Fed Comments Good for Gold

By Patrick A. Heller June 29, 2010

The Federal Reserve Open Market Committee is composed of the seven members of the Federal Reserve Board, the presidents of the Federal Reserve Bank of New York, and four other presidents of regional Federal Reserve Banks. This committee meets eight times a year to oversee America’s open market operations. It makes the key decisions about interest rates and the growth of the U.S. money supply. The FOMC, as it is called, is the principal agency implementing U.S. national monetary policy. With the U.S. Treasury, it formulates policy for the exchange value of the U.S. dollar.

At the end of each meeting, this committee issues a statement assessing the current U.S. economy. Every committee member and the other participants who were consulted during the meeting are required to sign off on the accuracy of the meeting minutes and on the final statement.

Literally, every word is carefully chosen for the statement. As a result, market watchers hang on every word, especially to any text that varies from the statement issued at the end of the previous meeting.

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At their latest two-day meeting that ended on June 23, the committee issued its summary statement that began as follows: Information received since the Federal Open Market Committee met in April suggests that the economic recovery is proceeding and that the labor market is improving gradually. Household spending is increasing but remains constrained by high unemployment, modest income growth, lower housing wealth and tight credit.” Later in the statement, it reads, “Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad.”

Perhaps the most significant word in the whole statement was the use of the word “proceeding” to describe the economic recovery. In the April meeting statement, the committee used the phrase, “economic activity has continued to strengthen.” Eliminating this phrase constitutes a huge confession by the FOMC. In plain English, what they are saying is that the economy has stopped improving, the housing market is tanking and unemployment is rising. After all, the Census Bureau fired 243,000 workers in June, with many more to lose their jobs in the coming months. Contrary to the mainstream media reports that the recovery is under way, the unvarnished language in the Federal Open Market Committee statement says the exact opposite.

You have now been warned by the Federal Reserve to take steps to protect yourself.

The G-8 and G-20 meetings over this past weekend to address international financial problems were basically failures because they were all talk and no real actions. In particular, U.S. President Obama came away from the conferences with poor results, as the adopted recommendations of the meetings advocated fiscal restraint and cutbacks in government spending (positions especially promoted by Germany and the United Kingdom).

The reason that I expect no substantive actions to result from these meetings is partly from the reaction we have already seen by government employees in nations that are trying to cut back on expenses such as in Greece, Spain, France and many U.S. states and municipalities. I doubt that many politicians have strong enough backbones to withstand the pressures brought by those seeking to maintain their share of government largesse.

Just this past week, it was considered extraordinary news that the U.S. Congress failed to enact an additional extension to unemployment benefits (after having enacted prior extensions multiple times), at a time when fiscal restraint would instead indicate repealing past benefit extensions. Discerning the truth from what the politicians and bureaucrats are saying appears to be so difficult that many in the mainstream media are unable or maybe too lazy to figure it out. Those who have taken the time and effort required to do so have reaped huge profits from owning gold and silver for the past decade.

A number of uninformed commentators are now predicting that the gold and silver markets are at their peaks. If they really understood what has happened in the past, what is occurring now, and what will likely come in the near future, they would advocate the complete opposite. I agree with my friend, silver market commentator David Morgan, when he says that the easy money has been made with gold and silver already, but the big money is yet to be made. For your own financial well-being, come along for the ride.

Patrick A. Heller owns Liberty Coin Service in Lansing, Mich., and writes “Liberty’s Outlook,” the company’s monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Coin Update (www.coinupdate.com) and Financial Sense University (www.financialsense.com)

By Terry Wooten
New York — (Kitco News): Rhodium prices could rise substantially during 2010, driven largely by strong fabrication and investment demand, the CPM Group Platinum Group Metals Yearbook 2010 said Tuesday.

The report by the New York-based metals consultancy also said price support will be accentuated by the concentration in the metal’s supply and demand. CPM said about 72 percent of rhodium’s supply comes from South Africa. Output there has benefitted from the increased mining of the rhodium rich UG2 ore body.

