Gold demand drops 17% in Q2 year-over-year

In the Lead: “Everything Has a Price”

Gold prices opened with double-digit gains on Thursday and touched $1,817.90 per ounce ahead of the New York session’s start even as the US dollar reclaimed the 74.00 level on the trade-weighted index. For a change (but not much of one) silver tried to keep in lockstep with gold but managed only a 20 cent rise out of the market’s starting gate (to $40.44).

In day-to-day reversal of fortunes, platinum and palladium declined as some profit-taking emerged in the wake of yesterday’s rallies and as the impact of demand-based apprehension made itself felt in the trading pits. The former lost $1 (quoted at $1,836) and the latter fell $5 (to $767) as the action got underway in New York.

Demand-oriented worries continued to batter industrial metals and crude oil as well at this juncture; losses of over 1.3 and up to 2% were tallied in base metals and black gold this morning, undoing yesterday’s attempts at a rally. In the background, crude oil was being hit with a 2.3% loss and was trading at $85.54 per barrel. While that price tag does not translate into $2 per gallon premium gas at your local friendly station just yet, fear not. Would be President-ess Bachmann promises such prices under her future putative leadership.

Of course, you are not being told just how such a feat (one that befits an evening with David Copperfield in Vegas) might be achieved. Suffice it to say, economists who have read the pledge conclude that the USA might see such prices only if and when deflation was decimating its economy at full speed. What price $2 gas? Don’t even go there…

A day of losses in overseas equity markets appeared to be set to continue on this side of the globe as well as the sun rose over North America this morning. Risk aversion and a generalized malaise continue to grip the investment psyche despite any concrete event (default, downgrade) or announcement that spells “doom.”

Nevertheless, at least in Morgan Stanley’s opinion, the US and the Old World are presently hovering “dangerously close to a recession.” As Lloyd Bridges might say in a sequel to “Airplane!” today: “Looks like I picked the wrong time to embark on fiscal tightening.” The difference-this time around-might be that China could be unable to step in and “pick up the slack” as it managed to do back in 2008, as it is itself actively trying to engineer a slowdown.

Anticipation of some kind of gloom, however, is at a fever-pitch and it is translating into yet another push in gold towards the record area visited just last week, near $1,820 per ounce. Data released in the US (CPI for now, the July LEI, and existing home sales later on) also contributed to the shaping of the markets as the day’s trading got underway. Meanwhile, the Swiss National Bank continued to try to keep the fire hose at full bore on the franc by adding more liquidity (80 billion Swissies’ worth to be exact) to the banking system there. Don’t count on much success just yet.

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