Boring (read: predictable) as the Fed meeting results turned out to be, the expected dollar free-fall and corresponding gold spike did not materialize in their wake last night. Bullion fell to an overnight low of $1,385.30 on the bid side of spot prices as the greenback gained ground on the rising conviction that the US economy is indeed on the mend, and as it was also helped by the on-going ‘review’ of Spain’s debt rating by Moody’s Investor Service.
The rating agency, which has been in a downgrading ‘mood’ of late, did in fact take its scalpel out overnight and did cut Vietnam’s rating from B1 to Ba3 given what it sees as difficult conditions for that country. Yes, it (downgrading) can happen in Asia as well, even as the skies continue to darken over Europe somewhat more. Agence France-Presse reports that Greece was brought to a standstill today as some 15,000 angry protesters marched against their government’s austerity measures. This was the country’s seventh general strike this year.
Gold prices opened the midweek session with a modest $3.90 per ounce loss, quoted at the $1,392.00 level as scattered selling ahead of year-end and the US dollar at 79.69 on the index continued to exert pressure on the yellow metal this morning. Gold-oriented ETFs lost nearly 5 tonnes of metal from current balances yesterday. Silver fell 32 cents on the open, starting the day off at $29.18 the ounce. Holdings in silver ETFs rose once again yesterday, in contrast with the aforementioned gold ones.
ABN AMRO’s most recent price projections for the precious metals group call for peaks some 3 months from now, at $1,485 gold, $31 silver, $1,750 platinum and $815 palladium. Easy math. You have a 7% potential in gold, 14.8% in silver, 3% in platinum, and 8.7% in palladium. The “problem” – if any – The firm projects the 12-months-from-now levels to be: $1,375, $27, $1,700, and $750 per ounce, respectively.
The bank also notes that “The US dollar cannot be singled out as the root cause of the latest gold rally either since it is no weaker than a month ago and the gold:dollar correlation is moving ever closer to positive territory. Nor is it necessarily concerns over eurozone debt levels, although the gold:dollar correlation does imply an element of risk aversion.
“So while the gold price remains strong, we are a little concerned that if a correction comes it may not be signaled before the event. This gold rally appears very much sentiment based and investment demand in all regions and in most currencies is very strong. Any change to this current status quo could therefore see a sharp correction” concludes ABN AMRO’s VM Group.
Platinum dropped $12 to open at $1,693.00 while palladium lost an equal amount to commence trading at $747.00 the ounce. Rhodium was static at $2,280.00 the troy ounce. Today’s focus –more of the same – will be the US dollar and how it behaves in the wake of the release of November’s consumer prices and US manufacturing data.
The former rose 0.1% last month, driven largely by food and energy costs (both of which gained 0.2% in November) Core CPI rose 0.1% for the first gain since the middle of this summer. As things stand right now however, overall US CPI is still stuck below Fed targets of from 1.6 to 2 percent, and it remains at 1.1%. Repeat after the Fed: Inflation? What inflation?
The inflation data gave the US currency a further boost as of 8:40 NY time and helped drag gold back to near the $1,380-$1,385.00 area. As for the Empire State manufacturing index, it rose 22 points this month, following a lackluster (read: negative) November showing. It now stands at +10.6 on the back of rising new orders and shipments and a decline in inventories.