Gold Falls Slightly, Silver and Platinum Advance

Gold on Wednesday pulled back from a four-day winning streak and a two-month high despite rising crude-oil prices and a weakened U.S. dollar — conditions that tend to increase the yellow metal’s appeal. Silver and platinum advanced. U.S. stocks retreated.

In New York precious metals trading futures:

• Silver for September delivery rose 6.5 cents, or 0.4 percent, to $14.76 an ounce.

• Gold for December delivery — the most active contract — fell $3.40, or 0.4 percent, to $966.30 an ounce.

• October platinum gained $16.30, or 1.3 percent, to $1,293.10 an ounce.

Notable bullion quotes of the day follow:

"$960 an ounce had proved to be a very strong level of resistance as investors doubted whether gold could sustain itself above that in the short term," analysts at the London-based firm Bullion Desk were quoted on MarketWatch." With the dollar under increasing pressure a series of closes above $960 an ounce should see gold pushing to fresh highs."

"Bullion prices started the midweek session down a bit in overnight trading," Jon Nadler, senior analyst at Kitco Metals Inc., wrote earlier in the day. "Gold steadied near $965 per ounce and was still seen as overbought, but also as remaining dependent on goings-on in the dollar and oil pits." [Click to read Nadler’s full commentary].

In London bullion, the benchmark gold price remained unchanged at $960.50 an ounce. Silver gained 59 cents to $14.67 an ounce. Platinum was fixed $42.00 higher to $1,278.00 an ounce.

Gold, considered a hedge during times of high inflation and economic uncertainty, tends to follow oil and move opposite to the U.S. dollar. A rising greenback makes dollar-denominated commodities, like bullion, more expensive for holders of other world currencies.

Oil and gasoline prices

Oil rose Wednesday "as investors focused on U.S. dollar weakness and shrugged off a government report showing a rise in inventories," wrote Polya Lesova of MarketWatch. The Energy Information Administration (EIA) weekly report said demand for fuel last week rose 3.1 percent to 19.3 million barrels. Crude stockpiles, however, increased by 1.67 million barrels to 349.5 million.

"The market is getting support from the demand number, particularly the increase in distillate demand," Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut, was quoted on Bloomberg. "There was also a big drop in distillate supplies. Heating oil has been the strongest market this week and is leading the way higher."

New York crude-oil for September delivery climbed 55 cents, or 0.8 percent, to close at $71.97 a barrel.

Prices at the pump jolted higher. AAA reported that the national average for unleaded gasoline rose 2.4 cents in one day to $2.585 a gallon. The price is 7.4 cents higher than last week, 2.6 cents lower than a month back, and $1.29 less than a year ago.

U.S. Stocks

U.S. stocks finished lower Wednesday "as investors became cautious in the wake of some weaker-than-expected economic reports," wrote Catherine Clifford of CNNMoney.

The Dow Jones industrial average slid 39.22 points, or 0.42 percent, to 9,280.97. The S&P 500 Index fell 2.93 points, or 0.29 percent, to 1,002.72. The Nasdaq Composite Index declined 18.26 points, or 0.91 percent, to 1,993.05.

Gold, Silver and Metals: Prices and Commentary – Aug 5
by Jon Nadler, Kitco Metals Inc.

Do Buy in Dubai? What about Mumbai?

Good Morning,

The dollar-yen duo made some advances overnight, fueled by concerns that rallies in certain markets were about as overdone as George Hamilton’s perennial tan. At the same time, crude oil lost some of its…energy as apprehensions about its own recent moonshot rose ahead of US inventory reports being released. Technical analysts see scope for black gold to reach the $73 level this year, but also expect the commodity to be able to hold above $66 per barrel when/if corrections take their toll. For its part, the dollar’s eventual recovery against the euro is now not expected to break above $1.38 according to technicians over at RBC Capital Markets.

Asian markets took a seat on the bench to rest overnight, following four trading sessions of serious gains. Participants began to notice typical patterns of lessening or non-reaction to bullish news and rising concern about bearish ones, and they commenced pulling some of their chips off the market tables. On the other side of the world, signs that the UK is recovering were reflected in its government’s likely upcoming decision to end bond purchases, after having spent the equivalent of 10% of GDP to revive the badly sagging economy. Finally, retail sales in the EU fell once again in June, led by a sizeable drop over in Germany.

Footnote: the UK’s rate of inflation will lead that of the G-7 in 2010 according to the OECD. No, Harare is not coming to Heathrow just yet, either. However, services are expanding, manufacturing is on the rise, and home sales have shown signs of stabilization. Rising unemployment will however continue to plague the country, in the same fashion that the US is experiencing the jobs echo from the recent slump.

Bullion prices started the midweek session down a bit in overnight trading. Gold steadied near $965 per ounce and was still seen as overbought, but also as remaining dependent on goings-on in the dollar and oil pits. Technicians at Commerzbank offered up this snapshot analysis for the yellow metal:

"Gold’s advance to the highest level in two months may stall before it reaches so-called resistance at $972 an ounce, Commerzbank AG said, citing trading patterns. The resistance level is the 78.6 percent retracement of the move down from a June peak of $990.75, Karen Jones, a technical analyst with Commerzbank, wrote in a note yesterday. Resistance levels are where sell orders tend to be clustered.

