Gold Retreats, Breaking 3-Day Streak; Silver Falls

US gold futures ended lower on Tuesday and for the first time in four days as a firmer dollar curbed demand for metals in general.

Gold retreated 0.5 percent. Silver and platinum fell as well, with each declining 0.3 percent.

Crude oil managed a 0.2 percent increase despite the stronger dollar.

Also rising slightly were US stocks, with the Dow ending at a fresh 18-month high.

New York precious metal figures follow:

• Gold for June delivery fell $5.80 to $1,105.70 an ounce. It ranged from $1,102.40 to $1,114.20.

• Silver for May delivery retreated 5.7 cents to $17.330 an ounce. It ranged from $17.235 to $17.480.

• July platinum declined $5.40 to $1,626.10 an ounce. It ranged from $1,617.50 to $1,635.50.

In PM London bullion, the benchmark gold price was fixed earlier in the North American day to $1,107.00 an ounce, which was 50 cents lower than the price on Monday. Silver ended 26 cents higher to $17.410 an ounce. Platinum was settled at $1,622.00 an ounce, rising $11.00.

"We don’t think there’s much momentum right now for gold going higher," Walter de Wet, an analyst with Standard Chartered bank in London, said on MarketWatch. "The dollar strength is dampening investor demand" with investors booking profits when prices approach the $1,011-$1,015 level, helping to keep gold rangebound, he added.

"As we enter the second quarter of the year, downside pressure from weak seasonal demand should ease, although upward potential is also expected to be limited," Stefan Graber, Singapore-based analyst with Credit Suisse Group, wrote in a note cited on Bloomberg. "Investors should expect price gains for gold in 2010 to be considerably smaller than in 2009."

"Range-bound conditions dominated the overnight dealings in the metals markets as a firmer euro supported speculative sentiment but gold remained unable to break out of the broader, $1080-$1130 channel," wrote Jon Nadler, senior analyst at Kitco Metals, Inc.

"Physical gold offtake remained anemic in overseas markets as Thai and Indian buyers remained largely sidelined following earlier purchases. The upcoming wedding-friendly calendar period in India is expected to provide buoyancy to the local jewellery market." [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

Oil prices gained slightly "as investors remained cautious ahead of the first round of this week’s data on inventories and a rising dollar helped quash attempts to break out higher," reported Polya Lesova and Claudia Assis of MarketWatch.

"We see a gradual tightening of the market, and I think that will continue with the improvement in the global economy," Thina Saltvedt, a commodities analyst at Nordea Bank AB in Oslo, said on Bloomberg. "Gasoline stocks are coming back down to normal levels, which will be interesting as we get into the driving season."

New York crude oil for May delivery rose 24 cents to $82.37 a barrel.

The national average for regular unleaded gasoline declined a half penny to $2.795 a gallon, according to AAA fuel data. The current average is 2.1 cents lower than last week, 9.1 cents more than a month back, and 74.7 cents higher than the average from a year ago.

U.S. Stocks

U.S. stocks ended slightly higher "as investors weighed a rise in consumer confidence, more weakness in the housing market and a stronger dollar," wrote Alexandra Twin of MarketWatch.

"Stocks are just trickling higher, gains are selective, it’s a short week and being the end of the quarter, people have locked in a lot of their positions," Cleveland Rueckert, market analyst at Birinyi Associates Inc in Stamford, Connecticut, said on Reuters.

The Dow Jones industrial average climbed 11.56 points, or 0.11 percent, to 10,907.42 — the highest level since Sept. 26, 2008. The S&P 500 Index advanced 0.05 of a point to 1,173.27. The Nasdaq Composite Index rose 6.33 points, or 0.26 percent, to 2,410.69.

Gold, Silver, and Metals: Prices and Commentary – March 30, 2010

by Jon Nadler, Kitco Metals Inc.

Nosferatu 2010 – Resurrection of the Dollar

Good Day,

Range-bound conditions dominated the overnight dealings in the metals markets as a firmer euro supported speculative sentiment but gold remained unable to break out of the broader, $1080-$1130 channel.

