Gold hits new records; Soros calls bubble

Meanwhile, those very same values brought about a larger than 25% decline in Saudi Arabian gold offtake among certain retailers during the Ramadan-Eid Al-Fitr period this year. Overnight feedback from Indian retail contacts tell pretty much the same story; demand is virtually nil at current price levels. Translation: high gold prices trump tradition. More evidence that the latest surge in gold prices is largely a fund-driven futures/options/momentum/technicals flavored one comes from the retail physical gold coin demand front. Of course, you could just consult Kitco News for validation of same. However, consider this little ‘golden’ nugget, for perspective:

The Austrian Mint reported that sales of its highly popular Philharmonic 24K coins fell by 41% in the twelve-month period that ended in August. The exception, of course, was the month of May when European buyers flocked to coin dealers due to the debt storm taking place in the region. The drop in sales was apparently correctly anticipated by the Mint’s management, which announced last fall (to incredulous perma-bulls) that it was scaling back its output of coins by at least one-third for 2010, due to what it saw as an “abatement of crisis conditions last seen in 2008 and 2009.”

Translation: not everything you read on bullion bully bullish gold websites is true. Some of it is dangerously oil-circa-2008-flavored: “There is no downside to gold.” Whoa. While it may well reach pinnacles $100 higher than today’s the idea of ‘no downside’ is as valid as it turned out to be for $147 per barrel oil two summers ago. Translation: consult Mr. Soros on that one, no matter what things appear like today.

Silver opened with a one dime gain this morning, and was quoted at $20.70 the ounce. No let-up in the gains within the noble metals complex, either; platinum started the session with a $4 rise, and so did palladium. The former was quoted at $1,610.00 and the latter at $558.00 per troy ounce.

Over in yen and yuan territory, all was relatively calm overnight - but only on the surface. The Wednesday intervention by Japan is fueling speculation that the dollars which were bought in exchange for the yen sold might find their way into short-term US Treasuries. Translation: watch that yield curve.

The US administration has reportedly lost the last traces of its patience with China’s dawdling regarding the upward revaluation of the yuan. Words such as ‘unacceptable’ and ‘unsustainable’ were being bandied about by US officials. Translation: unless China does something to revalue it currency (and help create one million US jobs as well as make a deep cut in the US trade deficit in the process), US officials will ask their Chinese counterparts to translate “trade war” into Chinese. Fast. Even if Mr. Obama wants no Chinese feathers ruffled.

Until tomorrow, “Minden jot kivanunk” – Translation (from Mr. Soros’ native tongue): We wish you all the best.

Jon Nadler is a Senior Analyst at Kitco Metals Inco. North America

Websites: www.kitco.com and www.kitco.cn

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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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