Gold for immediate delivery fell 0.1 percent to $965.69 an ounce at 10:54 a.m. Singapore time. The precious metal, up 9.5 percent this year, touched $970.47 yesterday, the highest price since June 5. "Near-term strength is viewed as an elongated correction only," Jones said. "Our long-term bias remains negative. We view the $1,000 region as a ceiling for the market." A slide to less than $943.90, where there is 55-day moving average and Fibonacci support. "should be enough to alleviate upside pressure and cast attention back to $925, then the $904.80 support," the report said. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low."

The New York midweek session started off with a small loss for gold, as the metal fell $0.80 to $966.90 spot bid. Players remain on alert for further dollar moves and for signs that oil may commence a corrective move. Not much was seen in or expected from the stock index futures niche this morning. Polled traders pointed to conflicting news out of Dubai (a 40% drop in July sales as opposed to a 13% rise in H2 gold imports. " H2" is-what- five weeks old?) and to emerging (but equally conflicting) news from India as potentially canceling each other out as regards gold market sentiment. To wit:

"Gold jewellery sale volumes in Dubai fell around 40 percent in July on a year ago, as the economic downturn and summer heat deterred tourism, retailers said yesterday. Tourists are a large part of the market for Dubai’s tax-free gold, but recession has eaten into disposable incomes and hit the flow of visitors to the emirate, deepening the seasonal downturn in visitors as desert temperatures peak.

"There are no more tourists walking around the souk," said a salesman from ARY Jewellery based in Dubai’s old gold souk. "The situation for us is really bad, our sales are down nearly 40 percent. The heat and the fact that tourists have no money to travel are affecting the business and there are no indications of an improvement." Almost 8 million tourists visited the emirate, which brands itself as the City of Gold, last year. There were no official figures on the number of visitors so far this year, but hotel revenues in the emirate fell 40 on the year in May and June, according to a report issued by hospitality consultancy STR Global.

"I don’t see the situation improving much because the month of Ramadan is coming up soon and all people are thinking about is food, not gold," said Muhan Al Awadi, a Sales Manager at Al Ansari Jewellery in Dubai’s Gold and Diamond Park. Sales at his shop fell by as much as 50 percent in July, he added. Ramadan, a holy month for Muslims when they fast from sun rise to sunset, is expected to start on August 21.

Abu Dhabi, capital of the UAE, is less dependent on tourists than Dubai and saw sales in July up 30 percent on the year as expatriates bought jewellery before leaving for summer breaks. Gold has risen around 28.8 percent to about $955.55 an ounce yesterday from a low near $680 in October, as investors see the metal as a safe haven in a time of economic uncertainty. But in the Middle East retail consumers make up more of the market than investors and rather than buying gold, cash-strapped consumers are selling it. "At this time a lot of people in the Middle East are taking advantage of the high gold prices and selling their jewellery," said Rozanna Wozniak, Investment Research Manager at the World Gold Council, said."

This, as against the following:

"Indians have started buying gold jewellery and wholesalers are stocking up against anticipated price rises as the busy season gets under way in the world’s largest bullion consumer, dealers said on Wednesday. India, which accounted for more than 20 percent of global demand for gold jewellery in 2008, celebrates the Hindu festivals of Raksha Bandhan, Janmasthami and Ganesh Chaturthi in August, when demand for bullion usually picks up.

Elsewhere in Asia, gold’s rise to a two-month high above $970 an ounce spurred selling, but premiums for gold bars were steady at 70 cents to the spot London price in Singapore, suggesting that consumers would still buy on dips. "As against nothing earlier, there is at least something now. This month for the festivals, the real consumers will be buying, so demand has revived a bit," said Haresh Acharya, bullion desk head at Parker Agrochem Exports Ltd, a wholesaler in Ahmedabad. "However there is hardly any demand from northern India because of the below normal monsoon. If the monsoon fails, the full year will be very bad," said Acharya, referring to sales."

Silver continued to climb as the NY market opened for the day. The white metal rose 14 cents to reach $14.77 per ounce. Similar patterns were evident in the noble metals niche, where platinum added another $13 to climb to $1280 per ounce, and palladium gained $2 to the $277 level per ounce. The US Senate appeared ready to pour another $2 billion into the by-now-famous Cash 4 Clunkers programs. Informal discussions among traders and journalists are pondering how much in the way of noble metals will be recovered from said clunkers as they are supposed to be junked in the process, as against the offtake of same as tallied by the amount of new vehicles sold to the public. It might not be a surprise to learn that the recovered amounts could exceed the demand totals. At this point, this is still a hunch though.

This morning’s jobs report in the US revealed a loss of 371,000 positions in the July ADP index, making it the smallest such fall since October of 2008. The US dollar did not exhibit much in the way of material changes following the report – it was unchanged at 77.63 on the trade-weighted index. Gold however declined by nearly $4 and silver halved its previous gains, while crude oil turned slightly lower and was off 6 cents at 71.36 per barrel.

This stage of advance appears to be nearing a completion and we go with Mr. Fibonacci for the time being. Let’s see what the upcoming Bloomberg trader survey reveals when it is produced. This week, the participants struck out. Thus far.

* Due to travel, there will be no afternoon update published today. We return to our regularly scheduled broadcast on Thursday.

Happy Midweek to All.

Check out additional market resources at Live Bullion Spots, the Silver Calculator, U.S. Mint Collector Bullion Price Guide, and the Inflation Calculator.