Silver ETFs unload 580 metric tonnes

In the Lead: “NickelOdious”

A further decline in crude oil prices conspired to drag most of the commodities’ complex to lower value ground as the new trading week commenced. Thus, precious metals lost chart altitude levels as well, despite the minor, 0.15 loss recorded in the US dollar index this morning.

Part of the early selling pressure was related to investors’ raising cash to cover margin calls incurred in the wake of the sixth consecutive losing session in the equity markets on Friday. However, at the end of the day (or, shall we say, the beginning thereof) reports that China’s economy is slowing (and perhaps more than just a tad) coupled with posturing by Saudi Arabia that it might ratchet supplies of black gold higher in coming weeks were the prime catalysts for the price dips we witnessed this morning.

As regards China, the prospects of a possible “hard landing” by that country’s economy were brought into discussion once again. NYU’s Dr. Nouriel Roubini said that he does not see the combination of China’s reliance on fixed investment (now running at about half of its GDP), its lurking “massive non-performing loan problem” plus its huge amount of overcapacity as resulting in any kind of a rosy outcome. For Dr. Roubini, the period after the year 2013 presents a “meaningful probability” for a Chinese economic “runway disaster” unless the aforementioned issues are tackled and resolved.

Roubini goes one step further however, and he also factors in the possibility of a global-in-scope “perfect storm” of economic woes, if the Chinese scenario unfolds along his line of thinking and it does so while coming in addition to the restructuring of debt in Europe and the continuing (and now possibly aggravating) stagnation seen in Japan. Mr. Roubini gives the “perfect storm” scenario 30% odds of becoming more than a probability during 2013 or shortly thereafter [provided the Mayan calendar allows us all to actually make it into 2013 intact, at all].

Addressing roughly the same issue of risks to economic growth, former Harvard professor and President Larry Summers urged the US administration to consider expanding tax cuts to US workers and also advised that it would be “premature” to take away the stimulus “punchbowl” by the time this year ends. Mr. Summers raised the spectre of a possible US “double-dip” that might have been a reality by now, had the Obama administration not reached a compromise with GOP leadership on extending unemployment benefits and cutting taxes on wages in 2010.

Spot gold trading opened with a loss of $5.00 per ounce with the yellow metal being quoted at $1,527.00 in New York. Overnight lows came in at the $1,522.70 level and highs did not overtake the $1,530.00 mark. Gold failed to take out resistance overhead at the $1551.00 point and its chart path now opens questions as to the possible next level of lower-level of support being tested. For the time being, the slight uptick in equity futures (mainly on bubbling M&A activity visible out there) helped narrow losses and support metal above their overnight lows.

Silver fell by over 40 cents on the open this morning and it was quoted at $35.75 on the bid-side in New York. Overnight lows were noted at the $35.27 level and thus the $35.10 low seen one Friday ago once again came into trading focus as a potential pivot point which could usher in further declines in the white metal. The $39 mark needs to be convincingly overcome if silver is to try to take flight once again into the $40-$43 value zone.

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