Gold drops $100 while moving with U.S. dollar

In the Lead: “Norway In or Out”

Palladium dropped only $3 and opened at $747.00 the ounce. Our perception that it (palladium) may offer a somewhat lesser degree of downside risk has thus far been corroborated by the noble metal’s recent behavior. Palladium has traded within a 5% band in price since mid-August (consider that gold has lost 2% overnight and silver has fallen 2.3%) and it continues to offer better supply/demand fundamentals than, say gold.

Referring to such fundamentals, HSBC analysts note that “although gold has much to recommend it, [they] expect high prices to deter jewelry and other noninvestment physical demand and to increase scrap supply.” Rhodium remained bid at $1,850.00 per ounce based on the latest indications from New York trading rooms.

Over in Europe, following the biggest ever decline (9.9%) in the Swiss franc versus the euro, the Swiss National Bank took a wait-and-see attitude to learn if its efforts have indeed deterred the heavy influx of safe-haven-seeking monies. No sooner had the SNB turned the fire hose on to douse the red-hot franc, that another currency began to emerge as the target of haven-seekers worldwide; the Norwegian krone.

The country’s currency is now being…crowned as the next safe-haven “must-have” by many. This, despite assertions by its central bank that the crown (krone) is not liquid enough to play that role. The fact that the Norwegian currency has vaulted to an eight-year high against the euro did elicit some fear-laden statements from the central bank’s governor in which he said he “hopes to avoid the Swiss situation.”

Maybe enough attention will be paid to that currency from here on out so that the SNB might not have to go out and buy anywhere from half to a full trillion dollars’ worth of foreign currency in order to stem the hitherto incoming tsunami of money that threatens its unique economy.

In the wake of the declaration of currency ‘war’ by the SNB, the CME (no surprise) raised its margin requirements for trading Swiss franc futures effective today. With gold (and silver) doing what they have been doing of late, the SGE over in Shanghai will raise its margin requirements for trading them, effective on Friday. The CME following suit is quite possibly a question of only “when,” not “if.”

Then, the most bullish of forecasters of the Swiss franc – Wells Fargo – scrapped its calls for 1.06 in the franc-euro exchange rate; in essence acknowledging that the SNB means business. Swiss firms of all types cheered the SNB’s intervention yesterday. Looks like you may be still able to afford that bar of Lindt and/or that swanky Longines timepiece…for a while.

Until tomorrow, keep some Sominex handy, please.

Jon Nadler is a Senior Metals Analyst at Kitco Metals Inc. North America

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About the Author
Jon Nadler Jon Nadler is a Senior Analyst at Kitco Metals Inc. North America
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