Gold rallies on no-fly zone, drops on cease fire

The advent of the United Nations’ Libyan no-fly zone and the prospect of likely military action now being perhaps just hours away lifted crude oil prices in a hurry and that spark in the markets brought precious metals speculators back to the feeding frenzy trough equally fast overnight. Colonel Gaddafi’s machismo could be put to a severe “test” in coming days as British jet fighters are already being deployed as a prelude to efforts to remove the man (or at least his forces) from the scene in Libya. The situation has turned grave enough to warrant outside intervention (which, some say, was actually quite overdue).

The Colonel’s assertions that he would “crush” the last vestiges of the Libyan rebellion via some kind of civilian bloodbath to come in Benghazi was the last straw that the UN needed before it voted 10:0 (+ 5 abstentions) to impose the aforementioned no-fly zone, along with green-lighting “all necessary measures” (read: bombs away) intended to avert the strongman from making his apocalyptic visions of Benghazi a reality. It appeared early this morning that the several weeks of civil war could blossom into a dictator-removing conflict that harks back to the days of one, Saddam Hussein.

However, the situation remained highly volatile and black as well as yellow gold halted their advances in the wake of one Libyan official announcing that the Colonel had ordered a halt to all military operations (presumably against the rebels holed up in Benghazi) following the UN resolution. Thus, $103 crude oil morphed into $100.00 oil, and $1,425 gold turned into $1,418.00 gold within the first hour of trading action in New York. This is all yet to be sorted out, thus the reader is asked to excuse the possible staleness of the story by the time it lands on the Internet. To wit: moments ago, British PM Cameron told the BBC that Mr. Gaddafi will be judged “not by his (cease-fire) words, but by his deeds.”

The declaration of a cease-fire by Libyan Foreign Minister Koussa could drain the bullish energy manifest in commodities this morning in a hurry. However, just as that announcement was being made, a report from Yemen revealed that at least 31 civilians had been killed by security forces which opened fire upon them during an anti-government protest. Meanwhile, the Bahraini Shiites who have lost one of their comrades to a government crackdown buried the man this morning.

Ever since Tunisian vegetable vendor Mohamed Bouazizi was slapped by a policewoman on December 17 and subsequently set himself afire, the MENA region remains a powder keg which could continue to provide support the investor quests for any and all safe-haven assets and/or currencies. The incident has been called the “slap heard round the world” and has set into motion what is now known as the “Arab Spring” – a spreading revolt that has already toppled regimes in Tunisia and Egypt. Thus, wide trading ranges for all such assets of last resort will remain the order of the day, as international news flows continue to offer plenty of fuel to make for divergent trading sentiment with each and every hour that passes. The movements in the metals and other markets could yet intensify as pre-weekend book-squaring and the yet-to-come news from around the world make their presence felt among the speculative trade’s players.

Spot gold prices moved over a fairly broad $1,409 - $1,425 price range this morning, while spot silver quotes ran across a 75-cent price channel ( from $34.69 to $35.44) and the white metal was also seen as being buffeted by volatility and nervousness. Resistance in gold extends from near the $1,425 level up to the $1435 area at the moment. The solid gainers on the day were platinum and palladium, each of which recorded $18 rises (1 and 2 percent, respectively) and climbed to highs at $1,738 and $733 earlier in the session. Automobile dealers in the US and elsewhere are already asking buyers to pay sticker (or above) prices for Japanese vehicles whose supply is likely to be tight in coming months as ports in Japan are out of order and as essential parts become scarce for auto assembly plants.

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