“A shortfall of resources such as electricity, water and labor, however, could compromise mining activity in South Africa,” CPM said. The report noted such factors affected production in 2008 and helped drive rhodium to record highs.

CPM said that about 85% of rhodium’s fabrication demand comes from auto catalysts. “The concentration of fabrication demand has been and seems likely to continue to play an important role in driving the price of the metal higher during 2010,” CPM said in the Outlook.

“After weakening over the past two years, the global auto market is expected to show strength this year,” the report said. “This, coupled with the global tightening of emission standards focused on reducing NOx emissions, is expected to boost fabrication demand for the metal during 2010 and beyond.”

The Outlook noted that total rhodium supply in 2010 is projected to rise 4.8% to 1,054,820 ounces. In 2009, total supply was 1,066, 217.

An increase in South African production was largely responsible for the increase in rhodium min production, which was up 4.0 percent from 2008, CPM said.

South African rhodium production in 2009 was 722,407 ounces, up 14.1 percent from 2008 levels. The increase followed two consecutive years of decline due to a range of production problems that plagued the PGM mining industry in that country.

CPM said the growth rate in South African rhodium has been greater than the growth rate of South African platinum and palladium production. “This no doubt reflects increased focus on the rhodium-rich UG2 ore body and efforts to increase the recovery of rhodium from all ore processing, given the tight market conditions and high prices for this metal” CPM said.

CPM noted that investor activity in rhodium increased when the price was rising in 2008. The report noted that investors typically buy an asset when the price is on the rise, even though that may not be the best strategy.

“If investors purchased this metal at the time when rhodium prices were peaking in 2008 they may be highly unlikely to liquate their positions and most likely would hold on to their metal for at least a few years in anticipation of prices reaching those high levels once again, CPM said.

Likewise, the report said, those who bought the metal closer to $2,000 are not likely to liquidate their positions in anticipation of maximizing their profits. Several trading companies and investors bought rhodium in late 2008 and early 2009 when prices had dropped into a range around $1,050 to $1,400, CPM said.

The Outlook emphasized that hedge funds and wealthy individuals are typical investors in physical rhodium One Canadian retailer of precious metals this year began offering one ounce, five ounces and ten ounces of pure rhodium sponge. “There is a possibility that the investment market for this metal will expand following this move,” the report said.

Courtesy: coinlink.com

Strong fundamentals positive for platinum group metals – CPM

Investors are expected to remain attracted to platinum in 2010 because of potential price appreciation based on the metal’s tight supply, increasing fabrication use and investor demand.

Author: Dorothy Kosich
Posted:  Tuesday , 29 Jun 2010

RENO, NV - 

A combination of constrained supplies, rising fabrication and increased investor interest in PGMs is expected to drive these metals prices higher in the near future, New York metals consultants CPM said in a presentation Tuesday.

In CPM’s Platinum Group Metals Yearbook 2010, the analysts expect platinum demand to benefit from the global economic recovery this year.

Investors purchasing platinum for its safe haven attributions are likely to be outnumbered by those purchasing the metal for its tight market balance. Nevertheless, CPM said, “Investors are expected to remain attracted to platinum because of the potential for price appreciation based on the metal’s positive supply and demand fundamentals.”

Platinum ETF investment holdings are forecast to continue to rise this year.

“Given the forecast for strong investment demand during 2010, there is an expectation that there will not be sufficient metal coming into the market from newly refined supplies to meet both rising fabrication demand as well as robust investment demand,” CPM suggested. “This scenario suggests an extremely tight market, which would push platinum prices higher.”

CPM forecasts that global platinum mine production may rise 5.6% this year to 6,658,461 ounces. 

The largest platinum producer South Africa “is confronted with certain resource constraints which are not expected to be resolved in the near future and are expected to inhibit supply from the country, irrespective of how high metals prices rise.”

New mine production coming on line is expected to boost South African output to 5,112,174 ounces this year, up from 4,845,000 platinum ounces mined in South Africa in 2009.

