The biggest economic news event on Wednesday was Federal Reserve Chairman Ben Bernanke’s comments to lawmakers that interest rates would remain low for the foreseeable future to support the sluggish economy.
The pledge was a boon to stocks and oil, but not for gold which fell for a third straight day. The yellow metal was also pressured by an unexpected January decline in new homes sales, which placed added focus on struggling growth, lessoning gold’s appeal as an inflation hedge
New York precious metal figures follow:
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Gold for April delivery declined $6.00, or 0.5 percent, to $1,097.20 an ounce. The yellow metal ranged from $1,090.20 to $1,108.80.
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Silver for March delivery gained 5.2 cents, or 0.3 percent, to close at $15.940 an ounce. It ranged from $15.620 to $16.000.
- April platinum lost $3.00, or 0.2 percent, to end at $1,507.30 an ounce. It ranged from $1,496.80 to $1,524.30.
In PM London bullion, the benchmark gold price was fixed earlier in the North American day to $1,103.00 an ounce, which was a decline of $4.00 from the price on Tuesday. Silver fell 34 cents to $15.760 an ounce. Platinum was settled at $1,504.00 an ounce, declining $14.00.
Notable bullion quotes follow:
"The selling has abated because of what Bernanke said. We remain more on the sidelines to see" which way the market will trade in the near-term, George Gero, vice president of global futures at RBC Capital Markets, said on MarketWatch.
"The main driver for gold is as an inflation hedge," Jesper Dannesboe, a senior commodity strategist at Societe Generale SA in London, said on Bloomberg. "If people are worried about economic growth, then they are less worried about inflation."
"Fading US consumer confidence ended up fading gold speculator confidence as well, as the yellow metal continued to slide and broke the $1100 level in overnight trading," wrote Jon Nadler, senior analyst at Kitco Metals, Inc. "Also on players’ minds, remain the impending IMF gold on-market gold sale, and the recent revelation that China is not a likely candidate for said gold." [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 rose on Wednesday, helped, according to reports, by an Energy Information Administration weekly report showing rising gasoline demand and Mr. Bernanke’s comments on the U.S. economy.
"The most positive component of the day was the gasoline data," Costanza Jacazio, an oil analyst at Barclays Capital, said on MarketWatch. "We had very strong gasoline demand."
New York crude-oil for April delivery gained $1.14, or 1.4 percent, to end at $80 a barrel.
The national average for regular unleaded gasoline soared 1.8 cents higher to $2.678 a gallon, according to AAA fuel data. The current average is 7 cents more than last week, 3.1 cents lower than a month back, and 77.8 cents higher than the average from a year ago.
U.S. Stocks
U.S. stocks rallied "after Federal Reserve Chairman Ben Bernanke again pledged to keep interest rates low for the foreseeable future, reassuring investors worried about the outlook for the economy," wrote Alexandra Twin of CNNMoney.com.
"The market has been appeased by Bernanke’s comments, which broke no new ground," Michael Strauss, who helps oversee about $25 billion at Commonfund in Wilton, Connecticut, said on Bloomberg. "The Fed is not ready to withdraw the extended-period phrase because they’re still worried about the fragile nature of the recovery."
The Dow Jones industrial average gained 91.75 points, or 0.89 percent, to 10,374.16. The S&P 500 Index advanced 10.64 points, or 0.97 percent, to 1,105.24. The Nasdaq Composite Index climbed 22.46 points, or 1.01 percent, to 2,235.90.
Gold, Silver, and Metals: Prices and Commentary – February 24, 2010
by Jon Nadler, Kitco Metals Inc.
Fading US consumer confidence ended up fading gold speculator confidence as well, as the yellow metal continued to slide and broke the $1100 level in overnight trading. Bullion sank to a fresh one-week low of $1089 per ounce in London market action, even as the US dollar fell back a tad on the trade-weighted index (giving up 0.13) to reach 80.76 at last check.
The euro continued to hover near the 1.35 level against the US currency, as news of a massive and widespread Greek labour protest action continued to unnerve Europe and its markets. London-based Capital Economics opines that the recent revelation that Greece used complex financial assets to improve the official figures on the public finances earlier this decade "highlights the uncertainty surrounding the reliability of these numbers. But with signs that Europe is developing a rescue plan and the Greek Government may soon announce further austerity measures, the chances of a near-term funding crisis seem to have receded." The ‘rescue’ word keeps popping up day after day…
Market participants were still seen as eyeing Ben Bernanke’s appearance before the HFSC today and tomorrow, with a view to gleaning and bits of evidence that the Fed will indeed tighten in coming months. Also on players’ minds, remain the impending IMF gold on-market gold sale, and the recent revelation that China is not a likely candidate for said gold. Several overnight articles have sounded a wishful-in-tone plea for the Reserve Bank of India to take the remaining gold. Memories of what the last such purchase resulted in, last fall, remain strong among perma-bulls. RBI officials remained mum regarding that topic, of course, but one can safely assume that they have already been approached –probably several times by now- as to the fate of the 191.3 tonnes of yellow metal – by its current owner- the IMF.
