The midweek trading session in precious metals had something to offer to everyone, but most of all to the many platinum fans out there. Spot gold prices spent most of the morning oscillating between gains and losses and played second fiddle to a string of hot and/or cold news from the world or geopolitics, economics, and commodities. Topping the news scroll this morning was the ADP report on the US private sector’s addition of 201.000 jobs this month. Good, but not quite good enough, apparently. Analysts expected 217.000 positions to have been added to payrolls. The ‘missed’ number was later used as an excuse to explain why gold prices gained, as if the Fed was automatically going to extend QE2.5 based on the reading. More on why that might not be the case at all, way below.
Overall, however, the yellow metal appeared on course to chalk up its first gain in five days as the on-going military action in Libya and credit ratings downgrades for Greece and for Portugal trumped sliding crude oil prices and more hawkish talk coming from the Fed. This even as the head of one of Portugal’s banks said last night that he was not convinced that his country should accept an EU/IMF bailout. Black gold prices on the other hand, fell more than half a percent on news of rising US stockpiles (likely to their highest level since December). The US dollar marked time at and around the 76 mark on the index today.
Bullion traded in a fairly broad channel that extended from $1,411 on the lower end of the price scale to $1,425.00 on the upper reaches of same. Larger support/resistance remains in place from $1,400.00 to $1,450.00 and no decisive break is expected on either end of that value spectrum as more impactful news (than currently being supplied by the news flows) would be needed in order to set heavier trading action into motion.
Regardless of certain views by traders that perhaps a quintuple top attempt has been made and that it failed last week, and despite the apparent drying up of fresh inflows of speculative funds into the market, the gold bull market could be facing a problem of a different nature at this juncture. Thus, while additional pushes towards higher ground (the $1480-$1530 zone keeps being mentioned, as is the more remote possibility of a $1600 ‘print’ before year-end) may materialize, the gold bull market may be facing a temporary but more prolonged (on the order of a couple of years perhaps) period of weakness.
“Even within that secular increase in investment demand, you can have a cyclical pause, where investors pull away from the market for a time. And our view right now about gold is that we may be approaching a cyclical peak in a secular bull market.” Were the terms with which our good friend Jeffery Christian described the potential turn that might develop in the market perhaps as early as the latter part of this year. Mr. Christian was speaking at the launch of the CPM Group’s Annual Gold Yearbook 2011, an all-encompassing publication that dissects the ins and outs (literally) of the gold market’s tonnage flows. You can secure a copy of that most valuable book for yourself, for about 10% of the cost of an ounce of gold. Consider it money well-spent.
Also on the gold market front, we have heard from the other statistical research house in the business – GFMS of London. Their analyst and Managing Director, Paul Burton, spoke at a conference in Perth, West Australia today and indicated that not only did gold production reach a new all-time high in 2010 (at 2,652 tonnes) but that it is expected to do more of the same in 2011. Mr. Burton acknowledged that China has retained the crown among the globe’s gold producers, that Australian gold output rose by 16% last year, and that sustaining current gold prices (or trying to go for $1,600 as a possible target) is very much in the hands of the investment community at this juncture (in fact, almost entirely in the hands of said community).