Gold falls as oil price move down

One might as well begin today’s overview by mentioning that crude oil prices fell by $3.00 (to near $101.40) per barrel despite the air strikes that soon-to-be-decommissioned Colonel Gaffadi carried out against oil installations in his own country this morning. No word on how much damage was sustained.

Whether the selling pressure in oil came from the UN edging closer to the institution of a no-fly zone in Libya, or the fact that a couple of days’ worth of crude stockpile reports indicate that the supply situation is hardly tilted into anything that can be called a ‘shortage’ remains unclear at the moment.

For instance, the U.S. Energy Information Administration reported a rise of 2.5 million barrels for the week leading up to March 4, and that was fully quadruple the 600,000-barrel increase expected by petroleum analysts surveyed by the Dow Jones Newswires service. Underscoring the same reality, we got word that "There is no shortage of oil in the market," according to Mr. Youcef Yousfi, the Algerian Minister of Energy and Mines. “The high price,” he said, is a result of the "hardly predictable logic" of “oil traders in the financial markets.” Statements of the obvious are, sometimes, very, very useful.

It is quite possible that oil speculators lifted their greedy little feet off the price throttle in crude, now that they have seen a string of Libya’s neighboring countries (such as Saudi Arabia, Yemen, and Morocco) all take “pre-emptive” actions in terms of offering domestic concessions and reforms aimed at averting popular discontent from morphing into popular uprisings. It is also conceivable that France’s move to become the first nation to ignore Col. Gaddafi and instead recognize the Rebel National Council as “valid interlocutors” (ah, the French have a way with words!) has hastened perceptions that the Colonel will indeed soon join the ranks of the world’s deposed strongmen and become as relevant in terms of stature as he might be by running around amid a throng of NBA players on a court.

The sharp decline in oil, along with an initial 0.61% gain in the US dollar on the trade-weighted index (just when one thought the “end” was nigh) made for a wobbly start in the precious metals’ complex this morning. Gold spot prices opened with a loss of $12.60 per ounce, and were quoted at $1,416.30 on the bid side. The lows came in below the second support level near $1,410.00 after the $1,415.00 zone was pierced. The yellow metal is still likely to continue to trade within the $1,400-$1,450 range but there is a particular school of (Elliott Wave) thought that argues for a “final” push up to as high as the $1,530 area before this cycle draws to a close and prices head substantially lower. Still, one should be on the lookout for the psychological $1,400 mark as it is now very nearly “in play.”

Silver opened with an 87-cent drop for Thursday’s session, with a quote at $35.18 (but then touched lows near $34.75 the ounce). The roller-coaster in the white metal remains the defining pattern for the time being as tiring longs continue to duke it out with early profit-takers. Nevertheless, anyone who jumped onto the silver bandwagon in an “am I missing the boat?” panic on Wednesday was facing net losses on the order of 4.0%+ at this morning’s lows near $34.65 per ounce in the metal.

Platinum and palladium fell sharply, as specs took more profits, and did so despite easing oil prices (which should be viewed as beneficial for future automotive sales patterns). Clearly, someone out there saw the complex as having gotten ahead of itself in earlier weeks. Platinum dropped by $30 at the open, (and later by $40) and was quoted at $1,775.00 per troy ounce, while palladium lost $25 out of the starting gate this morning, with a bid quoted at $765.00 (approaching support near $750?).

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