Gold buffeted in Eurozone crisis wake

In the Lead: “The Italian Job”

Monday’s market opening in New York offered mainly shades of red as the dominant color for price tickers in precious metals. Gold was the stand-out counter-mover as it received a debt jitters-induced, $8.00 per ounce lift, that brought it up to the $1,552.00 spot-bid level right out of the session’s starting gate this morning.

Subsequently, the yellow metal climbed $12 right up to the pivotal $1,558.00 EW resistance point, the overcoming of which might tip the tilt into bullish posturing. Silver, platinum, and palladium all slipped lower however, right along with a sizeable sell-off in copper and crude oil. Silver dropped 7 cents to start at $36.64 per ounce while platinum was down $1 at $1,734.00 and palladium declined $10 to open at $766.00. Rhodium was unchanged at $1,975.00 per troy ounce, still some $50 better than last week’s lows. In the background, the price of a barrel of black gold fell to $94.65 while copper lost 1.61% to trade at $4.32 at last check.

By the 11:00 o’clock hour however, just ahead of Mr. Obama’s appearance before the aforementioned media microphones, conditions in gold turned far less enthusiastic than they had been this early morning, and the yellow metal was showing a loss of $1 per ounce ($1,542). Meanwhile, silver fell hard and fast as well, losing 121 (3.3%) cents to slide back to $35.50 the ounce.

Platinum and palladium were showing double-digit losses ($14 and $12) at that time as well. In the background, the US dollar advanced even further, rising to 76.15 on the index- a gain of .084 (1.12%) while the Dow sank 170 points in a broad-based sell-off by investors. Traders pointed to possible “just-in-case” tempering of positions in case Mr. Obama had good news to relay, and/or the possibility that the caving stock market might trigger margin call-related sales later in the week.

The latest in data from the CFTC indicates that net speculative length in gold contracts fell once again last week; albeit less sharply than it did in the prior week. Nearly 24 tonnes of longs’ worth of positions evaporated last week despite a 4% weekly gain in the yellow metal. Analysts at Standard Bank (SA) caution that they “beware of the build-up of speculative short positions [in gold].”

Silver’s short positions declined to 754.7 tonnes and it appears to point to the fact that (also in Standard Bank’s opinion) players are possibly “ignoring the market’s bearish attitude.” As for the players’ positioning in platinum, SB notes that a further, modest increase in short platinum positions last week “shows a speculative market decidedly bearish on Pt, which leaves the metal vulnerable.” The same however cannot be said about palladium; its long positioning remains robust and is underscoring the fact that “investors are more confident about Pd’s prospects than those of platinum.”

Well, it did not take a very long time for the European debt wildfire to reach the shores of the Italian peninsula and spark a slide in the country’s government bonds. While EU officials hastily prepared for an emergency summit to address the debt fear contagion, those irritating bond vigilantes that just won’t go away this summer pulled the plug from under Italian bonds in an equal hurry as the new week began this morning. That growing ball of fear and loathing did quite a number on global markets. Arrivederci gains…

Italy had, until now, been considered one of the relatively “safe” peripheral “PIIGlets” and the sheer size of its government debt (the third largest globally after Japan and the US) had equated with the perception that it was just simply “TBTF” (too big to fail). Well, so much for that particular take on matters.

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