Gold Hits Multi-Month High, Silver Rises 30 Cents, Stocks Struggle and Slide

Gold prices surged Wednesday as a weakened US dollar weighed into the mix and more investors looked toward the yellow metal as US stocks struggled and slid for a fourth consecutive day. In the end, gold hit a three-month high, nearing $980 an ounce. In other commodities, silver leaped forward 30 cents, platinum climbed timidly, and crude oil remained unchanged.

New York precious metals trading figures follow:

• Silver for December delivery jumped 30.5 cents, or 2.0 percent, to $15.365.

• Gold for December delivery added $22.00, or 2.3 percent, to $978.50 an ounce — the highest point since June 4.

• October platinum rose $3.30, or 0.3 percent, to $1,230.10 an ounce.

Notable bullion quotes of the day follow:

"A liquidation of other commodities and realignment into gold" explains today’s rally, Miguel Perez-Santalla, a Heraeus Precious Metals Management sales vice president in New York, was quoted on Bloomberg.

"At least one of the questions that is currently being asked out there, is whether gold might break its recently established cozy relationship with stocks and go back to its ‘old ways’ this fall," wrote Jon Nadler, senior analyst at Kitco Metals Inc. "The ever-shrinking triangle pattern within which the yellow metal has been trapped for the past two months has a growing number of trading houses envisioning a breakout." [Click to read Nadler’s full commentary].

In London bullion, the benchmark gold price was fixed $9.75 higher earlier in the day to $964.75 an ounce. Silver was at $14.91 an ounce for a 17 cent gain. Platinum was set lower by $24.00 to $1,210.00 an ounce.

In related gold news, the US Mint increased gold coin prices for its UHR $20 Gold Double Eagles and First Spouse Gold Coins. The change is in response higher gold prices over the last several days.

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 ended unchanged Wednesday in volatile trading "as government data showed crude inventories declined less than expected last week as imports jumped again," wrote Moming Zhou and Myra P. Saefong of MarketWatch.

The Energy Information Administration (EIA) revealed in its weekly report that crude inventories fell 372,000 barrels to 343.4 million in the week ended Aug. 28.

New York crude-oil for October delivery closed to $68.05 a barrel.

"Unless there is sustained positive economic news there is no reason for prices to run above $75," Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as managing director at MFC Global Investment Management in Boston, was quoted on Bloomberg. "Until demand really picks up or supplies are disrupted, the key driver will remain the economy."

The national average for unleaded gasoline fell a half penny $2.602 a gallon, according to AAA data. The price is 2 cents lower than last week, 5.3 cents higher than a month back, and $1.08 lower than a year ago.

U.S. Stocks

U.S. stocks ended lower Wednesday "as jitters about the economy prompted investors to unload some shares for a fourth-straight day even after a sharp drop in the previous session," wrote Angela Moon from Reuters.

The Dow Jones industrial fell 29.93 points, or 0.32 percent, to 9,280.67. The S&P 500 Index declined 3.29 points, or 0.33 percent, to 994.75. The Nasdaq Composite Index lost 1.82 points, or 0.09 percent, to 1,967.07.

Gold, Silver, and Metals: Prices and Commentary – Sept. 2
by Jon Nadler, Kitco Metals Inc.

Professor Panarin Ignites Gold. Not. Funds, On The Other Hand…

Good Afternoon,

Gold prices once again remained ‘in the zone’ overnight, unable to break to either side of the (narrowing) range we have now had in place for quite some time. The market was still on the beat on a $953-$958 path during the overnight hours, while oil and the dollar provided little impetus for more sizeable moves. Oil was trading a hair above $68 early this morning, apparently unfazed (as yet) by the discovery of a 3 billion barrel deposit by BP in the Gulf of Mexico.  

ADP employment data offered a bit of a departure from the recent string of positive numbers seen in the US economy. Private sector payrolls fell by 298,000 last month – a number somewhat larger than had been expected. Key labour market reports are still to come before the long weekend starts. Oil regained some composure, and the dollar added small bits to its earlier gains in the wake of the ADP figures. Dow futures once again did not look too healthy in the wee hours.

New York spot trading started with a minor ($1.10) loss in gold this morning. The metal was quoted at $956.10 per ounce on the bid side. Silver fell 15 cents to open at $14.87, while platinum suffered a more sizeable $23 loss to start at $1202 per ounce. We have not seen platinum dip under $1200 since late July. Palladium was off by $8 at this morning’s session start, quoted at $280.00 an ounce. The slowdown in the automotive world resumed just one week after the cessation of the CFC program in the US. Dealers are once again reporting vacant showrooms.

After that, it was all…uphill and off to the races, for the rest of the day. Gold added as much as 2.25% in the mid-morning fund-driven buying frenzy that followed the ADP report. We do not believe that this was a buying spree precipitated by the 48,000 jobs difference between expectations and reality. If anything, the jobs data points to further deflationary problems to linger while the economy recovers. That much, (the rising unemployment part) we have all been warned about. Crude oil does not hold the answer either, not today.

A virtual doubling in black gold’s price to its recent $75 pinnacle has once again raised the spectre of demand destruction, as well as a destruction of another kind: that of the fragile, emerging US economic comeback. No, today’s move in gold and, to a large extent silver, was all about funds, funds, and more funds. Small, individual trend-followers could be getting ready to pounce and buy when/if the four-digit mark comes into view. Media attention is sure to rekindle. This is, the fourth try.