Pre-holiday trading patterns became manifest as trading thinned out somewhat and traders were more inclined to tally their first quarter activity results than to engage in taking large fresh positions in either direction.

The euro remained just under 1.35 versus the dollar, while the latter eased another 0.10 on the index, leveling out just above the 81 mark. Crude oil recorded only marginal gains following yesterday’s risk appetite-induced strong rally. The dollar’s strength prompted Goldman Sachs and Citigroup to euthanize their short bets on the currency last week. This, after those trades lost a hefty 2.8% for wrong-way bettors.

In fact, Bloomberg says that: "A year after correctly predicting the currency’s decline and likening it to the fall of Rome, Royal Bank of Scotland Group Plc’s Alan Ruskin said it may soar 22 percent to $1.10 per euro if Greece defaults." The US dollar’s morticians –still not in short supply- may have a devil of a time come Friday, when the US Labor Dept. is widely expected to report a job creation figure in the US that might reach 190,000 positions (the most in three years).

Such a report is also seen as indicating that jobs were added while the economy grew, the S&P gained 5.6% and the latest consumer prices show no signs of the Weimar Republic’s inflation rates materializing on US soil, not by a long shot. Well, the markets will be closed that day anyway, possibly easing the severity of the grimness among some faces whose owners were actively rooting for the greenback’s demise and departure from the international reserve scene.

Physical gold offtake remained anemic in overseas markets as Thai and Indian buyers remained largely sidelined following earlier purchases. The upcoming wedding-friendly calendar period in India is expected to provide buoyancy to the local jewellery market. Other metals were boosted by news that the pace of economic growth might reach 12 (twelve!) percent in Q1. Copper prices reached a three-month high after gaining 3% on Monday, boosted largely by the speculation surrounding China’s growth rate.

New York spot precious metals dealing opened with subdued gains this morning, as currency movements offered to additional speculative fuel to the already distracted (by the shortened trading week) crowd of market participants. Such crowd is seen slowly losing membership as we turn into the home-stretch by Thursday’s lunchtime.

Gold opened with a $1.50 gain and was quoted at $1110.60 per ounce, while silver spot rose 3 cents on the open to start the session at $17.38 the ounce. Platinum started at $1626.00 with a $1.00 decline, while palladium climbed $3 to open at $473.00 per ounce. An additional $20 gain was reported in rhodium which reached $2440.00 this morning, following yesterday’s near 4% gain — the best in the complex.

CNBC and Marketwatch both reported that speculators are becoming apprehensive about rising real interest rates even as there is current support for gold prices provided by currency market gyrations. Rising rates in coming months could "dim the attraction of non-interest-bearing commodities priced in US dollars."

Meanwhile, the research team over at Standard Bank in S. Africa finds that although on an isolated basis the physical demand in bullion can be described as weak, the trend does show some improvement in the current month. The report says that: "Gold physical buying interest has slowed substantially since mid-February, as indicated by our physical gold index which dropped below zero in February — only a few days after the Chinese New Year. However, our index has risen sharply since the beginning of March, and has continued to rise this week." Thank Heaven for Indian brides-to-be…

Speaking of the other ‘Down Under’ our readers my still recall the early 2008 South African power supply issues that –when they first became manifest- drive the noble metals complex to dizzying heights. Now, Johnson Matthey’s Platinum Today reports that although we may not have heard too much about the electricity woes of miners in that country, the industry still faces a real challenge in getting the juice required to keep digging deep down underground.

JM’s update highlights the fact that "The electricity supply-demand balance during and after the winter 2010 period will be finely balanced. The risks of interruptions will increase as Eskom enters its summer maintenance season for the Eskom generation fleet. This risk "progressively worsens" between 2011 and 2013, or until the 4,800 MW Medupi power plant comes online."

We’ll keep the lights on for you. Happy Trading.

Jon Nadler
Senior Analyst

Kitco Metals Inc.
North America 

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