Gold rockets after U.S. ratings outlook downgraded

Precious metals trading in New York opened with declines across the board this morning as a stronger US dollar and fast-falling crude oil conspired to motivate profit-takers to do just that. The moves came on the heels of fresh record achievements in gold and silver amid heavy speculation late last week as well as during the overnight hours yesterday. Spot gold started the new trading week with a loss of $5.6 per ounce quoted at $1,480.80 per ounce while silver fell $33 cents to open at the $42.72 per ounce price marker.

All of that “profit-taking” was only manifest until the S&P rating agency slammed the US rating outlook with the “negative” label. Albeit the US’ sterling AAA rating remains in place, the shift from “stable” to “negative” in the outlook gave the markets an instant shudder of fear/greed and helped propel gold to within $1.80 of the $1,500 headline-making price level. It now appears that the profit-takers will have their hands full battling the profit-seekers in the wake of the S&P news. Volatility will not be in short supply, as was evidenced by the duration of the nearly $10 spike in gold this morning: roughly ten minutes. By 9:30 NY time gold was only ahead $2.50 per ounce. The onus is now on the Fed and on Capitol Hill to prove the S&P incorrect.

Platinum and palladium dropped by double-digits with the former losing $12 to ease to the $1,777.00 level and the latter slipping $20 to open at the $745.00 per ounce bid quote. Rhodium remained unchanged at $2,300.00 the ounce. In the background the US dollar gained 0.44 on the trade-weighted index to rise to the 75.38 level while crude oil was down $1.68 to $107.98 per barrel following Saudi statements that the market is in an “oversupply” condition.

Saudi Arabia has helped offset the drop in supplies resulting from the Libyan turmoil and said that there is “plenty [of oil] left” to cover the decline in Libyan exports. Over in Nigeria, President Goodluck Jonathan appears to be having…good luck as he is one step closer to re-election and such an outcome might also ease apprehensions about that country’s ability to keep the oil market adequately supplied. Nigeria is Africa’s largest oil producer.

Speculators in gold reduced their net-long positions just a tad last week, following three weeks of consecutive gains in such positions. There was a notable increase in the amount of short positions in silver, however, a development that has raised expectations of a correction being imminent in the white metals. Net-long positions in platinum and palladium experienced gains during the latest reporting period while the combination of speculative activity amid ample inventory lists in crude oil is making for conditions that might witness a sharp turn-about in black gold, at any moment.

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