Gold closing on platinum prices

In the Lead: “Talking [Ratings] Heads: Burning Down the House“

A highly apprehensive crowd of speculators put the pedal to yellow metal and pushed it hard overnight making for fresh records (it is now more costly than platinum!) and bolstering the value of the Swiss franc to new heights as well. Following the 634-point rout in the Dow, the “waterfall” plunge in the S&P 500 over the past week, and the entry of the FTSE into official bear territory, one can appreciate the sheer panic that has taken a hold of the global investment psyche. Some have speculated that the markets might have been “better off” if the U.S. had actually failed to raise its debt limit one week ago.

Gold’s ascent to levels as high as the $1,780 mark overnight has taken various normal metrics (charts, profit-taking, corrections, fundamentals, consolidation, etc.) out of the present discussion and has even begun to worry the bulls who had expected such values. The logic is that retreats – when they come – from such levels are generally anything but orderly events. Others, while acknowledging that gold could represent a form of insurance against equity market storms caution that purchasing such insurance after the financial house has already been consumed by flames might not be the wisest course of action.

To fathom that extreme volatility awaits these markets in the hours and days ahead is to do the obvious; the question will likely become to what extent people’s expectations of what constitutes “extreme” might be surpassed by the way the markets might come to act. In the classic sense of the expression, “all bets are off” might be the new “normal” in coming trading sessions. As CPM Group’s analysts put it overnight, this could be the “storm before the calm.” And that “calm” may not be all that tranquil, either.

With but a few hours to go prior to the Fed’s meeting, the markets opened with the same level of nervousness that has shaped the past week of action. Only a modicum of pre-opening stability was noted in Dow futures and in crude oil. The latter was able to reclaim the $80 level as the US dollar gave up some additional ground on the trade-weighted index (down 0.38 to 74.46 at last check). With the notable exception of silver, which continues to offer worrying signs of a disconnect, the metals complex opened higher in New York this morning.

Spot gold gained $26 to start the day off at $1,743 per ounce; nearly $40 under the overnight record it established as waves of fear swept through global markets. To now expect $100+ moves on an intra-day basis might not be out of line considering how matters have shaped up. However moves of a larger order of magnitude ought not to be discounted, either. When one loses the tethers of gravity, all outcomes are possible. Gold has not only lost said tethers; it has gone parabolic. Visit market history for a primer on how parabolas come to conclude.

Silver fell by one dollar and one penny in New York this morning; it opened at $38.02 per ounce. Questions as to why the white metal is not exhibiting $60 or $75 price prints continue to nag the silver bulls but given the potential sag in demand for the industrial metal that an economic dip might engender, such questions do have at least partial (and logical) answers.

Platinum and palladium recovered some of the value ground they have lost in recent trading sessions but given the magnitude of certain previous moves, even their double-digit (in the teens) comebacks this morning were deemed as relatively tepid. The former climbed $15 to open at $1,728.00 the ounce while the latter added $14 to start Tuesday’s session at $728.00 per ounce. Rhodium remained lower with a bid-side quote at $1,825.00 following a fairly sizeable loss on Monday.

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