Metals report for April 27

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 per 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, Ford Motor Co. reported $2.1 billion in first-quarter earnings, its fourth consecutive profitable quarter and its best in six years during a time when many were writing the obituary of the U.S. 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 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 U.S. 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 shitty” deal by the former head of sales and trading at Goldman.

Jon Nadler

Senior Analyst, Kitco Metals Inc. North America

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About the Author
Jon Nadler Jon Nadler is a Senior Analyst at Kitco Metals Inc. North America
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