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Yamana Gold, Inc. Message Board

  • jmdpampa jmdpampa Sep 20, 2008 11:57 AM Flag

    Article on commoditites. Barron's

    Credit Storm Hits Commodities
    By ANDREA HOTTER

    Financial-sector storms keep copper prices in a vise, while gold soars.

    THE HURRICANE RIPPING THROUGH the financial sector is creating havoc for commodities, too. Cash -- with some money-market instruments excepted -- is again king.

    Liquidity in commodity trading has dried up, and investors are cashing in their assets, regardless of fundamentals. The volatility rivals that found in the financial markets. The latest wave of banking crises has pushed copper and the base metals to multi-month lows and grains far off their summer highs; it has left crude subject to jagged price movements between $90 to $100 a barrel.

    Gold struggled to attract buying until after the U.S. government announced its bailout of American International Group (ticker: AIG). When it finally did, gold prices enjoyed their biggest one-day dollar-gain ever. But as quickly as buyers snapped up the metal, they shed it on Friday as U.S. equity markets rallied. (See Follow-Up "AIG's Stock Is Likely to Be Toast".)

    "Volatility [in commodities] is likely to get worse as liquidity dries up on counterparty risks and participants become unwilling to take on fresh risk; deleveraging and risk-aversion are set to remain in vogue," says London-based Calyon analyst Robin Bhar.

    All this has given commodities substantial downside risk. For while new homes, highways and automobiles will still be built and the world's growing population will need to eat, moderating global growth and bad news from Wall Street will keep investors pulling money from commodities to meet obligations elsewhere. And commodity prices are subject to outside forces because the fundamentals don't matter right now. This is true of grains, despite strong demand and ongoing supply constraints. Until its brief burst last week, it also was true of gold.

    Global steel prices are slipping as demand weakens in key markets across the world, with credit restrictions biting and consumers working from inventories. In platinum, a metal with apparently superior supply-and-demand fundamentals, a dramatic sell-off by investors seeking cash has more than halved prices since the start of the year.


    --------------------------------------------------------------------------------
    DOW JONES REPRINTS



    For commodities like copper, the global implications are severe. Demand for the industrial metal is falling as even Chinese consumers step away. Selling copper looks like a safer bet, traders say.

    The markets are watching to see whether money managers will continue to unwind the ever-popular "short-greenback/long-commodities" trade that buoyed prices. Right now, many are concerned about "how much more of the U.S. economy may end up nationalized and therefore the creditworthiness of the U.S. national debt," says Saxo Bank's John Hardy.

    But there's light at the end of the tunnel. Even though commodities could stay under pressure as global growth moderates and the dollar stabilizes, a sustained commodity collapse is unlikely, analysts believe. Emerging-market demand won't vanish, and the supply side is still relatively constrained.

    NYMEX'S COMEX NEARBY GOLD futures saw its biggest weekly pop since 1980, rising $100.30, or 13%, to $860.60 on safety buying after this week's financial tumult. Gold prices pulled back Friday after the U.S. government announced several measures to quell market nerves.

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    • Again, "gold gave up it's gains Friday"
      How can gold have given up it's gains friday
      (close 871) from Thursday (close 854)
      My numbers way off here?

      Which book was that when the gov erases history
      "1984" ?

    • Here's where I disagreed.

      "The latest wave of banking crises has pushed copper and the base metals to multi-month lows and grains far off their summer highs; it has left crude subject to jagged price movements between $90 to $100 a barrel."

      Fall in CPI mostly due to forced liquidation and the dead cat dollar rally.

      "For while new homes, highways and automobiles will still be built and the world's growing population will need to eat, moderating global growth and bad news from Wall Street will keep investors pulling money from commodities to meet obligations elsewhere."

      Yes, there has been some liquidation, but that was expected. There is also an anticipated rotation into commodities by those fleeing financial instruments. The author seems to perceive a "commodities substantial downside risk" by only looking at the capital withdrawn but not money rotating into the sector. The reason IMO that the markets are falling is that capital is being withdrawn and is now looking for a safe place to park until the dust settles.

      "Global steel prices are slipping as demand weakens in key markets across the world, with credit restrictions biting and consumers working from inventories."

      Could it be also said that consumers are "eating into inventories"? Most all know what happens next, but for those who don't, when inventories are reduced they must later be replaced. This demand is then overlaid consumption and prices RISE as a result. Rising prices in a financial downturn attract attention and a speculative momentum is created. Or so the bogfit theory goes!

      "For commodities like copper, the global implications are severe. Demand for the industrial metal is falling as even Chinese consumers step away. Selling copper looks like a safer bet, traders say."

      If every trade has a long and a short, then logically you can find "traders" who take almost any and every position. As far as Cu is to Yamana 60% (?) production is hedged. China has long-term infrastructure plans that will continue, which includes electrification of the countryside.

      "The markets are watching to see whether money managers will continue to unwind the ever-popular 'short-greenback/long-commodities' trade that buoyed prices."

      I suppose they will, as long as those positions still exist on the books of funds in trouble, but that can't last forever. Hedge funds might be in trouble but there is still a lot of money floating around the world. When Cu gets cheap enough someone will step up and buy it, and any profitable business, like a gold/copper miner, going forward will enjoy tremendous popularity with the capital now out of the general financial markets. I would be cautious of Cu miners with marginal earnings because some may suspend operations if the Cu market falls.

      b.

      • 1 Reply to bogfit
      • This article seems dated to me. Was it written before this weeks debacle?

        The deleveraging story is out the window as far as I'm concerned. It's about safety and it's always been about inflation. Anyone with any knowledge in macroeconomics understands that this potential bail-out of all bail-outs will be hyper-inflationary.

    • Most likely Friday's buying euphoria will be gone come Monday but the question is whether traders will go back to the deleveraging sell commodities mood or say, massive money printing is coming our way so let's buy gold.

      We'll soon find out.

      • 1 Reply to jmdpampa
      • It sad that our gov turned it' cheek and allowed the greedy scum bag wall street crooks and Banking ceo's distroy the US economy. All of the dems and rep are responsible for this mess and it may take 25+ years for the US to recover if we don't become another Haiti first. The financial raly on Friday will be very short lived as the world digests the economic fall that will happen with the fed bail outs to save the banking whores that raided/stole working class peoples money. DC is printing new money like theirs no tomorrow with only $140 bil in Fort Knox gold to back up trillions of dollars of debt. If their was ever a good time for the average person to buy Gold and Silver and protect their families well being now is the time to buy with both hands. It's beginning to look like a mad max movie.

 
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