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TGB could Explode on Copper Demand outstripping supply by 265,000 tons in the first four months of the year

July 19, 2007 – Comments (0)

Gold futures tap six-week high as copper ralliesBy Myra P. Saefong & Polya Lesova, MarketWatchLast Update: 10:35 AM ET Jul 19, 2007
SAN FRANCISCO (MarketWatch) -- Gold futures climbed past $676 an ounce Thursday morning, marking their highest level since early June, as copper prices rallied as much as 2% to their highest level in a week. Concerns over high energy prices and overall weakness in the U.S. dollar continued to support gold prices, while strong demand for copper and expectations for growth in consumption lifted copper. Gold for August delivery was last up $20 at $675.70 an ounce on the New York Mercantile Exchange after climbing as high as $676.50, the contract's highest level since June 6. September copper gained 1.7%, or 5.95 cents, to $3.6225 a pound. It touched $3.635, its highest level since July 12. "Copper is partly riding higher on the back of the fund buying driving lead to a record high and tin to a 25-year peak" on the London Metal Exchange, said Martin Hayes, an analyst at BaseMetals.com. Although LME copper stocks rose above 100,000 metric tons, that was due to metal arriving in Asian warehouses, he said in e-mailed comments. "That was expected, and may be coming to an end now." At the same time, he pointed out that "all the labor disputes are still dragging on." Chile's Codelco said output has been reduced at three of its mines, due to a four-week strike by contract workers, according to Hayes, and production at the El Salvador mine in northern Chile was halted for a third day after workers blocked entrances. "The company's Andina and El Teniente divisions, both in central Chile, are producing at about 90 percent of normal levels." Copper found additional support from an International Copper Study Group report showing world refined copper consumption outpacing production by 265,000 tons in the first four months of the year, according Edward Meir, analyst at Man Financial, in a morning note. "This compares with a surplus of 35,000 tons in the year-ago." Also of note was a report that China's economic growth accelerated to 11.9% in the most recent quarter, rapid even by Chinese standards. Economists had expected China's economy to grow 10.8% for the three months ended in June. Read more about China. "This is keeping the Chinese economy on course for a staggering fifth straight year of double-digit expansion and has dispelled any notion that the authorities are having success reigning in the booming economy," Meir said. Gold staminaAs for gold, "prices continued at levels above $670 per ounce amid continued weakness in the U.S. dollar and near 11-month highs in the crude oil price," Kitco Bullion Dealers analyst Jon Nadler said in a morning note. On Wednesday, gold futures closed up $7.80, or 1.2%, at $673.70 an ounce after a high of $675.30. In the currency markets Thursday, the dollar traded mixed against the euro and the yen, stabilizing after falling to fresh lows in the previous session. See Currencies. "Gold remains firm and the dollar remains under pressure staying near record lows versus the euro and sterling with Fed Chairman, Ben Bernanke's Congressional testimony yesterday weighing on the currency," said Mark O'Byrne, director at Gold & Silver Investments Ltd. Bernanke reiterated that "upside risks to inflation remain the Fed's main concern, [though] markets were more interested in his references to other problems," said O'Byrne in a research note. See Fed story. Meanwhile, crude futures prices continued higher, toying with the $76-a-barrel level, feeding worries over high energy prices. See Futures Movers. Also on Nymex, September silver gained 6 cents at $13.35 an ounce, October platinum added 80 cents to $1,338 an ounce, and September palladium rose $1.30 to $373.50 an ounce. Gold warehouse inventories were unchanged at 6.97 million troy ounces as of late Wednesday, according to Nymex data. Silver supplies dropped to 133.3 million troy ounces, down by 521,465 troy ounces, while copper supplies stood at 21,065 short tons, off 295 short tons. Indexes tracking mining and metals stocks climbed again Thursday. The Philadelphia Gold and Silver Index (XAU : phlx gold silver index capital-weightNews , chart , profile , moreLast: 156.73+2.32+1.50%
12:02pm 07/19/2007
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XAU156.73, +2.32, +1.5%) was last at 155.83, up 0.9%. The CBOE Gold Index (GOX : CBOE Gold IndexNews , chart , profile , moreLast: 161.94+2.26+1.42%
12:21pm 07/19/2007
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GOX161.94, +2.26, +1.4%) rose 160.94 points and the Amex Gold Bugs Index (HUI : amex gold bugs index equal-$ weightNews , chart , profile , moreLast: 369.09+3.99+1.09%
12:21pm 07/19/2007
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HUI369.09, +3.99, +1.1%) was at 367.96 points, with both trading 0.8% higher. As for sector exchange-traded funds, the StreetTracks Gold Trust ETF (GLD : streetTRACKS Gold Shares ETFNews , chart , profile , moreLast: 66.88+0.26+0.39%
12:02pm 07/19/2007
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GLD66.88, +0.26, +0.4%) was up 0.4% at $66.86, while the iShares Silver Trust ETF (SLV : ishares silver trust isharesNews , chart , profile , moreLast: 132.01+0.86+0.66%
12:02pm 07/19/2007
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SLV132.01, +0.86, +0.7%) added 0.9% to $132.10. The Market Vectors-Gold Miners ETF (GDX : market vectors etf tr gold miner etfNews , chart , profile , moreLast: 42.85+0.37+0.87%
12:02pm 07/19/2007
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GDX42.85, +0.37, +0.9%) rose 0.5% to $42.70. Myra P. Saefong is MarketWatch's assistant markets editor, based in San Francisco.
Polya Lesova is a MarketWatch reporter based in New York.