Gold enjoys hikes as oil spikes higher

Mr. Jansen also threw a bit of cold water on the assertions that we are in some kind of ‘peak gold’ condition, as his firm believes that mining output of bullion will increase by about 3 to 4 percent in 2011 and in coming years as well, continuing the pattern we have already revealed to you in these columns over the past three years. With margins such as the current ones being enjoyed by the majority of the PDAC’s attendees, such a little fact should come as no surprise. Mr. Jansen also noted that the steepening Treasury yield-curve is prompting some gold market players to begin shifting out of the metal and into equities that now appear to be “cheap.”

Also from the stages of the PDAC, and focusing on the same idea of changing interest rate conditions, comes word that while the current low real interest rate conditions are still conducive to the types of gains we have recently witnessed in the metals’ (and other commodities) complex, the changing trend in same could have some deleterious effects on prices.

GFMS Chairman Philip Klapwijk alluded to the fact that the “froth” we are experiencing in certain commodities, and precious metals in particular, could be “taken out” when more countries begin to hike rates as India and China already have. Thus, we advise, keep an eye on the ECB and the Fed for the latter part of this year, and in 2012.

Silver prices soared to a high of $36.79 per ounce, and then opened at $36.66 on the spot market with a gain of 99 cents. Whilst silver-oriented ETFs reported a robust inflow of ounces, the open interest in the white metal did show a decline on the aforementioned reporting period, and it was the first such shrinkage since near the end of January. Copper prices, also showing signs that they have vaulted way ahead of fundamentals-based levels, were indicating that heavy speculative trading is afoot on the COMEX.

Platinum and palladium opened on the mixed side this morning, with the former showing a $3 decline to $1,838.00 the ounce and the latter ticking higher by the same amount, to reach $813.00 per troy ounce. ETFs specializing in the noble metals showed increased in platinum balances but some outflows from palladium ones. Overall however, the PGM niche seems to indicate the same heavy-handed speculation that is currently defining oil, copper, and silver and it could result in sizeable price shifts should conditions around the world turn on the proverbial dime.

Such turns were already manifest later this morning, when oil halved its earlier gains, and gold prices fell into the red just one hour after having opened with the aforementioned robust gains. Volatility remains very much on the scene as spec funds exhibit intense activity and will not shy away from profit-taking at any moment. At last check, platinum was down $12, palladium fell $11, and silver was ahead by only 44 cents. Chalk it up to…oil. Oh, and the US dollar clawed its way back to 76.33 on the trade-weighted index.

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