Gold’s safe haven status coming into question

In the Lead: “The [Mining] Wizards of Oz”

Meanwhile, certain firms among gold’s recent promoters also came under (regulatory) questioning as it turned out that their “efforts” were geared mainly at separating unwary folks from their life savings. The words “Florida” and “gold scam” just do not appear to be in a position to be separated from one another.

CFTC reports released on Friday indicate that net speculative length in gold has ebbed to a point where some may now legitimately question the potential for further sizeable upside in the metal. While net longs have seen a gain in silver, the white metal remains in a fairly precarious position if/when gold sells off strongly (as was the case this morning). Analysts at Standard Bank (SA) note that platinum’s net speculative length continued to increase last week and is currently at its second-largest level of 2011 to date.

Over in palladium, the specs on the long side remained relatively weak. The noble metal appeared to ride out last week’s gold price storm quite decently. As previously opined, the PGMs present smaller levels of downside risk and could be the niche from which the next sizeable gains in precious metals might well originate, as they are in a superior supply/demand fundamentals’ position.

Some of the same aforementioned safe-haven attributes likely also came into question this morning as the yellow metal recorded losses on the order of more than $50 within the first couple of hours of trading. Traders in New York attributed some of the decline as having been prompted by an unwinding in the Fed-related betting on easing and some of it as the result of funds rotating money into rising equities (Dow up 170) and crude oil (WTI up $1.58 to near $87 pbbl.).

The fact that the next Fed meeting will entail two full-day sessions is being seen by some as a quest by Mr. Bernanke to build consensus within his team prior to just pulling the “QE” lever in automatic fashion. Silver also lost more than 2% in mid-morning dealings and brought the maintenance of the $40 level into question once again.

Given the expansion in volatility, traders now have to live with increased margin requirements courtesy of the CME while retail investors need to ponder the widening gap between low/high forecasts being made by market observers. The latest tally of such projections covers a price spectrum that extends from $1,480 up to 2,100 – and all of them cover the next four months (!).

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