Metals report for May 4

Spot gold opened the Tuesday session with a $6.10 gain, quoted at $1188.40 as participants staged yet another assault at the $1190 price marker. Gold bulls are taking the parallel rise in gold and the dollar in stride, and the focus has shifted to euro-bashing from last fall’s incessant dollar requiems. Whatever excuse works. The IMF’s gold reserves declined by 18.5 tonnes (595,000 ounces) in March on the heels of a 5.6 tonne sale of gold in February. While that figure appears small relative to the big plays in the futures and/or ETF markets, it represents a full year’s worth of global bullion coin sales by a leading mint.

Meanwhile, yesterday’s $800 future gold forecast by a Barclays strategist engendered howls of disbelief among die-hard dyed-in-the-wool gold bugs who chose to shoot the messenger rather than allow for any variance in perma-bullish opinion (currently, once again, at a fever-pitch). However, one of the longest-standing and most respected names in this business has now also scaled back on edge-of-space price projections.

Robin Bhar (analyst at Credit Agricole in London) said in a report this morning that gold will likely trade at $1100 in half a year and at $1050 in one year – those figures lower by $150 and by $125 than previous estimates. Go figure. Must be that everyone at every institutional source is drinking some wicked, bearish Kool-Aid. This should be good for another 23 pieces of hate mail. Folks, we call’em as they see’em, even if they are a 1:100 minority. You do want to be fully informed, no?

Silver declined 8¢ on the open, starting the day at $18.72 per ounce. Meanwhile, platinum shed $6 to open at $1715.00 and palladium fell $5 to the $535.00 level on profit-taking and the aforementioned apprehensions related to Chinese demand. In fact, Chinese Purchasing Managers Index levels have fallen to 55.4 from a 57 reading recently. Mining firm shares continued to receive a drubbing this morning despite the gain in gold, as Australia’s proposed 40% “Henry Tax’ on resource company profits (even though it won’t come until mid-2012) kept sellers busy and buyers at bay.

No change was once again reported in rhodium – still parked at the $2800.00 bid level. Technicals indicate that –as mentioned yesterday-little stands in the way of achieving the $1200 psychological mark for the bulls at this point. Albeit physical markets show increasing resistance (scrap flows) above the $1180 area, futures market spec longs remain in the driver’s seat and are currently calling the shots. The overt stratagem is to continue to plant fears of the Greek contagion engulfing all of the PIIGS and the EU collapsing into a smoldering pile of default rubble, with more than a few bull spokespersons alluding to the US as being “next in line” for staging a Greek-style tragedy.

Jon Nadler

Senior Analyst, Kitco Metals Inc.North America

www.kitco.com and www.kitco.cn

Blog: http://www.kitco.com/ind/index.html#nadler

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