Gold Hits Two-Week High, Silver Retreats

New York gold futures rose Tuesday to their highest level in two weeks, despite a stronger dollar and falling oil prices — situations that typically pressure gold prices lower.

S&P’s downgrade of Greece’s and Portugal’s credit rating was the major factor cited in safe-haven gold buying, as well as a catalyst in driving down oil and U.S. stocks.

New York precious metal figures follow:

• Gold for June delivery advanced $8.20, or 0.7 percent, to $1,162.20 an ounce. The yellow metal ranged from $1,146.60 to $1,165.30 — its highest price since April 12.

• Silver for May delivery fell 21.8 cents, or 1.2 percent, to $18.119 an ounce. It ranged from $18.060 to $18.415.

• July platinum declined $24.10, or 1.4 percent, to $1,720.90 an ounce. It ranged from $1,715.00 to $1,758.90.

• June palladium tumbled $17.45, or 3.1 percent, to $548.95 an ounce. It ranged from $545.50 to $570.95.

In PM London bullion, the benchmark gold price was fixed earlier in the North American day to $1,149.50 an ounce, which a loss of $5.00 as compared to Monday. Silver dropped 19 cents at $18.160 an ounce. Platinum settled at $1,722.00 an ounce, falling $30.00. Palladium declined as well, retreating $21.00 to $550.00 an ounce.

"Clearly, gold is making a unilateral move here," Michael Guido, the director of hedge-fund sales at Macquarie Bank Ltd. in New York, said on Bloomberg. "Gold is breaking away from its negative correlation with the dollar and becoming a haven trade."

"Gold seems to be defying the traditional pattern — stronger dollar, lower gold prices — over the last weeks, pointing to stronger perception of gold as an alternative currency," Commerzbank analyst Eugen Weinberg, said on Reuters.

"Gold market participants have taken note of a rising tide of scrap gold flowing into the market in the wake of the near 4% gain in spot bullion prices over the course of the past month. As things stand right now, the size of the strength in investment demand has practically been offset by the sale of old gold," wrote Jon Nadler, senior analyst at Kitco Metals, Inc. [Read Nadler’s full commentary.]

In related gold news, the United States Mint on Thursday will release its 2010-dated American Buffalo coins. For more information, read the CoinNews article: 2010 Buffalo Gold Bullion Coins Available April 29.

Oil and gasoline prices

Crude oil prices fell "as rating downgrades for Portugal and Greece reignited fears of a spreading euro-zone debt crisis and a U.S. barometer of oil inventories showed a larger-than-expected increase," wrote Claudia Assis and Polya Lesova of MarketWatch.

"It’s like a ticking time bomb in Europe," Clarence Chu, a trader with options dealer Hudson Capital Energy in Singapore, said on Bloomberg. "At some point they can’t keep pumping in cash. That will really cripple the recovery and affect oil."

New York crude oil for June delivery tumbled $1.76, or 2.1 percent, to $82.44 a barrel.

The national average for regular unleaded gasoline rose four-tenths of a cent to $2.858 a gallon, according to AAA fuel data. The current average is one-tenth of a cent lower than last week, 5.5 cents more than a month back, and 80.8 cents higher than the average from a year ago.

U.S. Stocks

U.S. stocks declined "after Standard & Poors cut Greece’s debt rating to junk and lowered Portugal’s debt rating, raising fears that a euro zone debt crisis could slow the global economic recovery," wrote Alexandra Twin of CNNMoney.com.

"It’s the fear that Greece or Portugal may affect other areas of Europe and derail this economic recovery," Burt White, chief investment officer at LPL Financial in Boston, which oversees $379 billion, said on Bloomberg. "There’s now a perception that we might see Greece or Portugal failing. If that happens, we may see more headwinds."

The Dow Jones industrial average fell 213.04 points, or 1.90 percent, to 10,991.99. The S&P 500 index lost 28.34 points, or 2.34 percent, to 1,183.71. The Nasdaq Composite index retreated 51.48 points, or 2.04 percent, to 2,471.47.

Gold, Silver, and Metals: Prices and Commentary – April 27, 2010

by Jon Nadler, Kitco Metals Inc.

How God Worked

Good Morning,

Gold prices held firm near the $1150 price level overnight but dollar strength in the wake of more eurozone uncertainties about just how and when it is that Greece might get the aid it has requested, prevented the yellow metal from straying too much higher than $1157 the ounce.

Gold market participants have taken note of a rising tide of scrap gold flowing into the market in the wake of the near 4% gain in spot bullion prices over the course of the past month. As things stand right now, the size of the strength in investment demand has practically been offset by the sale of old gold.

The dollar continued to make headway on the trade-weighted index as the feeling of possible contagion from the Greek debt debacle itself spread like a typical flu bug in a kindergarten. Stocks in Portugal and Spain fell on such apprehensions, but the real action in equity markets overnight was in…China. No, the SGE’s 2.1% slump was not on account of PIIGS, but rather on that of local…piggies whose hot-to-trot casino plays in the real estate market have prompted the Beijing government to basically say: "Yo, that’s about enough!" and could have it ready to send a few regulatory scuds in their direction at any moment.

