The operative word in the markets this morning was "resolution.” After much guessing and second-guessing about what has been said and done thus far about Greece, the issue appears headed for (some kind of) a resolution this morning. Greece will formally ask the EU for a rescue package. Not coincidentally, the ‘give’ on Greece’s part came after its rating was downgraded by Moody’s rating agency yesterday…The rescue package request news lifted the euro off of one-year lows, as it also caused Greek bonds to rally, various stock indices to rise, the U.S. dollar to retreat a bit, and commodities to stage a comeback as risk appetite reignited.
A resolution of sorts was also apparently in the making as regards the Goldman case – just one week after the news roiled market like a spring storm. Securities laws experts are suggesting that the firm simply cut its losses and settle with the SEC. There is much at stake for the most profitable firm in Wall Street history here. Getting on with business – at the expense of a settlement rather than a protracted court battle - may well be the simplest, most expedient resolution to the messy situation, legal scholars opine.
No clear resolution for the tack the U.S. economy may be on was on offer in this morning’s durable goods orders. New orders plummeted by a net 1.3% on account of a 67% freefall in aircraft orders. If one takes that (important) component out of the Commerce Department’s equation, then the conclusion would be that durable goods orders actually rose at the fastest rate in over 24 months (the U.S. recession is commonly thought to have commenced in December of 2007). Crude oil and gold (but not so the dollar) remained lower after the hot/cold news release.
Equally unclear this morning were the trends in precious metals spot markets. Gold opened steady-to-higher, but then slipped to $1135 once again – showing a $5.20 decline at last check- as the durable goods numbers made a durable impression on speculators. As things were lining up for next week –based on Bloomberg’s weekly surveys-some traders expected the dollar to gain next week and commodities to not do so well in the wake of same. Some of this may have to be reassessed, now that the Greece factor appears to have been somewhat neutralized.
Silver fell nine cents to trade at $17.89 while the noble metals were the subject of some profit-taking following their recent, uninterrupted string of heady gains. Platinum was off by $15 at $1725 and palladium lost $5 to ease to the triple-five level. No change once again, in rhodium. It remained at $2900 the troy ounce. The recent low near $1130 might offer support for the yellow metal on the precious team, should prices head further towards that direction later on today.
In the broader market picture for gold, the fact that there is still no resolution in sight for the outcome of the upcoming UK General Election might make a difference as to which direction prices head towards. TheStreet.com reports that ‘a hung parliament could lead to increased economic uncertainty and lower confidence among savers.” Such conditions would be conducive to favourable nods coming in gold’s way. Of course, we must not lose sight of the fact that the report featured on TheStreet came via a PR Newswire citing the opinion of online bullion dealers GoldMadeSimple.While not mentioning hard figures for the period, the World Gold Council said this morning that Indian gold demand preliminary reports "suggest a continuing improvement…supported by seasonal festivities.” Also possibly helping matters for gold offtake in India, a stronger rupee (up 3.6% on the quarter) which made the yellow metal cheaper in local terms. The formal Q1 report by the WGC is not due until mid-May.
Jon Nadler Senior Analyst, Kitco Metals Inc. North America
Websites: www.kitco.com and www.kitco.cn
