Gold Falls Slightly, Silver Below $17, Stocks Retreat

New York gold futures ended slightly lower on Wednesday, pressured by a rebounding US dollar and tumbling oil prices. Silver and platinum averaged a fall of about 1 percent, with the former declining 9 cents below $17 an ounce. US stocks retreated from their 1-year highs after the Federal Reserve said the economy has "picked up," but kept its outlook mostly unchanged.

New York precious metals figures follow:

• Silver for December delivery fell 20.5 cents, or 1.2 percent, to $16.910 an ounce.

• Gold for December delivery declined $1.10, or 0.1 percent, to $1014.40 an ounce.

• October platinum lost $11.40, or 0.9 percent, to $1,327.80 an ounce.

Notable bullion quotes of the day follow:

"The weakness in the dollar is also contributing to the strength in the gold market," Brian Kelly, chief executive of Kanundrum Research, a commodities and macroeconomic research firm, was quoted on MarketWatch. "With the benevolent tailwind of a weak dollar, gold could easily trade to $1200 an ounce."

"Sell-off fears continue to swirl in the various gold dealing rooms we contacted during the overnight hours – they are based on the gargantuan long positions in NY, and on the uninterrupted (by any significant corrective action) manner in which prices have gotten where they now are. This, despite poor fundamentals," wrote Jon Nadler, senior analyst at Kitco Metals, Inc. [Click to read Nadler’s full commentary.]

In London bullion, the benchmark gold price was fixed earlier in the day to $1,010.25 an ounce, which was a $3.75 decline. Silver was at $17.10 an ounce for a 14 cent loss. Platinum was set lower by $5.00 to $1,325.00 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 tumbled, falling the most in five weeks "after a U.S. Energy Department report showed an unexpected increase in stockpiles as refineries idled units for seasonal maintenance and fuel demand dropped," wrote Mark Shenk of Bloomberg.

"With a rise across the board in all inventories the numbers today confirm that we are in a high supply and weak demand environment," Tariq Zahir, managing member of Tyche Capital Advisors, was quoted on MarketWatch. "We would not be surprised to see a weak energy market which could also be fueled further by a strong dollar or weak equity market."

New York crude-oil for November delivery slid $2.80, or 3.9 percent, to $68.96 a barrel.

The national average for unleaded gasoline declined four-tenths of a cent to $2.540 a gallon, according to AAA fuel data. The price is 1.6 cents lower than last week, 8.6 cents down from a month back, and $1.19 less than a year ago.

U.S. Stocks

U.S. stocks retreated from 1-year highs "as investors took a sell-the-news reaction to the Fed’s decision to hold interest rates steady and keep its outlook on the economy relatively unchanged," Alexandra Twin of CNNMoney.com.

The fed said US Inflation was "subdued" and extended its purchase of mortgage-backed securities and debt into the first quarter of 2010.

The Dow Jones industrial average lost 81.32 points, or 0.83 percent, to 9,748.55. The S&P 500 Index fell 10.79 points, or 1.01 percent, to 1,060.87. The Nasdaq Composite Index declined 14.88 points, or 0.69 percent, to 2,131.42.

Gold, Silver, and Metals: Prices and Commentary – Sept. 23
by Jon Nadler, Kitco Metals Inc.

Elephant Talk is What We Need

Good Day,

Narrow ranges defined the overnight trading hours for gold, as the metal gyrated between $1010 and $1020 per ounce, closely tracking the dollar’s own close orbit around the 76.10 mark on the trade-weighted index. Nevertheless, the greenback is still at, or near a one-year low point against the euro and sentiment shows little in the way of improving as yet. Today’s FOMC meeting could make a difference, but not necessarily mark a turning point. The Fed is expected to underscore the idea that the US economic recovery has indeed begun, but it is also expected to leave rates alone for the time being.

Gold started the midweek session off on a steady note very near the $1015 level, showing a $0.90 loss at the opening bell. The dollar was equally flat, showing no movement on the index and a quote of 1.479 against the euro. Oil prices moved very little as well, stalled at $71.50 per barrel. Evidently, the larger bets are waiting the Fed out for now. Silver opened with a two-penny loss at $17.10 per ounce, while platinum fell $7 to $1326 and palladium slipped by $5 to $296 per troy ounce.

Sell-off fears continue to swirl in the various gold dealing rooms we contacted during the overnight hours – they are based on the gargantuan long positions in NY, and on the uninterrupted (by any significant corrective action) manner in which prices have gotten where they now are. This, despite poor fundamentals. For example, confirmation of just how lousy the 2009 Indian gold offtake is becoming, came from Reuters late yesterday. Reporter Frank Tang interviewed local trade-watchers/dealers and summed up the developing scenario in a manner that surprised even us:

"India’s gold imports in 2009 may fall to their lowest level since trade was liberalised 12 years ago as high prices have put off buyers in the world’s biggest market for the metal, a top importer said on Tuesday. Total imports may fall to 500 to 550 tonnes, Shilpa Kumar, senior general manager of the global markets group at ICICI Bank, one of India’s top three gold importers, told Reuters in an interview.

