Gold goes into Friday with 12% loss for the week

In the Lead: “The Hole Story”

Gold continued its stormy gyrations overnight, pretty much in concert with something that goes by the name of Irene; weakening, then strengthening, then weakening again, but still heading toward an as yet unknown final destination for the week. The yellow metal lost most of Thursday’s gains overnight only to recapture those losses ahead of the opening of the week’s final trading session in New York and ahead, of course, of the much-anticipated Jackson Hole speech by the Fed Chairman himself. Then again, by market opening time, gold as well as the rest of its teammates in the precious metals’ complex were seen headed towards lower price thresholds.

Spot metals dealings opened with a drop of $5.60 in gold at the $1765.70 mark per ounce on the bid-side, as against a tad weaker US dollar (down 0.11 at 74.09 on the index) and the trade was not very mindful of the larger than 1.5% sell-off in crude oil at this juncture. Most of the trading interest was centered on the upcoming Bernanke speech and the speculation surrounding what he might or might not have on offer for the markets.

To what extent the roughly 12% drop in bullion’s value this week will be mitigated by the day’s end remains to be seen, but surveys contemplating that which might happen to gold next week might have to be taken with a spoonful of salt as the majority of them got it wrong for this week. The latest Bloomberg survey of traders and analysts at least is basically split on its projections for the coming week. Jackson Hole still preoccupies many and will shape some book-squaring decisions to come, despite the fact that Mr. Hoenig said “Basta!” the Fed has done all that it can, and that monetary policy can only go so far.

Signals (make that: flares) from certain charts indicate that – as based on gold futures – conditions prior to Wednesday’s drop in gold showed the daily chart of the October contract exceeding the so-called Stoller Average Range Channel (STARC) bands (not to be confused with Bollinger bands) for three sessions. According to such analysis the more important support in gold resides at $1,620 and down to the $1,550 area, with $1,480 representing the previous ‘lift-off’ launch pad in the yellow metal. Resistance is currently seen up near the $1800/1825/1850 mileposts.

Silver lost 30 cents at opening time in New York and fell to $40.82 per ounce on the bid. The white metal appears stuck at the round figure for now, about equally far from the must-hold $37 area as the $43 one where presumably the bulls might get emboldened somewhat. Platinum and palladium each fell by about $5 to ease to the $1,813 and the $746 levels respectively. Only rhodium remained static with a bid at $1,875.00 the ounce.

While the Jackson Hole story remains pretty much the…whole story for this Fearsome Friday, the rest of the world isn’t exactly being…idle. China, for example, has been busy with its previous and on-going tightening agenda; it has ordered its banks to now include their margin deposits in required reserves in order to further curtail excessive levels of liquidity. We are talking about funds totaling roughly two-thirds of a trillion dollars (say QE2-size money). The PBOC has raised bank reserve requirements nine (!) times since last November.

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