Gold hits two-week lows as euro slumps

Commodities fell across the board on the possibility of further erosion in Chinese-originated future demand. Crude oil lost $1.60 (nearly 2%), copper sank 2.7% and the white and noble metals shed values as well. The Dow fell over 135 points on the aforementioned Chinese and Irish news items. Silver was showing a 12 cent loss at the 10 o’clock hour in New York, quoted at $25.41 (my, how quickly that $30 ‘is imminent’ price paradigm has shifted). As for gold, the $1,325 level now appears as a ‘must-hold’ since clustered sell-stops are thought to be trip-wired thereabouts.

Platinum fell $14 to the $1,657.00 level while palladium gave back an additional $15 to drop to $655.00 the ounce. Rhodium was off by $10 at $2,390.00 per troy ounce. Johnson Matthey opines that platinum will show a surplus for the current year (likely to still be absorbed by ETFs for the most part) while palladium might shift into deficit conditions next year, if Russia does not come to market with stockpile sales.

Volatile metals markets have engendered action on the part of market mechanism mavens. Last week’s hike in silver futures margin requirements (just in time?) have apparently paved the way for similar restrictive moves coming as of tonight’s close in gold, platinum, and palladium contracts as well. Both initial as well as maintenance margins will be affected. Cooking with heat is now best done with a nice pair of Nomex gloves. All puns intended.

No Dudley puns to follow, but the Fed’s William Dudley (he, dove) asserted flat-out this morning that the Fed’s QE (1 or 2 or both) will NOT cause an ‘inflation problem.’ Those words alone were good enough for a seven basis-point decline on the yield on ten-year notes right after the 9 o’clock hour in New York.

It has been repeatedly tendered that the Fed (and other central banks) not only possess the power to create unlimited amounts of money to throw at particular ‘problems’ during given business cycles, but also to suck up (hard, and fast) any such excess liquidity when the cycle normalizes and (most importantly) before one or another country begins to resemble Zimbabwe in terms of runaway inflation.

Thus, we bring you the ‘heretical quote of the day’ - “People do not understand clearly” that “we can have an enlarged balance sheet and not have a long-term inflation problem,” Mr. Dudley said in an interview with CNBC. {Insert howls of disbelief here} Yeah, we know; it’s all propaganda. Like it was in 1982, when the Weimar Republic, famine, and martial law were all ‘imminent’ in the US (at least in the minds of certain newsletter vendors).

Until tomorrow,

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

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

About the Author
Jon Nadler

Jon Nadler is senior metals analyst with Kitco Metals Inc. in Montreal.

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