Gold suffers as bubble warnings increase

Leftover selling pressure depressed gold price as the mid-month session got underway this morning in New York. Spot gold bullion traded $9.10 per ounce lower out of Monday’s starting gate, with a bid quoted at $1,359.70 and all indications were that this was about to develop into another volatile and highly unpredictable trading day.

Silver fell 20 cents at the open and a bid of $25.84 was seen. Traders will be watching US economic data and the first tranches of Fed purchases while still fixating on charts to ascertain what the damage from Friday’s action might be. Retail sales and the Empire State’s manufacturing index reading will provide the additional fuel for more gyrations (including possible recovery attempts after the Friday selling event).

Indian gold imports totaled 43 tonnes last month – a 65% improvement over October of 2009 levels (albeit Diwali, the festival ahead of, and for which most of such gold flowed into the country took place a fortnight later this year). The question now turns to what happens post-festival, especially if gold remains above $1,320 (this, as a good number of “bargain-hunting” orders are said to be on local jewellers’ books beneath such a major support point in prices).

The white metal lost a hefty chunk on Friday, after having traced a parabola of its own on recent charts. As of the opening minute, only platinum showed at $2 gain quoted at $1,668.00 while palladium slipped $4 lower to $672.00 and rhodium marked time at $2,400.00 per ounce. Fasten seatbelts and keep hand on wallets would be the most likely-to-succeed advice for the day. Instead, ‘back up the truck, honey’ is what one is more likely to encounter advice-wise.

Don’t look now, but a small (very small) headline count about possible difficultly going in these markets has started to crop up. Some of them might yet raise eyebrows. On Wednesday, Comcast Finance listed ten bubbles that Daily Finance’s Charles Wallace had identified. Top spot, and the title of "the biggest, baddest bubble of them all," went to gold. How Soros-esque. This, as per Robert Wiedemer, author of “Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown.”

Not far behind (and certainly ahead on reader response comments-more than 1,000 of them) was Marketwatch’s “Why Gold Is a Bad Investment” weekend investor feature. Bad as that title might sound to some, it lacks no soundness. Gold is, in fact, not an investment. Heard this one first-hand, way before this video segment, in London last fall, from an instantly recognizable “gold is money” guru. Gold is, but a simple, fool-proof, credit risk-free, insurance policy for your other (actual) investments in the event they should turn to ashes. When it become pure speculation, that’s when you start seeing more of what was seen not only on Friday but in the weeks leading up to that day.

Friday’s metals meltdown (the largest in four months) brought a couple of background items that had perhaps been somewhat neglected by exuberant speculative bulls into sharp focus. First, one was able to identify an acknowledgement that whatever China says and China does still very much matter to the markets, and especially to the commodities markets.

Granted, the weekend passed without any further rate hike surprises from Beijing. Nevertheless, commodities traders will remain acutely attentive to the news stories coming from that all-important (to them and to the rest of the world) country.

We saw just such a Chinese-originated story buffet the markets early this morning. Reports (later denied by two firms) that the Chinese authorities had asked major banks to suspend real estate lending sent shivers of fear through base and precious metals markets and overcame apprehensions manifest at the same time about Ireland’s potentially imminent decision on whether or not to ask for a life jacket from the EU.

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