Although range-bound conditions still prevailed during the overnight market hours, gold prices were able to repair yesterday’s closing losses and return to near the $1110 value zone following a fresh decline in the U.S. dollar. Indian buyers remained cautious last night, exhibiting signs that $1100 or lower would still be their preference when setting out to buy dowry-related baubles. That might be a bit difficult in view of the fact that April and May’s wedding season could keep price tags on the elevated side. A lot still depends on ETF-related demand overseas, and how the market shapes up in the wake of action in the currency markets (read: the dollar-euro tango).
Meanwhile, all is apparently still not well on the gold fabrication demand front. Today’s Zaman reports that: “According to recent figures announced by TURKSTAT, the Turkish statistical authority, Turkey's year-on-year exports went down by 1.3 percent to $8.43 billion in February 2010. [The} major cause for the fall was the decline in raw and semi-processed gold exports to $161 million in February 2010 from $1.6 billion in February 2009," Turkish State Minister for foreign trade Zafer Çağlayan said.” That is as sizeable a drop as we recall seeing in recent memory.
The euro managed to reclaim the 1.35 level against the greenback, but apprehensions about Greece’s lack of success in raising funds via bond issue sales became manifest among currency traders and progress to the upside was slow, at best. Greece has unveiled plans to offer a global bond in dollars over the next two months as it attempts to raise nearly $16 billion in funding requirements by the end of May.
Investors lost money on the country’s most recent sale of bonds, and the country needs to borrow somewhat north of 30 billion euros in the current year. Also undermining general sentiment in Europe were figures showing that regional inflation accelerated more than forecast (1.5% versus February’s 0.9% rise), courtesy largely of spiking oil prices, and that unemployment reached the round 10% level last month.
Rounding out the category “dismal news harvest” this morning, the fact that analysts’ wildest (read: gloomiest) expectations about the state of Irish banking were outdone by the findings that the country’s banks need some $40-plus billion in new capital to address what some are calling “appalling” lending decisions made in the past. Why, there used to be a time in the U.S., when a house flipper who could fog up a mirror could get a jumbo loan based on stated income and a drive-by appraisal too…Think 2006.
Gold prices opened firm for the start of a thinning-out midweek session, notching a $7.90 per ounce gain to the $1111.20 bid level. In the background, the U.S. dollar was still slipping on the index and losing 0.31 at 81.17 while still recording three-month highs against the Japanese yen. Silver gained 21 cents to start at $17.49 the ounce.
The noble metals complex appeared to benefit from further ETF-based attention as the quarter ends and piled on additional gains. Platinum added $22 to start at $1639 while palladium climbed $9 to open at $478 per troy ounce. Rhodium held steady at the $2460 mark this morning.
The ADP employment data indicated that U.S. firms eliminated 23,000 positions this month as against analysts’ expectation of 40,000 jobs being created. If this is a precursor to Friday’s Labor Department data, well, the dollar certainly did not like it. Gold, however, did – it added a couple of additional dollars to its opening gains on the news.
Resistance in the yellow metal still lies overhead, first near the 100-day moving-average near $1120 and then higher up near the $1135 area. Thwarted rallies to those levels could once again engender pullbacks towards the $1080s. Otherwise, thin conditions prevailed and price moves appeared to exhibit the general exaggeration in magnitude that normally accompanies a lack of participants reporting to work.
Jon Nadler
Senior Analyst, Kitco Metals Inc. North America
Websites: www.kitco.com and www.kitco.cn
