New York gold futures finished higher on Thursday, lifted by news that European nations would help Greece in its debt problem. Gold was not the only beneficiary. Reports cited gains in crude oil and US stocks as also benefiting from the planned rescue.
By Thursday close, New York gold climbed 1.7 percent, silver advanced 1.9 percent, platinum inched up 0.4 percent and oil rose 1.0 percent.
New York precious metal figures follow:
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Gold for April delivery gained $18.40 to $1,094.70 an ounce. The yellow metal ranged from $1,072.90 to $1,095.90.
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Silver for March delivery climbed 29 cents to close at $15.590 an ounce. It ranged from $15.175 to $15.665.
- April platinum rose $6.40 to end at $1,519.30 an ounce. It ranged from $1,496.10 to $1,527.30.
In PM London bullion, the benchmark gold price was fixed earlier in the North American day to $1,076.25 an ounce, which was an increase of $6.75 from Wednesday. Silver fell 23 cents to $15.370 an ounce. Platinum remained unchanged at $1,511.00.
Notable bullion quotes follow:
"Gold is moving along with all of the commodities," Adam Klopfenstein, a senior market strategist with MF Global Holdings Ltd.’s Lind-Waldock unit, said on Bloomberg. Buoyed by economic optimism, "people want to embrace gold with the overall risk-tolerance that is coming back into the market today," he added.
"We’re seeing some short-covering and technicals are improving," Suraj Raythatha, metals analyst at Royal Bank of Canada, said on MarketWatch. "Volumes continue to be strong ahead of the Chinese holiday."
"The deal that was expected to be reached regarding the fate of Greece’s debt problems was indeed reached early this morning," wrote Jon Nadler, senior analyst at Kitco Metals, Inc. "What then followed was also what was largely to be expected in various markets; Greek bond yields fell further, the euro climbed a tad, European shares rose mildly higher, and the dollar slipped marginally on the trade-weighted index… All of the above factors conspired to bring gold back up." [Read Nadler’s full commentary.]
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
Crude oil prices advanced, "tracking a rebound in commodities and stocks on Wall Street after the European Union pledged to support Greece weather its debt crisis," wrote Nick Godt and Polya Lesova of MarketWatch.
"The strengthening oil price is attributed to the financial considerations because of the plan that France and Germany have brewing to help Greece," Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore, said on Bloomberg. "The stock markets in China and Hong Kong are all up so we are seeing investors coming back into the oil market."
New York crude-oil for March delivery rose 76 cents to finish at $75.28 a barrel.
The national average for regular unleaded gasoline fell a half penny to $2.636 a gallon, according to AAA fuel data. The current average is 2.3 cents lower than last week, 11.5 cents less than a month back, but 69.6 cents higher than the average from a year ago.
U.S. Stocks
U.S. stocks also ended higher with most reports referencing the Greece news.
"The recent news on Greece has been very encouraging," Peter Jankovskis, who helps manage about $1.7 billion as co-chief investment officer at Oakbrook Investments in Lisle, Illinois, said on Bloomberg. Investors are growing more optimistic on their accord and more confident that the situation won’t have spillover effects to the U.S."
The Dow Jones industrial average climbed 105.81 points, or 1.05 percent, to 10,144.19. The S&P 500 Index advanced 10.34 points, or 0.97 percent, to 1,078.47. The Nasdaq Composite Index rose 29.54 points, or 1.38 percent, to 2,177.41.
Gold, Silver, and Metals: Prices and Commentary – February 11, 2010
by Jon Nadler, Kitco Metals Inc.
Good Morning,
The deal that was expected to be reached regarding the fate of Greece’s debt problems was indeed reached early this morning. EU President Jose Barroso lifted many a weight off of many a shoulder on Thursday, as he announced that the EU came to an accord on the crisis. “It’s not about gifts of money or subsidies, but about loans with interest that can be extended quickly to help a country as quickly as possible so that it doesn’t come to turmoil on the financial markets, and to a crisis that no one can control anymore,” Austrian Chancellor Werner Faymann said in a televised interview.
What then followed was also what was largely to be expected in various markets; Greek bond yields fell further, the euro climbed a tad, European shares rose mildly higher, and the dollar slipped marginally on the trade-weighted index. Among the first beneficiaries of the EU decision were bank shares. Marketwatch reported that:
“What seems to have galvanized minds is the realization that much of European banking is heavily exposed to southern Europe and Greece in particular. French and German banks are between them carrying around 85 billion euros of exposure to Greece and over 600 billion euros to southern Europe more generally,” said economists from French bank Societe Generale in a note to clients Thursday.
None of this means that Greek labour action is coming to a halt any time soon, or that the country will scrap its austerity plans. The going will remain tough, albeit the markets’ focus now shifts to the problems in Spain, Portugal, and other "Club Med" countries.