At least one of the questions that is currently being asked out there, is whether gold might break its recently established cozy relationship with stocks and go back to its ‘old ways’ this fall. The ever-shrinking triangle pattern within which the yellow metal has been trapped for the past two months has a growing number of trading houses envisioning a breakout.

Note that ‘breakout’ does not automatically imply a break up – albeit today’s action appears promising. It is simply a break – one way, or the other- out of the triangle formation. Odds makers can have a field day with this one. Every one of the analyses that offers a scenario for gold prices to make new highs also hedges it by allowing for the possibility that a breakdown could also occur. Such suspense remains conspicuously absent from most hard-money communiques. That camp expects -no, make that-demands a major rally. It will take today’s move as a celestial sign that ‘it’ has begun. We remain in the ‘agnostic’ camp (as in, we do not know the unknowable).

A source that treats matters from both the technical as well as fundamentals viewpoints without injecting passion or a sales agenda into its findings, just released its take on the state of (technical) affairs in gold. We bring you Goldessential’s analysis, as written prior to this session’s rally:

fig.1

 "Analyzing trend and pattern studies, charts reveal the formation of a triangle consolidation pattern following the strong run-up from around $680/oz an ounce that was initiated in

Q4-2008 (fig 2).

On the top chart (fig 1), the series of lower highs (red arrows) and higher lows (green arrows) can be seen on a detailed (daily) chart. Volatility studies – measured by taking a 30-day Standard Deviation (in green sub-chart)-, have shown a strong reduction of the volatility as of lately, and suggest the possibility of a pending momentum fueled break-out.

At this moment, the boundaries of this consolidation triangle are situated at $967 to the topside. A break above here could see volatility gaining for a test higher should the $970 level subsequently give way. However, a momentum-based break-out is only expected to gather momentum above the key medium-term resistance levels that are lying close by at $980-$990 an ounce, after which gold has a very decent (chart-based) opportunity to move past the $1,000 an ounce mark. Key target here is the previous $1,030.80 high, followed by $1,050. Nevertheless, a rejection of the $980-$990 area would fit in the (still ongoing) series of failures to post a higher high on the longer-term graphs, with every single attempt (we have counted three) to break above the record high of $1,030.80 an ounce from March 2008 high having so far ended up in a short-term reversal.

Assessing longer-term charts, the odds for the aforementioned test of the $980-$990 area have slightly increased, with price action and pattern formation having held up well during the traditional summer doldrums. The sustainability of any occurring break-out can be discussed, although falls out of the scope of this (technical) analysis (see publication; August 12: ‘ETF and speculative flows, is the sky still the limit’)

Conversely, a confirmed break below the $930 an ounce mark triangle support would be an initial bearish signal, with downside potential following such a bearish break in our opinion by far exceeding the sustainable upside potential. Support is densely layered through the lower $900’s, although any ‘concrete’ support areas (unlike resistance levels to the topside) are relatively far off at $906 (minor), $864, $845-$830, $800, $760 and ultimately $730 an ounce (long-term chart support), with the latter being a must hold on the long-term charts not to invoke further price deterioration (fig 3).

Fig 3: Long-term (daily) support graph, Spot Gold, $/oz)

On the shorter-term charts, initial support is suggested at $935. Below $930 opens for $925 an ounce, followed by $920, $912 and $906 an ounce. We add that short-term movements could continue to gravitate around the $940-$945 area, which has served as a mid point over the last few months, and which is roughly coinciding with the middle of the earlier mentioned consolidation triangle."

In the interim, global investors continued to unload equities in most markets (except China’s) overnight. Sellers were seen emerging in growing numbers following yesterday’s slide in the Dow. Japan’s Nikkei average lost nearly 250 points, the Hang Seng dropped nearly 2%, and assorted magnitude losses were recorded from Frankfurt to London this morning as well.

Underlying the rush for the exit doors is the apprehension that the speculative fever which has in good part defined the tremendous bounce in global equities since this spring was just that: speculation on the breadth and depth of the economic recovery. There are also fears about the integrity of the financial system – at least parts of it. Banks have been under investor selling pressure recently, despite a growing number of them announcing the repayment of TARP funds.

More and more US banks are checking out of “Hotel Geithner” of late. On the other hand, the FDIC’s Sheila Bair sees potential trouble brewing in the commercial real estate mortgage sector. Thus, after nearly synchronized and near-50% run-ups in certain markets, investors appear ready to perhaps sit it out on the sidelines for the September-October period. That’s a big ‘perhaps’ but it is shaping up in that direction, thus far.

The latest roundup of the numbers, as at 14:00 NY time showed the US dollar at 78.38 on the index (off by 0.38), crude oil at $67.75 pbbl (down 30 cents), palladium down $3 at $285.00 per ounce, platinum up $4 at $1229.00 per ounce. The leaders were silver, up 31 cents at $15.33 per ounce, and gold – the headline grabber today- up $19.00 at $976.20 bid.

Back to the screens. Unless, of course, you are heeding the alarm bell of one Igor Panarin, a Russian Professor who says that events are continuing to confirm his doomsday prediction first made over 10 years ago, that the United States will completely collapse like the Soviet Union before the end of 2010, and warns that the chaos could begin to unfold in as little as two months. In which case, you are already setting up your tent in Fiji, and enjoying the scenery while Rome prepares to burn far, far away.

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