Gold Prices Retreat Slightly, Silver Declines 0.7%

New York gold prices shifted slightly lower on Wednesday as a variety of factors to include profit-taking, increased risk appetite, and a stronger U.S. dollar were cited for the yellow metal’s $3.90 decline.

Silver and platinum retreated the most as compared to the other precious metals. Each fell 0.7 percent.

In other markets, crude oil extended yesterday’s 2.4 percent advance to finish at a six-week high while U.S. stocks were mixed with the major indexes closing near Tuesday’s levels.

New York precious metal figures follow:

• Gold for August delivery declined 0.3 percent to close at $1,230.50 an ounce. It ranged from $1,228.30 to $1,239.50.

• Silver for July delivery lost 13.7 cents to end at $18.441 an ounce. It ranged from $18.380 to $18.660.

• July platinum fell $10.50 to $1,567.50 an ounce. It ranged from $1,566.00 to $1,585.10.

• September palladium retreated 35 cents, or 0.1 percent, to $475.20 an ounce. It ranged from $470.65 to $476.45.

In notable bullion quotes of the day:

"What’s tending to happen is people are tending to buy gold and other assets at the same time," Standard Chartered analyst Daniel Smith noted on Reuters. "We are going to push higher in the weeks ahead. The pullback we saw from the previous highs is quite limited and investors are still waiting to come into this market."

"Gold has trouble at these higher prices," Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois, was quoted on Bloomberg. "Gold doesn’t want to go over $1,250, and it doesn’t want to go under $1,210."

"It is becoming apparent that at least some aggressiveness among speculators as regards pouncing upon the euro and piling further into bullion is still on the decline. Call it habituation," wrote Jon Nadler, senior analyst at Kitco Metals, Inc. "It may provide a cushion under current prices as few dare exit positions just yet, however it also limits fresh safe-haven shopping sprees as upside potential is being questioned." [Read Nadler’s full morning commentary.]

In PM London bullion, the benchmark gold price was fixed earlier in the North American day to $1,234.50 an ounce, rising $9.50 from the price on Tuesday. Silver climbed 9 cents to $18.510 an ounce. Platinum settled at $1,568.00 an ounce, adding $10.00. Palladium advanced $11.00 to $471.00 an ounce.

Oil and gasoline prices

Crude oil prices closed "higher Wednesday as investors discounted an unexpected rise in crude inventories and futures ran higher with U.S. stocks," wrote Claudia Assis and Kate Gibson from MarketWatch. Gasoline inventories, however, did retreat last week according to the Energy Information Administration.

"The drawdown in gasoline was somewhat supportive," Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania, said on Bloomberg. "Both gasoline demand and draws usually peak after the July 4 holiday."

New York crude oil for July delivery rose 73 cents, or 1 percent, to close at $77.67 a barrel.

The national average for regular unleaded gasoline rose four-tenths of a cent to $2.700 a gallon, according to AAA fuel data. The current average is 1.3 cents lower than last week, 16.7 cents less than a month back, but 2.6 cents higher than the average from a year ago.

U.S. Stocks

U.S. stocks "recovered from deep losses Wednesday and finished a choppy session near the previous day’s closing levels as investors considered mixed economic news and BP’s agreement to establish a $20 billion escrow fund and cancel its quarterly dividend," noted Hebah Yousuf of CNNMoney.com.

"Essentially, the market has held on to yesterday’s gains and you have to call that encouraging," Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut, said on Reuters.

The Dow Jones industrial average advanced 4.69 points, or 0.05 percent, to 10,409.46. The S&P 500 Index slid 0.62 of a point, or 0.06 percent, to 1,114.61. The Nasdaq Composite Index rose 0.05 of a point to 2,305.93.

Gold, Silver, and Metals: Prices and Commentary – June 16, 2010

by Jon Nadler, Kitco Metals Inc.

The Pain in Spain Falls Mainly On…

Good Morning,

Well, nobody expected an inquisition in…Spain, again. Yet, that is exactly what throngs of financial media reporters did following rumors of a Greek-style bailout package being prepared on behalf of the country by the IMF/EU teams.

The media’s chief weapons; persistent questioning of the authorities, as seen for example, in the El Economista. Will Spain cave in? Will it be able to outline budget trimming measures that satisfy targets? Will the euro be subjected to more torture? Whither Gallegolandia? As they say: "¿Quién Sabe?"

And then, there is the upcoming Friday meeting between Spanish PM Zapatero and IMF chief Strauss-Khan… A tete a tete that is sure to have the paparazzi in tow. Denials ensued, both from the Spanish finance ministry as well as the IMF. However, the bond end euro vigilantes tried to equate rumour smoke with actual debt problem fire and brought out…the rack, interrupting the rally in the euro which had blossomed over the past few days. The common currency retreated to under 1.23 and eurozone bonds exhibited beads of sweat in the wake of the speculations on Spain. The jitters are as palpable as any being felt at a dramatic corrida.

In other news from the Old World, inflation gained traction in the eurozone last month (to 1.6%), mainly in the wake of the declines suffered by the currency of the realm. Meanwhile, unemployment claims fell in the UK and job creation showed 5,000 positions being added as the British economy appears to be weathering the recession and working through its own recovery process.

