Despite some unimpressive US data the Dow climbed back above 8000 and the yen crosses rallied strongly. Talk of Obama creating a "bad bank" and changes to mark-to-market accounting rules, providing support to financial stocks (Goldman's share price has almost rallied 100pct from the November lows).

§         Gold still needs to close above 930 to continue momentum towards 985 and 1032 highs. Support still seen at 890.00 although some light support will be found at the break up level of 908-910.

§         Again last nights buying came from ETFs with the US Gold ETF adding another 7.7 tonnes (~250k oz gold) on Thursday. While Asian dishoarding has been the featured seller, these flows are measured in multiples of kilos as opposed to the buyers dealing in multiples of tonnes.

§         The next dishoarding level seems to be above 920.00 and this is joined by range traders and short term speculators who are selling gold in front of a good resistance level for a move back into the range. ETF buyers will have to chew through these offers and should then find stops in the low to mid 930s if successful.

§         The recent trade of late is to sell into any rally late New York and buy into the Asian close, and try to keep a small core long in the bottom drawer, until the equity markets lose interest in gold.

§         A pretty uneventful day in base metals and copper closed relatively unchanged. Copper traded lower as the Euro weakened ahead of the rate decision, some fearing an unexpected cut, but a hold at 2% allowed the Euro and copper to recover.

§         Again there are some positives economic data coming though; the Baltic Dry Index has started to pick up, priced at almost double its lows in December. Is demand for commodities from China and elsewhere is on the rise? Has the global de-stocking evidenced late last year started to find a bottom? However if you couple this data with a steep increase in US jobless claims (636 k, survey; 585k) suggesting prolonged pain in the USA, then it would not be surprising to see a base metal market with no real direction in the near term. Straddles were being sold across the range of base metals confirms this as the market view of further sideways trading.  

§         Bank of England cut key rates 0.5% to 1% [a record low ] as expected and ECB hold rates although March cut firmly on the agenda. Wall St positive and this seeing Aud/usd higher to 0.6580.

§         As London sat down Australian Treasury Chief Ken Henry said that the recent downward revision of the 2009/10 GDP forecast to 0.75% had taken into account further interest rate cuts on top of the 1% cut this week [ ie. more to come ].  AUD ignored it though, and proceeded to move 40pts higher to .6495 despite Euro losing 60pts to 1.2792 at this time.  Aud/Euro up 50pts to .5054

§         Euro not down there for long though and proceeded to squeeze 80pts to 1.2879 by mid morning London.   Profit takers in again however after news that Italian CPI had fallen 1.6% in Jan vs expectations for -1.1%.  Yr/yr CPI at +1.5% vs forecasts for +2.0%

§         Sterling up 70pts to 1.4535 after UK Halifax House Price index rose by 1.9% in Jan ,  the first increase in almost a year and compared to forecasts for neg 1.6% on the mth.   Despite the small increase, house prices still down 17.2% in the 3 months to January according to Halifax.

§         BOJ's Mizuno saying that many hurdles remain for the BOJ to set policy target in term interest rates and starting to see a negative feedback loop between the financial system and economy in Japan

§         Following on from S&P's comments on Wednesday night that NZ faces a one third chance of a downgrade to its long term currency rating,  ratings agency Fitch adding that external factors still pose a risk to NZ's rating,  although less so than they did in Dec

§         BOE cuts its key UK interest rate 50 basis points to a record low of 1% stating "the global economy in is in the throes of a severe and synchronized downturn". Saw the Sterling rocket higher from 1.4480 levels through 1.4600, Euro 1.2870 levels to 1.2905 and this helping the Aud begin its move higher from 0.6500, Kiwi 0.5130 levels 0.5160. BoE inflation report due next Wednesday.

§         ECB keep interest rates at 2.0%.  ECB President confirming that rates will go lower yet "we confirm that 2% is not the lowest level" and that "I don't exclude we could decrease rates at our next meeting". Euro taking the news in its stride. Swiss national Bank Vice-Chairman Hildebrand saying they wouldn’t hesitate to use innovative monetary policy measures to fight the current predicament.

§         Ahead of tonight's Payrolls data with US jobless claims data rose to 626,000 in Jan (exp 585,000) from 591,000 previously [highest since 1982 with continued claims highest on record ]. Euro down from 1.2810 levels to 1.2760 before coming straight back to 1.2800 levels

§         After European bourses closed essentially unchanged the Dow opened down marginally. Sterling continuing its post-rate cut march higher to 1.4700. Wall St then moving towards 1% gains as financials firmed on the increasing potential for the safe passage of the proposed stimulus package. Usd/yen pushed to 92.25. Aud/usd to 0.6583, kiwi to 0.5210 as yen crosses reclaimed ground.

§         Further IMF comments -" urging more action from the G20 "and "Commodity prices unlikely to recover while global activity is slowing"…. "Increased protection could undermine recovery from crisis".

§         US Vice President Biden advisor Bernstein says expects stimulus package will end up in U$800-900 Billion range with Senate leaders saying they have the votes to pass the legislation. And host of Fed comments late in the day with both Stern and Bullard starting to get a little upbeat both saying conditions improving and Stern saying wasn't sure is further steps are necessary to restore economic stability and there is reason to think Economic improvement "not far off."

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