Tuesday’s bullion market sessions got off to a bit of a bumpy start as the greenback was making steady progress towards 81.70 on the index and as the euro once again broke under the 1.33 mark on the aforementioned debt virus doing its thing on investors’ emotions. A near $1 drop in crude oil did not help matters for the metals either. Thus, gold gave back Monday’s hard-fought gains, and then a bit more…The release of the Case-Shiller index home price data (guess where house prices actually went up, year-on-year?) added to selling pressure in gold and in oil while the greenback touched 81.80 at last check.

New York spot gold opened at $1149.10 with a $3.90 loss and more substantial declines were observed in other metals. EW short-term analysis indicates that gold might push above $1172 and possibly as high as $1183 (or above) followed by what it terms a ‘very steep decline.’ Silver fell 16 cents to start at $18.12 the ounce. EW analysis for the white metal opines that push beyond $18.64 could lift silver as high as $19.50 before the current pattern draws to a close.

Meanwhile, platinum players did not wait for such patterns to complete and, for the moment, the played profit-taking poker and sapped $22 from the noble metal’s price on the open. Spot bid was indicated at $1719.00 per ounce. Things appeared quite similar in palladium, which fell to a one-week low at $550 after losing $14 at the start of the session.

No action was reported in rhodium. In automotive news, FoMoCo reported a $2.1 billion in first-quarter earnings (its fourth consecutive one, and its best in six years, during a time when many were writing the obituary of the US auto industry). The company expects continued ‘solid’ profits in 2010 and is forecasting higher unit sales.

Here’s one firm for which the financial crisis proved to be a case of ‘we’re better off today than when this thing started.’ GM, on the other hand, as part of its own comeback, and with an eye on the future, will invest $200 million into a motor manufacturing plant in Ontario that currently employs 1200 of our fellow Canadians.

There will be plenty of newsworthy material on tap this trading day, as not only does the Fed commence its two-day ritual of interest rate and other policy-oriented discussion, but we get to hear from a string of Goldman executives who will be paraded before a US Senate Subcommittee on Investigations. The gentlemen will try to explain just what went on with certain mortgage-linked investments a while back. Investments, such as one bearing the name of Timberwolf Ltd. (a mere $1 billion in size) that was christened as "one shi**y" deal by the former head of sales and trading at…Goldman.

This just in: the potential ‘scapegoat’ at the centre of the SEC’s action against Goldman, Mr. Tourre, plans to deny the allegations against him. This throws a bit of a wrench into the works, but should make the upcoming action (both on Capitol Hill and in the Manhattan courts) all the more ‘entertaining.’ If you are into that kind of thing…

Whether or not we will get any real insights into much more than ‘who-may-have-said-what-and-who-may-have-done-that-other-thing’ out of the Goldman hearings, remains unclear. We probably will not, and what’s done is done. The real lessons may still be found in the process of how and why the firm got into this predicament.

For a cogent insight into the incredible juggernaut that Goldman turned into over the past decade, look no further that David Weidner’s piece on Marketwatch.com this morning. In it, you will learn how "Between 1998 and 2008, Goldman more than doubled in size. Its roll of employees rose to 30,522, up from 15,361. Its principal investments grew to $13.96 billion, up from $1.4 billion and its leverage ratio rose to 26.2-to-1, up from 24.7-to-1. In other words, Goldman morphed into an uberbank, and its size and the risk the firm took on grew with it."

As well, Mr. Weidner will offer you a glimpse at the real issue — the fact that "The problem with fast growth — for any company not just Goldman — is that it’s hard to manage." The result? "There were too many new faces. It was a new business even the smart guys didn’t fully understand. For all of the firms chasing Goldman, it was Goldman that, in the end, had to chase, or at least stay a step ahead of other firms. Goldman was successful, but that success came at a cost. The identity of the firm was lost. A bank that was once the gold standard of American finance succumbed to the temptations of quick, easy money."

Question du jour: Will any of this change, anytime soon? Nah. A small news item (also on Marketwatch, late yesterday) should give you a hint:

"Democratic efforts to reform how the nation’s bank are regulated received a major setback Monday after Republicans voted unanimously to oppose a key procedural motion put forward by congressional leaders that would have allowed for a debate on the financial institution bill by the full Senate."

The "Party of ‘No Way’ sez: "Party On, Wayne!" Or Lloyd, or Joshua, or Craig, or…

Jon Nadler
Senior Analyst

Kitco Metals Inc.
North America 

In addition to the bullion 2010 American Silver Eagle that is already available, the United States Mint this year will also issue the bullion America the Beautiful Silver Coins. Click on the link to visit a sister site of CoinNews and learn about the coin and the new bullion series from the U.S. Mint.