Gold drops despite Egypt fighting worsening

Silver prices opened with a 12-cent loss this morning, trading at the $28.23 per ounce bid level, and once again showing quite a narrow overnight trading range ($28.18 to $28.41). Platinum was down by $9 at the $1,822.00 mark and palladium lost $7 to start the session at $805.00 per ounce. No change was noted in rhodium, trading at $2,450.00 the ounce. In the background, the US dollar was up 0.27 on the trade-weighted index (at 77.32) while crude oil climbed 62-cents to the 91.48 per barrel mark. The euro traded at $1.375 against the US currency (wait; wasn’t it supposed to have collapsed by now?).

On tap for the markets’ “breakfast fare” this morning were the most up-to-date figures from the US Labor Department. The agency said that US jobless claims applications fell by 42,000 to the 415,000 level. In doing so, the filings basically negated last week’s bump in same. Continuing claims for benefits also declined (by 84,000 filings) to the 3.93 million mark.

The jobless claims filings news lifted the US dollar somewhat further (to 77.61) on the index and subsequently dragged gold to lows near $1,324.00 per ounce. In other US economic news, the productivity level of American workers increased during the last quarter of 2010, and it did so at a rate that was largely unexpected by economists. Such gains took place amid falling labor costs in the US. The focus now shifts to tomorrow’s jobs data, within which analysts believe they will learn of an addition of 140,000 jobs to US payrolls in January.

Continuing on our recently posted topics on inflation, hyperinflation, deficits, and the markets – important subjects one and all ­­– we now bring you Globe and Mail-reported reality of a…corroborating kind; namely, the G&M’s intrepid reporter, Martin Mittelstaedt’s article posted last Friday. Writes Martin:

“If inflation were a credible threat to the future value of money, bond prices would be cratering, and interest rates rising sharply. That’s why many market watchers believe the current jitters over inflation may be a giant, economic version of a head fake. These pundits believe the chances of anything resembling the last inflationary blowout in the 1970s – when years of double-digit hikes in consumer prices created a worldwide wage-price spiral – are remote. Some analysts are even warning that inflation should be the least of our worries. They believe the most dangerous long-term problem is the high risk of inflation’s scarier and opposite “number” – deflation.”

The article cites economist Lacy Hunt (whose Texas firm, Hoisington Investment Management Co., is apparently the holder of a very successful track record in the bond market) as one who “believes the U.S. Federal Reserve, through its program of printing money known as quantitative easing, has caused massive flows of funds into commodities, emerging markets and other speculative investments. The quantitative easing program is set to expire in June, and Mr. Hunt doesn’t think it will be renewed, suggesting the price distortions it caused will be reversed.”

None of the above, of course, has even remotely decreased or stopped the incessant flow of bubble-dismissal cheerleading talk from coming at you. Last night’s e-mail inbox contained at least nine urgings to load up on commodities and to take cover against events that will make next year’s Mayan calendar TEOTWAWKI date a mere picnic on the grass. As always, there is ample room for both camps to offer up their case. The question is: at what point do investors begin to realize that a good degree of confirmation bias is at work here, as opposed to cogent parsing of “on-the-ground” reality. Wish we had that answer.

Until tomorrow,

WISHING A HAPPY NEW YEAR TO OUR CHINESE AUDIENCE!

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

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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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