Monday, 16 September 2019 06:52 GMT
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Stuffing the diamond goose a bit more gold is copper a "buy"? and more...




(MENAFN - ProactiveInvestors)Diamonds and precious stones Headlines this week were unsurprisingly dominated by the two major producers that managed to reaffirm the markets fears over too much production and not enough sales. However the reaction to this concern could not be more different. DB announced their third production cut this in 2015 to leave full year guidance at 29Mcts (from 29-31Mcts & 31-33Mcts) no sales data was provided. Alrosa on the other hand driven by the obvious benefits of a weak rouble continue to push on with their production plans despite the obvious collapse in demand. Full year production guidance of 38Mcts has been reaffirmed but more of a concern was a 43% decline in gem-quality sales (Industrial down 17%) during a period that saw a 20% uplift in production to over 11Mcts. Inventory-wise I now estimate that Alrosa has almost 20Mcts in the safe potentially rising to around 22-23Mcts by the end of the year. Thought of in another way about 15% of global production in 2014 or based upon current demand trends at least 20% of global supply. Yet the company forecasts prices after falling 8% in Q3 will be stable in Q4. I hope they are right. Precious metals After the efforts in recent trading sessions the precious metal complex seems to have taken a breather. Gold hit $1191 last week. Prompting some wise old souls to bank that >$100/oz. return. Amusingly when asked how gold has done this year most reply down 5-10% well prior to the weakness in the last couple of days it had had "+" sign in front of it (albeit briefly). Not what the forecasters had predicted at the start of the year. I remain somewhat controversially of the view that we could yet see $1200oz. in 2015. Happy to resend my gold thoughts from last week if interested. Elsewhere commentators are again talking of a US interest rate hike just this time in December and in 2015... and the Venezuelans are getting ready to drop 80tonnes of gold into the market...conveniently forgetting they already mortgaged a portion of their reserves to Citi earlier in the year. This week: Gold: (0.5%) Silver: (1%) Platinum: (0.5%) Palladium: (1.5) Rhodium: Flat Base metals: Unsurprisingly after the Glencore-inspired rally in the lesser known base metals there has been an element of profit taking as traders look back at the warehouses and conclude that actually we remain pretty well balanced in the near term and frankly not many are willing to take a bet 18-24 months out right now. In an admittedly contradictory note though I see Bloomberg has helpfully noted that "the 20 largest brokers on the Shanghai Futures Exchange ranked by open interest held a combined net-long position of 14388 copper contracts on Friday from 9184 lots a week earlier" These companies held 175294 long positions and 160906 short positions the data showed. Jinrui Futures Co. a unit of Jiangxi Copper Co. China's largest producer is the biggest holder of copper positions which are being used as a proxy for the Chinese economy. On that theme our erstwhile economics doyen Simon French (he that claims to be considering his next missive by watching the test match on a discreetly placed iPad) this morning noted that Chinese house prices on an annualised basis are declining at the slowest rate since August 2014 and could even move into positive territory next month. Watch the red metal if this happens; I expect to see some more supply disruptions and am becoming much more confident here... Poised to pounce. This week: Aluminium: (6%) Copper: (1%) Lead: (4%) Nickel: (2%) Tin: (0.5%) Zinc: (3%). Bulk commodities: Chinese crude steel production declined by around 3% last month pulling iron prices to around 3-month lows. The fall-out from the ongoing furore over Sinosteel has raised more than a few eyebrows and does not bode well for the industry and the obvious impact in the near term on iron ore prices especially as the big three continue to increase output. Not helping matters is the World Steel Organisation. Last week they forecast steel demand in China would decrease by -3.5% in 2015 and -2.0% in 2016 after hitting a demand peak in 2013. Global steel demand will shrink 1.7% to 1.5 billion tonnes this year before expanding modestly in 2016. Company announcements/news/meetings: Gemfields Buy (PT: 75p) We were fortunate enough to host a sales team presentation Ian and Janet during the week. Whilst no new news was disclosed we remain confident that despite the inevitable concerns over pricing throughout the wider gemstone industry Gemfields will continue to grow in line within market demands and continue to increase returns to shareholders accordingly. Griffin Mining Under review (PT: under review) Griffin Mining sadly experienced another fatality at its Caijiaying operations on 17 October. With underground operations suspended the company confirmed it would continue to process stockpiled ore for a minimum of two months at current rates. Following a change of analyst we have placed our recommendation and financial forecasts under review. Major movers this week: Amara (15%) management buying stock Anglo American (12%) weak Q3 and Alrosa impact Aureus (12%) operational failure halts production Acacia (hold PT:250) Q3 results SHG +15% Rambler (25%) Lonmin (20%) Ved (12%) Next week: Updates from Petra - Keep an eye out for our preview note Barrick Gold Kaz Minerals & First Quantum


Stuffing the diamond goose a bit more gold is copper a "buy"? and more...

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