Precious metals extended their Wednesday losses overnight as continuing turmoil in the Old World unnerved investors and they ran to the sidelines (and the shelter of the US dollar –which added another 0.53 on the index to once again aim for the 87-mark following its own decline last night). The flux in the markets showed absolutely no signs of dissipation as various statements were made by market observers.
For example, Germany’s Ifo Institute, a research body that gathers monthly business sentiment data, opined that the EU-IMF package ‘rewards speculators’ and that it ‘hurts German interests.’ Meanwhile, the common currency was up – and this helped dent the metals further- but was still struggling just above the 1.23 level, as perceptions that it is turning ‘radioactive’ have brought programs to diversify out of dollars to a standstill worldwide, and have replaced them with aggressive dollar-buying.
On the other hand, given the growing prospects for outright currency market intervention, some brave buyers might be starting to eye the battered currency. China could be one of those buyers as it seeks to broaden its reserve exposure. There appears to still be no gold buying checkmark on the country’s immediate shopping list however. Officials must not have read the plethora of hard-money newsletter-based guarantees that showed them buying it throughout the past six months…
New York spot precious metals dealing opened with sharp losses in gold and staggering losses in the noble metals complex. The yellow metal started the session with an $11.50 loss per ounce, quoted at $1179.90 and shortly after the opening it headed to under the $1175.00 level. Should support fail to hold near these levels or some massive buying wave sweep gold significantly higher soon, the prospects of a slide towards the $1100-1150 area might open up, and change the game significantly. Resistance is now in place up near $1210.00 as well as higher. For the moment however, the meltdown is in full swing and shows little in the way of abating.
Silver dropped another 48 cents this morning, starting the day off at $17.72 and, it too, was later apparently aiming towards lower support levels as it dipped to $17.50 –trouble is, each day brings a new one into focus. The most significant damage this morning was inflicted (once again) in percentage terms upon platinum and palladium. The former lost $111.00 an ounce to drop to the $1490 mark shortly after the open, while the latter crumbled by $46 per ounce to reach $412.00 this morning.
Crude oil fell $1.72 this morning, Dow futures did not bode well, and the US dollar remained firm following the US Labor Department’s report that 25,000 more people filed for jobless claims last week, pushing the tally up to 471,000 – the highest in one month.
The formerly soaring group of noble metals suffered a triple-whammy hit over the past several sessions; a combination of coattail effect from gold sellers, the perception that the eurozone turmoil could result in a global double-dip, and the loss of car registration numbers in Europe in April (a near 22 percent loss). Evidently, locals were busy watching Greece crumble and were in no mood to buy shiny new wheels.
All of this, despite news that a) Russia may have exhausted the supplies of its saleable palladium, and b) that catalytic converter thefts are on the rise once again, underscoring the ‘desirability’ on these relatively rare metals among certain ‘investors.’ The trouble here - in this writer’s view –is an acronym that may yet come to haunt the gold market as well: ETF effects.
No one should delude themselves that ETFs which control sizeable portions of a metal’s annual supply will not affect the market when they either court it or sour on it. The largest of gold ETFs for example, holds nearly 1/3 of total annual gold supplies (or about half of annual global gold mine output) in its vaults, and NOT in tungsten-filled candy wrapper-coated form, either. Redemptions from such a pool cannot be ignored, should not be ignored.
Market-maker Heraeus’ veteran Miguel Perez-Santalla opined in this morning’s analysis that: “This morning you are going to hear a lot of technical mumbo-jumbo about what is going on. In reality this is a classic scenario. After Platinum dropped 100 dollars yesterday the traders with deep pockets were probably as surprised as you were about the apparent weakness. True to form, the same guys would then think to themselves: Hey there are probably more weak hands at this table! So since there was no fundamental news to change the scenario from one day to the next they applied pressure and, Boom! Platinum is down another $100!
These are the kind of moves that in a market which is relatively small compared to capital markets, and even gold, are going to happen from time to time. Is the bloodletting over? We can’t be sure at this point but there is definitely some good industrial buying coming into the market at these price levels that will add some support and maybe bring this collapse to a halt.”
Something that shows no signs of coming to a halt is the emerging war on Glenn “Arguing With Idiots” Beck and his incessant (but explainable) gold-oriented propaganda. Time News Feed reports that “New York Congressman Anthony Weiner clearly watches his news broadcasts live, because he’s seen some ads that have really ticked him off. On numerous occasions, Glenn Beck has dedicated entire segments of his program to explaining why the U.S. money supply is destined for hyperinflation with Barack Obama as president. He will often promote the purchase of gold as the only safe investment alternative for consumers who want to safeguard their livelihoods. Also mentioned by name in the report: Fred Thompson, Dennis Miller, Mark Levin, Laura Ingraham, Lars Larson, Michael Smerconish, Monica Crowley and Mike Huckabee.”
Can Sarah Palin and the Tea Party be far behind in urging people to pile into gold for sheer survival purposes because the USA will turn into Zimbabwe? Probably not. They already have G*d and G*ns on the ‘must-have’ agenda.
Happy (Careful) Trading.
Senior Analyst, Kitco Metals Inc. North America