Gold prices held steady overnight against such a background of uncertainty. US inflation-tracking figures as will be revealed in today’s PPI and tomorrow’s CPI data are not expected to provide much in the way of enthusiasm for gold bulls, according to Kitco News’ own Debbie Carlson.

Ms. Carlson quotes Mr. Jim Smitherman, a commodities broker at Coquest Inc., as having said that "the attitude in the markets concerning inflation is "steady as she goes. Inflation data is tame and should remain so for the remainder of the year. I think the Fed will maintain its current policy for the foreseeable future. Commodity prices in general are lower over the last six months and barring a collapse in the dollar I would expect them to remain that way. Those calling for inflation right around the corner have been doing so for 2 years now. How far away is this corner?  I think it is a long ways away."

As regards the gold/euro play these days, it is becoming apparent that at least some aggressiveness among speculators as regards pouncing upon the euro and piling further into bullion is still on the decline. Call it habituation. It may provide a cushion under current prices as few dare exit positions just yet, however it also limits fresh safe-haven shopping sprees as upside potential is being questioned following the possible pivot point that 1.20 on the euro has thus far shown to be. Thus, yesterday’s gains in bullion remained in the price equation this morning and only small-scale selling was manifest early on Wednesday.

Spot metals dealing in New York opened with a $0.50 gain in gold which was quoted at $1234.90 the ounce. The action was rather subdued but players were keeping an eye on the Spanish rumour-mill nevertheless. Apprehensions that the EU debt issues could translate into difficulties for the US economic recovery are still preoccupying the trade.

Physical gold offtake continues on the lackluster side of things, with Indian buyers having crossed their arms for a third day this week and manifesting a predilection to buying the yellow metal at under $1220.00 the ounce. Meanwhile, flows of scrap bullion have shown signs of gaining traction in the wake of last week’s foray above the $1250 mark once again. While we may not get the traditional summer doldrums following next week’s solstice, any lull in the European theatre may possibly provide profit-takers with an opportunity to do just that.

Meanwhile, what is Russia –whose international reserves are the world’s third largest– buying in order to reduce its US dollar and euro exposure? Not that certain asset that some folks expected, to be sure. According to Bloomberg News, "Russia may add the Australian and Canadian dollars to its international reserves for the first time after fluctuations in the U.S. dollar and euro."  Bloomberg also reports that "U.S. dollars account for 47 percent of Russia’s reserves, while euros make up 41 percent, British pounds 10 percent and Japanese yen 2 percent, Ulyukyaev said in November. The central bank has reduced dollars from 50 percent in 2006, when euros accounted for 40 percent and the remaining 10 percent was in yen and pounds. Russia’s international reserves, the world’s third biggest, reached $458.2 billion on June 4."

Nearly one year ago, Russian PM Medvedev regaled reporters at a G-8 summit in Italy with a prototype coin (not struck in gold) representing a ‘world currency’ intended to supplant the greenback. In fact the conspicuously absent word from Mr. Medvedev’s ‘launch’ of the proposed planetary-currency-to-be was…gold.

Kitco News’ own intrepid reporter Daniela Cambone caused quite the stir earlier this week when she interviewed a seasoned gold market insider who asserted that "gold is not a currency" despite having shown some signs of acting as one lately. We have always called it ‘life insurance for your basket of wealth.’ But, do you really wish to cash in on your life insurance policies (of the conventional or bullion kind) any time soon? Thought not.

"Mr. Miguel Perez-Santalla, interviewed on the sidelines of the 34th International Precious Metals Institute Conference, said gold should be bought for its normal value uses and not as a hedge against the end of the world. He also said that gold is a beautiful commodity and in great demand and should be used for its beauty and its properties. "You should invest in gold in the sense you need to hedge [with] something of value that will always have value," he said. "But if you are looking for the end-of-the-world savings, that is not going to be the thing to help you."

Silver started the midweek session unchanged, quoted at $18.54 per ounce. Platinum was off by $3 at $1570.00 and palladium lost $1 to open at $469.00 the ounce. Both noble metals spiked on Tuesday, overcoming perceived resistance levels, mainly on account of the news item that quoted South African state-owned power utility Eskom as saying it is ‘ready’ for a possible strike among its 16,000 workers.

In early 2009, power supply interruptions to the country’s mines proved a major boost to gains in the price of PGM group metals. Now, the spectre of no juice is once again visible. Ever tried to play footie in the dark? Perhaps spectators should consider leaving their vuvuzelas at home and bringing some torches to the country’s stadia…

Happy Trading.

Jon Nadler
Senior Analyst

Kitco Metals Inc.

North America 

In bullion coin news of the day, United States Mint on Tuesday published the first round of sales figures for the newly released fractional Gold Eagles. Between their launch on Thursday and through to Monday, buyers purchased 28,000 of the 1/2 oz sizes, 42,000 of the 1/4 oz sizes and 240,000 of the 1/10 oz sizes. For more information, read the CoinNews article about fractional 2010 Gold Eagles sales. To see how the value of the greenback has changed over time, check out sister site’s US Inflation Calculator.