Thursday, November 7, 2013

Heraeus, Nov 7 Commentary

Good Afternoon,

If you are watching CNBC this morning you would think the world revolves around the company Twitter. While the media is focused on the equity markets and the Twitter IPO, traders in the commodity market continue to play the range game. Here is a recap of the news this morning:

1.       Bank of England kept the interest rate at 0.50% and kept their bond purchasing program steady
2.       European Central Bank surprised the markets by cutting interest rate to 0.25% from 0.50% and signaled that they will keep interest rates low for as long as necessary   
3.       US weekly initial jobless claims at 336k and continuing claims at 2868k
4.       US GDP grew at 2.8% in the 3rd quarter faster than most estimates
5.       US personal consumption grew at 1.5%, less than expected
6.       GDP price index increased at 1.9%, more than expected

ECB is focused on not letting the European economies slip back into recession and pump maximum liquidity into the markets. Lack of inflation and stubbornly high unemployment rates are causing concerns. US economy grew at a faster pace in the 3rd quarter due to increase in inventory levels but there are underlying signs of weakness from business to consumer spending. Economic and political uncertainty in the US have been affecting business and consumers alike. US job markets are showing signs of life but the real unemployment rate and the quality of the jobs being created are both being debated. After all these data, we are right back at where we started… waiting for more “convincing” data to point us to the direction of the US and global economies and further central bank actions. Precious metals continue to trade in a range, gold $1300-$1325, silver $21-$22, platinum $1425-$1475, and palladium $725-$765. Any attempts to break these ranges have so far been met with stiff counter moves. We anticipate gold and silver to trade slightly lower on continuing debate over US FED bond purchase tapering. Platinum and palladium will move depending on next sets of economic data out of China and Europe with South African mine strike news in the background. We believe traders will continue to trade the ranges and jump heavily into a position once data becomes clearer. 

David M. Lee
Heraeus Metals New York LLC