"The knee-jerk [selling] reaction [in gold] was due to stop losses being triggered on the COMEX futures market during overnight Globex trading hours," said Carl Johansson, Senior precious metals analyst with Goldessential.com in Belgium. He added that: "Prices had been sitting comfortably on top of the $1,098-$1,100 an ounce platform over the last few days, but the breach below here saw a significant bout of stop-losses triggered, sending prices lower on the back of an avalanche of selling. An estimated 5,000 lots of the COMEX April gold futures contract were seen changing hands in a five minute timeframe as prices ducked to their intraday lows. This is a volume you rarely see overnight, confirming the notion of stop-loss driven momentum."
The midweek session in New York opened with losses across the precious metals price boards this morning. Gold spot was down $9.00 per ounce, quoted at $1094.50 as participants now look for additional support for gold to possibly emerge in the lower $1,090’s. Underneath that level, the $1,083.00 figure is thought to be able to offer some support, however, the technical charts are now damaged a bit more. This prompted Commerzbank technical analyst Axel Rudolph to warn about the potential "failure of support near $1,074 per ounce, which would mean [gold] bullion could slide back to $1,025.70, the October 2009 low." Jesper Dannesboe, a Senior commodity strategist at Societe Generale SA in London, said today by phone that: "The main driver for gold is as an inflation hedge. If people are worried about economic growth, then they are less worried about inflation.”
Silver started the Wednesday trading session with a 12-cent drop to $15.73 per ounce. The white metal has been the worst-performing precious metal thus far this year, and, in the opinion of Barclays Capital analysts, it "may drop as much as a further 11 percent (to $14 an ounce)." Silver’s technical charts show that prices have formed a so-called "head and shoulders top" and then failed to hold above a 27-month pivot line, which Barclays says "is a bearish signal."
Platinum got off to a bit of a rocky start as well this morning, losing $6 to $1503 per troy ounce. Palladium fell $3 to start at $427 the ounce. Rhodium showed no change at $2420.00 per ounce. In the background, crude oil was off 14 cents, trading at $78.72 per barrel, while the US dollar was still down 0.20 on the index. South African state-owned utility Eskom got its requested 24.8% energy tariff hike this morning, engendering apprehensions that such a move will not only fuel inflation but erode mining company profit margins in that country. The news may potentially prove bullish for the noble metals, as there remains the possibility that platinum/palladium/rhodium miners might curtail production schedules in order to mitigate this latest sharp rise in energy costs. More similar hikes are slated by Eskom over the next couple of years.
Meanwhile, the noose appears to be tightening just a tad more around various commodity speculators’ necks in the wake of the egregious crude oil market hanky-panky of 2008. Reuters reports that: "The U.S. Commodity Futures Trading Commission said on Tuesday it will hold a public meeting on March 25 to examine whether position limits are needed for gold, silver and copper futures markets. The CFTC, the top regulator for futures markets, has long enforced position limits for grains trading, and is now mulling similar restrictions on the number of contracts speculators can hold for other markets.
Reuters also added that: "Metals traders have said it would be difficult for the CFTC to clamp down on speculation in precious metals because most trading takes place outside the United States, especially in physical markets." Yes, but…the trend is not exactly your friend – in this case.
Something that has been very, very friendly to Australia’s mining sector has been the Chinese economic miracle. The growth in that country has now given rise to what the Reserve Bank of Australia has concluded could be "the mother of all mining booms." The RBA surveyed 160 years of Australian mining booms and found that: "It’s a very big boom," – according to its Deputy Governor, Mr. Ric Battelino.The five big mining booms recorded in Australian history have generated periodic surges of export-based wealth but have also forced abrupt economic and social change and usually generated inflation pressures that have been difficult to contain. However, perhaps this time around, the Aussies have a bit less to worry about on those fronts, mining boom notwithstanding. The problem? The very recipient of those commodities being dug up at a feverish rate. Read on:
Harvard University Professor Kenneth Rogoff might have something to say about the likelihood of the Chinese phenomenon continuing at its current (and former) torrid pace. In fact, he has a lot to say about it. Namely that- in his opinion: "China’s economic growth will plunge to as low as 2 percent following the collapse of a "debt- fueled bubble" within 10 years, sparking a regional recession."
You’re not going to go a decade without having a bump in the business cycle," Rogoff, former chief economist at the International Monetary Fund, said in an interview in Tokyo yesterday. "We would learn just how important China is when that happens. It would cause a recession everywhere surrounding" the country, including Japan and South Korea, and be "horrible" for Latin American commodity exporters. If there’s a this-time-is-different story in the world right now, it’s China," Rogoff said in the speech at a forum hosted by CLSA Asia-Pacific Markets, a unit of Credit Agricole SA, France’s largest retail bank. People say China "won’t have a financial crisis because there’s central planning, because there’s a high savings rate, because there’s a large pool of labor, blah-blah," he added. "I say of course China will have a financial crisis one day."
Until that day comes, Good on You, Bruces. Keep digging.
Happy Digging.
Jon Nadler
Senior Analyst
Kitco Metals Inc.
North America
Blog: http://www.kitco.com/ind/index.html#nadler
In gold coin news, the United States Mint raised gold coin prices for its numismatic products. The change was the result of the weekly London fix gold average hitting and staying above $1,100 an ounce.
