Gold struggles to gain steam amid crisis

Precious metals prices opened amid mixed price trends this morning, reflecting on-going uncertainty and unease in all markets in the wake of the emergent Japanese nuclear plant crisis. Spot gold dealings got off to a rocky start, despite a sizeable slide in the US dollar on the trade-weighted index overnight. The fact that gold was struggling just to maintain the $1,400 level at a time when – given such epic crisis events – it would have been expected to be challenging price targets fully $100 higher, did not bode too well for the bulls. At the moment, it appears that the ebb and flow of prices in the equity markets is the dominant price-determining agent for precious metals and other commodities. The US dollar’s movements appear to have taken a back seat in that regard.

The divergence between gold (being sold off along with the greenback) and related metals was manifest in the small gains that silver, platinum, and palladium all recorded at the start of the New York session this morning. Silver climbed 13 cents to $34.40 per ounce on the bid-side at the start of the day. While some market technicians see a potential “bear flag” forming in gold at present, and observe the six-week-long price uptrend as having been cancelled, Wednesday night’s Elliott Wave short-term update has identified the key level for the bearish case in the yellow metal as the $1433.39 mark that was reached during what it calls a “counter-trend rally” on the 14th of the month.

A similar situation exists in silver, where the key, “not-to-be-overcome” level that would keep the bears energized is now seen as the $36.56 price level. Meanwhile, platinum advanced by $6 to $1,695.00 the ounce, while palladium moved $15 higher to open at $711.00 per troy ounce. In the background, crude oil also staged a “typical” dollar-inverse move to higher values, gaining $1.90 to reach the $99.88 per barrel mark. Black gold was lifted higher by escalating violence in Libya as well. Col. Gaddafi’s offspring has given the rebels but 48 hrs. before which he labels them as being neutralized and the rebellion as having been smothered.

Analysts at Standard Bank (SA) view the platinum and palladium markets as being largely defined by their respective marginal producer cash-costs at present. The research team at the bank opines that if either market tilts into surplus in 2011, the underlying production cash-costs of marginal PGM producers would not be likely to support the price of these metals on a fundamentals-based equation.

At this time, and factoring in the Japanese natural disaster, the supply/demand picture in the two noble metals is turning toward a…delicate condition. Prior to the quake, the SB team had projected a deficit of about 110,000 ounces in platinum for the current year, and a 358,000 ounce shortfall in palladium. If the sale of vehicles in Japan were to decline by, say, an extreme and perhaps not likely 25% this year, due to the terrible events we are currently witnessing, then the platinum deficit might narrow to but 48,000 ounces and the one in palladium could shrink to only 38,000 ounces – almost a balanced paradigm for both.

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