Gold and yen trade at highs against dollar

Gold prices opened with mild gains this morning, after having touched overhead resistance at the $1,230 mark during the overnight hours. The yellow metal started the Tuesday session off with a $0.60 per ounce rise, quoted at $1226.10 as against a 0.19 drop in the U.S. dollar on the trade-weighted index (last seen at 82.26). Gold later slipped into the red column, losing anywhere from $1 to $2 per ounce while the rest of the complex remained firm.

July U.S. industrial output figures were expected to show a 0.5% rise, following a rather thin 0.1% improvement in June. The actual number was a full percent gain, with much of it being attributed to the fact that GM (for a change) did not idle its auto plants this summer, to stockpile inventory. Field reports indicate that more than one U.S. auto dealer is parched when it comes to the inventory of iron it has available to move into consumers’ hands.

Meanwhile, decent earnings reports from Home Depot and Wal-Mart helped buoy stock index futures this morning, in a welcome respite from the recent gloominess. So, maybe, the U.S. is not quite ready to fall into the double-dip abyss that was being envisioned all over the place last week. Let’s see what today’s bounce in sentiment does to safe-haven asset values as the day wears on. Thus far, the industrial output numbers were somewhat countervailed by a less than robust gain in July’s U.S. housing starts. And thus, the ‘unusual uncertainties’ and ‘uneven recovery’ continue to yield hot/cold daily news…

In the background, crude oil was trading a tad higher than its five-week lows, and the greenback was trading at $1.286 against the European common currency, while the latest quote on the yen was showing a reading of 85.26 against it. Providing yen quotes as a matter of routine may yet become…routine when talking gold. Why? Read on.

It turns out that as alternatives as to where to place one’s money dwindle to a precious few for Asian investors, the Japanese yen and gold have become de facto (if strange) bedfellows of late. Both assets are trading near decade or decade-and-a-half highs against the U.S. dollar. The latter has of course been undermined by the presence on the scene of something we have harping about quite frequently in these posts: the carry-trade.

With ultra-cheap dollars (still) available to burn, courtesy of the Fed, the ‘carry-oke‘ clubs of Asia have been courting (and more) assets such as the yen and gold. Simultaneously. For the moment, (in terms of performance) the yen is in the lead of the ‘most-requested safe-haven play’ list. Once again, a warning: recall what happened when the yen carry-trade expired. It is now wearing the label ‘the most recent global financial crisis.’ When the dollar-carry draws to a close (and it will), well, better not dwell on that now…

Silver added 16 cents at the market’s open this morning, and was quoted at $18.57 the ounce. EW analysis has raised the odds of a sharp, upward spike in the white metal (to at least above $20 per ounce) in the wake of certain chart/wave patterns observed by its resident analysts.

This, at a time when the same analysts see a topping out pattern in gold’s most recent ascent. Only a pole-vault to above the June $1,265 gold…bar would change that perspective. And, yes, there is still plenty to fret about as regards the lavish attention being paid to gold by speculative-minded funds.

Platinum rose a fairly hefty $10 on the open, with a quote on the bid side at $1,540 per troy ounce. Palladium did not waste time either, rising $9 per ounce to start at the $490 level. This, despite findings by Kitco News’ own team that speculators have unloaded long positions in palladium futures and options recently, and that such unwinding has contributed to recent price weakness in the metal. In anyc case, with an $11 gain on the day, at least today, the noble metal is shining quite nicely. GM’s flexing of its production muscles is undoubtedly helping.

Jon Nadler is a senior analyst at 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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