"We expect the year will be lower than last year as there was such a big fall in the first quarter, it can’t be completely compensated in the calendar year," Kumar told Reuters. In 2008, India’s imports were at 712.6 tonnes, according to World Gold Council (WGC). In the first half of the year, Indian demand was 55 percent lower than a year ago, but the gap will be narrowed to 23-30 percent for the full year as higher wages for government employees and an official scheme for rural employment has cushioned the impact of failed monsoons, she said."

The convergence of key levels (support as well as resistance) in various markets leading up to the FOMC and the G20 meetings could be interpreted as coincidence albeit many do not believe that to be the case. What will come to be regarded as a dovish or hawkish stance by the Fed, remains to be seen. As for the dollar, well, it’s still an open case. We do know that the proceeds of the 403 tonne IMF gold sale will go into the US currency. But, is $13 billion enough to ‘rehabilitate’ the US currency at this juncture? The one certain thing is, that when US interest rates do begin their eventual upward adjustment process, even the first quarter-point tweak will move mountains in certain markets. The interest rate ice age has lasted long enough for that type of occurrence to be baked into the cake.

That same interest rate environment has given rise to the idea that perhaps the dollar is the next carry trade-funding currency, replacing the yen – a currency by which the term has largely been hitherto defined. The Japanese currency was a safe bet for speculators searching for a cheap source of funding for their ventures into various other markets. After all, given near-zero interest rates and a fast-deflating economy in Japan, how could they miss? Yet, miss they did- as in October of 1998 when a sharp downturn in the bond market made all of them run in sync. The yen rose by 18% in…four days, and by 25% in two months. Wipeout. These are the risks of the carry trade, these are the risks of one-way bets.

Despite all of this, and a record that shows speculative talk to not only be cheap, but often wrong, the talk continues. Talk of the imminent collapse of the dollar. Talk of the imminent collapse of America. Talk of a lunar launch for gold. Talk of a new world order. Talk that the world is recovering. Talk that the storm is over. Talk that inflation is coming. Talk that deflation is here. We would rather have talk without talking too much. Clear meanings in but a few simple words. Alas, it is not to be. We lack elephant talkers, these days. Marketwatch’s Rex Nutting dissects the rivers of talking flooding our lives and finds that -as we have always said- at the end of the day, it is all noise in the void, devoid of action:

"The world has its share of problems right now — global financial meltdown, global warming, global unrest — but mostly we’re talking about them more than we’re actually doing things to fix them. America, the most prosperous nation and the one with the largest military, can’t escape problems of its own: Unaffordable health care, economic malaise, and troublesome international allies and foes. What are we doing about them? Mostly talking.

For instance, the Federal Open Market Committee is meeting Tuesday and Wednesday to talk about fixing the financial system and the economy. The meeting will be just talk, because the Fed has already done what it’s going to do. Now they are waiting, and filling in the awkward silences with reassuring talk.

Sen. Max Baucus, D-Mont., the chairman of the Senate Finance Committee, announced Tuesday that his committee will wrap up the biggest-ever makeover in health-care in just a couple of days. Forget the fact that he’s been talking to the members of his committee for months in a fruitless attempt to find common ground to act. Baucus is powerless to get his way, so all he can do is talk.

President Barack Obama is the biggest talker of all. He talked to the TV pundits all day Sunday, talked to David Letterman on Monday, and talked to the U.N. and the Chinese on Tuesday. On Wednesday, he’ll talk to the Israelis and the Palestinians and the Japanese and the Russians. Then on Thursday and Friday, the president will travel to Pittsburgh for more talk with the Group of 20 leaders. At the end, the G20 leaders are expected to issue a statement full of lofty promises, and almost no action.

Is this the best we can do? Maybe. These issues are problems because they are beyond the ability of any one person, or committee, or nation to fix. They require coordinated action. Global climate change cannot be fixed without full cooperation of everyone. If one country goes it alone, the agreements to reduce greenhouse-gas emissions will fall apart in a race to the bottom. The global financial system cannot be restructured without the full cooperation of everyone. If one country imposes stronger requirements than the others, the bankers and shadow bankers will go elsewhere, and the whole world will be vulnerable to the next credit bubble and bust. Sometimes the talk seems cheap, because it is simply empty words. But agreement on these thorny issues can only be achieved by trusting each other to do what’s best for all, even if it means each of us must sacrifice something.

Winning trust begins with talk, but can’t be cemented without real action."

The FOMC attendees will be talking. Mr. Obama will be talking (some say, sternly) at the UN. The G20 will be talking this weekend. Mr. Ahmadinejad is talking friendship and peace. In the interim, the markets will also be talking, based on all that outside talk. But, for every talker, there ought to be a listener as well. In theory.

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