Gold hit as commodities dive after Fed hints

Financial markets suffered a setback in sentiment (and values) across the board as the new and final week of what has been a most dramatic March got off to a start. The inability by Japanese authorities to report good news from the compromised nuclear plant reactor situation and the defeat of the coalition of German Chancellor Angela Merkel following a state election set investors on a souring mood about the global economy.

The euro dipped in the wake of the developing political situation in Germany and also following the suggestion made by ECB governing council member Ewald Nowotny that Portugal should bite the rescue bullet and get on with its economic life. As the euro fell against the US dollar, so did most commodities, including crude oil, despite the still unresolved Libyan politico-military situation. Precious metals were no exception to this morning’s sell-off by global investors.

New York’s Monday morning trading session saw gold prices opening on a defensive footing due to the aforementioned shift in investor sentiment across the globe. Spot trading in the yellow metal started off with a loss of $19.00 per troy ounce. The opening bid-side quote came in at $1,411.20 and traders were on the alert for another potential breach of the round figure beneath current levels.

Just last week, bullion values practically achieved a $1,450.00 per ounce print on the back of MENA regional turmoil and perceptions of inflationary pressures that might in part be brought about by the recent disaster in Japan and the potential for continued easy money policies by that (or several other) country’s central bank.

However, Friday’s release of US GDP data (an upwardly revised set of figures that did not manage to make the impact it might otherwise have, due to the headline-stealing issues coming from Japan and the MENA area) started to impact trading sentiment as well this morning.

Any corroborating evidence that a good trend for the US economic recovery is building steam is seen as lessening the need for the Fed to keep its accommodative policies extended to “infinity and beyond” (as the spec trade has been hoping since about 2007). That, in turn, would also lessen the need for as much protection as was previously seen as optimal in gold and other metals (silver, primarily).

Of course, there is also the possibility (make that a probability) that spec funds decided that skimming profits following last week’s run to a fresh pinnacle was quite the wise thing to do, especially in the absence of additional and/or scarier headlines than those which we’ve already been subjected to this month. Thus, sell they did this morning, and quite heavily at that.

Silver spot prices fell by 80 cents on the open, showing a quote at $36.52 per ounce. The noble metals complex also fell victim to selling and did not appear to be able to benefit from the scheduled reopening of certain Japanese automotive assembly plants. Platinum dropped by $25 per ounce on the open in New York this morning, and it was quoted at $1,723.00 per ounce, while palladium fell $14.00 to ease to the $735.00 per ounce mark. Standard Bank (SA) analysis cautions that albeit open interest in palladium apparently grew in the latest reporting period, net speculative length as well as ETF interest in the noble metal fell.

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