Gold bolstered as dollar slips

China and its anti-inflation/anti-bubble combat took centre stage in the market news flows once again during the overnight hours, as its People’s Bank announced a half percent hike in reserve requirements (to 18%) for the country’s banks.

The move represents the sixth such tightening this year and it comes just one day ahead of the release of November inflation and other economic metrics for the world’s second largest economy. Polled analysts believe that inflation may have risen further, possibly to as high a level as 4.6%, and that the PBOC might raise interest rates even as soon as Sunday if it feels that the inflation dragon is growing yet another unwelcome head and getting ready for a menacing flight.

The news from Beijing dented most of the Asian regional equity markets overnight, especially as China’s trade activity gauges (imports and exports) rose to records last month thereby offering yet another reason to believe that the PBOC might do something – and soon – in order to prevent some runaway scenarios that might prove difficult to deal with at a later date.

Commodities markets, on the other hand, treated the Chinese trade statistics with speculative “joy” and continued to rise for a third day, with specs probably figuring that they can deal with Chinese tightening if and when it comes, but not just yet. ‘Tis the season to keep pushing for a big fat profit bag under the tree. Has been most of the year.

After having recovered somewhat during Thursday’s session, gold prices opened with an eighty-cent loss on Friday, quoted at the $1,386.20 per ounce spot bid level. Scattered selling was still being observed at opening time; however a slippage to just under 80 on the trade-weighted index by the US dollar helped minimize bullion’s initial loss early this morning.

Silver also fell – by fifteen cents – to open at the $28.61 per ounce mark. Wednesday night’s EW analysis found that Tuesday's 7% high-to-low intraday reversal (daily continuation contract) after recording a new 52-week high “was the third largest intraday reversal after a new 52-week price high since August 1971 (nearly 40 years).” In a somewhat similar move, silver made a slightly higher high in May of 2006 (after the April 2006 high), but then declined a whopping 37% in just five weeks.

Platinum advanced $2 on the open and was quoted at $1,677.00 per ounce, while palladium gained $1 to start the final session of the week at the $739.00 per ounce level. Rhodium showed no change at $2,260.00 the troy ounce. A mix of hot-cold news from the automotive sector might give the noble metals specs something to ponder over the weekend.

Carmaker VW announced that its November sales gained a robust 16% and that it will remain on track to sell more than 7 million sets of wheels in 2010. The (long-awaited) global upturn in automobile sales represents a larger-than-proportional blessing for the German carmaker. China, once again, takes the ‘cake’ – for VW. And, what a sweet mooncake that, is.

VW’s November Chinese car market deliveries popped by 29%. In fact, overall Chinese car deliveries rose by 29.3% last month – to a new record of 1.34 million units. That said, automotive analysts expect precisely the Chinese automobile market to be the one that might show a mild contraction in the coming year.

A shrinking to the 11% growth level is anticipated for Chinese vehicle sales in 2011, according to Deutsche Bank analysts who point to the dissipation of stimulus effects and to the lower likelihood of sustainability for such astounding year-on-year gains as that market has recently been witnessing. Hopefully, any such “slowdown” will be mitigated by a revival in US and European auto sales next year. Russia, India, and Brazil auto markets are still expected to perform robustly in 2011.

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