Base and noble metals suffer after quake

SPECIAL BULLETIN – The Japanese Earthquake and its Aftermath

Friday’s horrific natural disaster plunged the nation of Japan into what Prime Minister Naoto Kan has described as the worst crisis his country has faced since World War II. The aftermath of the 9.0 earthquake is just beginning to take quantifiable shape, but it has already resulted in some revisions of projections regarding Japan’s economic situation. At the moment, all efforts are being made to save as many lives as is still possible and to avert further collateral damage from the flooding, the continuing power and telecommunications outages, and the untold dangers being posed by the country’s several failing nuclear power plants.

As was largely expected, the Bank of Japan injected a record quantity of cash into the country’s financial system while also expanding its asset purchase program to double its previous size. Some ¥15 trillion were added to Japan’s money markets overnight in order to stabilize conditions and to avert an undesirable rise in the national currency that was seen as on the horizon in the wake of emergent repatriation of same.

The dual accommodative gesture by the BoJ managed to calm investors in the currency markets for the time being. The Japanese yen traded at 81.795 at last check, while the US dollar slipped to 76.47 (off by 0.08) on the trade-weighted index. Crude oil continued to fall, losing 68 cents to trade at $100.47 after having spent a period of overnight time under the century mark. Falling black gold prices dragged the Canadian dollar lower as well however.

Nevertheless, the Nikkei average sustained a nearly 634 point-large decline in Monday’s trading as the event sparked fears that the Japanese economy may continue the contraction it had exhibited in the final quarter of 2010. Still, very few analysts are of the opinion that the disaster will undo the near-5% rate of global growth that was underway in 2010, or that the setback that the Japanese economy may suffer will be anything but a temporary one.

Amid the quite fluid economic and geopolitical conditions on display around the world as the middle of the year’s third month approaches, precious metals opened on a nervous and uncertain note for trading this morning. Gold continued to receive some additional safe-haven oriented bids and climbed $6.80 out of the market’s starting gate in New York (the initial quote was $1,426.40 for spot bid prices). Standard Bank (SA) notes a decline in speculative activity in gold. Open interest and net speculative length have shown marginal shrinkage in the most recent CFTC reporting period. However, there also has been a decline manifest in the amount of short positions present in the market.

Silver added only 3 pennies to Friday’s closing values, however, to open at $35.93 per ounce. Unsurprisingly, platinum and palladium suffered some declines in value as news of Japanese auto plant closures continued to unnerve speculators in that niche. Platinum dropped $16 to the $1,761.00 per ounce mark, and palladium fell $8 to the $749.00 level. Rising risk-aversion is also contributing to the possibility of additional selling. There has been a waning of investor interest in palladium in recent trading sessions, as observed by Standard Bank (SA) commodity analysts in their most recent market report.

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