All of the above factors conspired to bring gold back up towards the $1080 level and erase Wednesday’s $7 loss from the boards. New York spot markets opened Thursday’s session with gains across those boards, as the US dollar hovered just under the 80-mark (79.96) on the index and the euro rose to 1.370 following the Greek deal announcement.
Spot gold climbed $6.60 to start at $1077.30 per ounce, while silver added 15 cents to open at $15.31 an ounce. Platinum gained $4 to rise to $1513 and palladium gained $5 to touch $417. Rhodium was unchanged at $2330 following yesterday’s $40 per ounce rise.
The technical picture as seen through the lens over at GoldEssential.com offers hope for the bulls so long as the yellow metal is successful at closing above the $1084 level, albeit a convincing break of more overhead resistance at $1110-$1117 is required to get this market back on the fully bullish track. Breaching the $1062 area on the other hand, could usher in tests down near the $1044 area –a level that must hold lest gold will then possibly aim for $1030 or lower.
Elliott Wave analysis sees some potential hope for the bulls as well. It notes that the 10-day Daily Sentiment Index (trade-futures.com) has fallen to 20.1% bulls, which is lower than it was in September and November of 2008. While EW analysts do not "expect a rise of the magnitude that followed the October 2008 low, one potential is that gold might be set to rise back to the January 11 high near $1162 in order to complete the corrective pattern."
They conclude that "as long as spot prices do not close above $1085 we will maintain our top count shown on the chart. This means gold is in wave (3) down and should be on the verge of falling hard, declining to the $950-$970 area, near the apex of the wave (B) triangle."
Interestingly, that same $950 number appears elsewhere as well, and in a place where one might not expect it at all; in the words of Marc Faber. Having declared not too long ago that gold will "never fall to under $1000 an ounce again" we find it curious to read on Bloomberg this morning that the Swiss guru (who sees America GDP as consisting of only beer and prostitutes anymore) now says that he: "won’t rule out that gold will go down to $950 or $1,000, but I don’t expect more downside." Nobody expected the Spanish Inquisition, either, but, which will it be; $950 or $1,000? (Depends on one’s definition of ‘never,’ presumably).
The Khaleej Times relays the contents of a Reuters article this morning, one which opined that such a possibility can come about as the US starts to raise interest rates following a period of extremely loose monetary policy aimed at curing that which ailed its economy.
"Gold’s decade-long bull run may plateau in the medium term as a rise in US interest rates from record lows makes prices vulnerable to a dollar recovery and weaker investment demand. While ongoing fears over the stability of paper currencies and inflation may keep gold at high levels, it will struggle to maintain the soaring investment flows that took it to an all-time high of $1,226.10 an ounce in December, analysts say. In the short term, gold’s underlying fundamentals look fragile as jewellery demand languishes and miners lift supply.
Gold’s bull run since early 2001 has gone hand-in-hand with dollar weakness, but the U.S. unit has firmed since December as fears over rising euro zone debt levels knocked the euro. But moves in U.S. interest rates from current record lows will be the main driver of the dollar, and consequently gold. A Reuters poll released earlier this week showed primary dealers believe the U.S. Federal Reserve will start lifting rates in the fourth quarter of 2010.
While gold may be able to shrug off a rebound in the dollar if other factors emerge, analysts are skeptical it will make significant new gains in such an environment. "You can be a gold bull and still believe in rising interest rates if you believe in inflation, which a lot of gold bulls do," said Daniel Sacks, a portfolio manager at Investec Asset Management. "We’re not convinced."
As for the above-mentioned Fed actions, the questions remain: "When?" and "How?" Well, the Wall Street Journal polled a few top economists in the wake of Mr. Bernanke’s Wednesday testimony before the HFSC — one in which he offered the blueprint for the Fed’s exit strategy (albeit not the calendar that some thought might come with it). RBS and Morgan Stanley market experts offered the following descriptions of what the Fed Chief had to say:
- "Bernanke explicitly throws out the possibility that the Fed will switch its rate tool from the funds rate to the interest on excess reserves rate. Bernanke suggests that the Fed could target the interest on reserves rate coupled with a reserves target (back to Volcker rules!).
- The Chairman underscores that when the reserves situation gets back to normal, the Fed would return to a funds rate targeting regime. The footnote on this issue explicitly mentions a corridor scheme, with the funds rate bracketed by a discount rate ceiling and an interest on reserves rate floor. — Stephen Stanley, RBS
- Bernanke’s testimony contained lots of interesting tidbits and reinforced the notion that the progress toward an eventual Fed exit is underway. We continue to believe that the exit process will unfold fairly quickly during the second half of 2010, spurred by market-based indications of rising inflation expectations as the economic recovery takes hold. — David Greenlaw, Morgan Stanley
Happy Trading.
Jon Nadler
Senior Analyst
Kitco Metals Inc.
North America
Blog: http://www.kitco.com/ind/index.html#nadler
Check out other site market resources at Bullion Prices Today, Silver Coins Values for older United States Mint coins, and the US Inflation Calculator which easily finds how the buying power of the dollar has changed from 1913-2009.