Platinum production from Russia is forecast to increase from 831,000 ounce in 2009 to 890,000 ounces this year, according to the yearbook.

CPM projects that total newly refined platinum supplies will rise 5.5% from 7,043,000 ounces last year to 7,468,461 ounces this year.

Secondary platinum recovery, which fell 25% last year to 750,000 ounces, is forecast to increase 8% this year to 810,000 ounces due to the present improvement in platinum prices and pick up in the auto sector.

“Platinum fabrication demand is forecast to rise at a healthy pace during 2010,” CPM advised, “driven largely by an improvement in global economic activity and restocking of metal by users.”

Total platinum fabrication demand dropped 4.1% to 6,584,000 ounces in 2009. The yearbook projects fabrication demand will recover 8.4% to 7,137,000 ounces this year.  However, CPM predicts the growth in demand for platinum jewelry during 2010 “is forecast to be relatively weak compared to 2009.”

“The declining platinum price volatility, at least during the first three months of 2010, coupled with an improving economic environment that could boost discretionary spending among consumers, are both factors that could supply platinum jewelry demand,” CPM suggested.

In their analysis, CPM noted investor interest in platinum futures remained high in 2009 and early this year. Commodity funds and other institutional investors held large net long positions throughout last year.

Combined trading volumes of platinum declined 30.4% to 101.7 million ounces on Nymex and Tocom last year.

Unfortunately, there were no Platinum Eagle coin sales by the U.S. Mint in 2009 because the Mint had run out of coins due to strong investor demand. “The Mint plans to produce these coins sometime around July or August this year,” CPM advised.

PALLADIUM

Total palladium supply reached 7.6 million ounces last year, the third consecutive year that total palladium supply declined.  This year total supply is expected to increase 8.2% to 8,265,706 ounces, according to CPM’s forecasts.

However, CPM cautioned, “The increase in supply is not expected to be enough to meet the needs of both fabricators and investors.”

Meanwhile, total palladium fabrication demand dropped 7.5% last year to 7,170,500 ounces. Total fabrication demand is forecast to increase what CPM called “a healthy 8.2% pace in 2010, reaching 7,795,000 ounces.”

In their analysis, CPM said palladium investment demand rose sharply last year and in the first quarter of 2010 due to several factors including the expectations of a tight supply/demand balance in the palladium market. The launch of a new palladium backed investment products and the continued increase in investor interest in commodities as an asset class also generated palladium investment demand.

Trading volume for palladium on both Nymex and Tocom was a combined 45.5 million ounces last year, down 44.1% from 81.4 million ounces traded in 2008.  Combined inventories of palladium in both Nymex and Tocom vaults were up 46.1% for a total of 673,735 ounces at the end of last year.

RHODIUM

Newly refined total rhodium supply was up 4% at 1,006,217 ounces in 2009. Total supply of newly refined rhodium is projected by CPM to increase 4.8% to 1,054,820 ounces this year.

The growth rate in South African rhodium production has been greater than the growth rates of South African platinum and palladium production, CPM observed. “This no doubt reflects the increased focus on the rhodium-rich UG2 ore body and efforts to increase the recovery of rhodium from all ore processing, given the tight market conditions and high prices for this metal.”

Nearly 85% of mined rhodium supply comes from South Africa. “Due to this concentration, total rhodium supply is sensitive to the various factors pertinent to South African mining,” CPM said.

“Rhodium mine production in South Africa will be negatively affected by the tightness in and any potential future shortfall of South African electricity supply, as well as labor issues. Rhodium supplies meanwhile will be positively affected, to some extent, by the ongoing reliance on UG2 ore in PGM mining.”

Overall South African mine production of rhodium is forecast to total 754,061 ounces this year, up 4.45% from 2009.

Rhodium production in Russia is expected to increase to 87,000 ounces this year, according to the yearbook.

CPM also forecasts that total rhodium fabrication demand may rise 11% to 992,273 ounces this year.

To order the CPM Group’s Platinum Group Metals Yearbook 2010, go to www.cpmgroup.com

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“100th Anniversary of the Canadian Navy”

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