Gold regains half of $100 loss

In the Lead: “The Waiting Game”

Gold regained nearly half of Wednesday’s $60 loss in value overnight as overseas traders tentatively entered the market in the hope that short-term gains were in the cards. The overall mood developing in the markets – as well as among central bankers apparently – is one where waiting is taking precedence over aggressive action.

Spot New York dealings opened with a rise of $32 in gold and with a 70-cent gain in silver. The former was bid at the $1,850.00 level while the latter was quoted at $42.25 the ounce. Speculation continues unabated in the gold market as to whether or not there were/are ‘major’ players in the market, doing their ‘thing’ behind the scenes and creating the type of nauseating roller-coaster rides we have (almost) become accustomed to over recent weeks.

The only concrete evidence of a central bank seller (thus far) has been the one related to Libya’s central bank disposing of 29 tonnes of bullion earlier this spring (at you-know-who’s direction). However, the $100 sell-off in the earlier part of this week has also been pegged by some as an event that was precipitated by a governmental sale of some gold.

Yet to be determined is which entity (if any) did the selling (fingers have been pointed at the IMF and/or the Swiss National Bank thus far). On the other side of the argument table we find the imagined goings-on by putative buyers of bullion on price dips. China’s name (once again, of course) keeps popping up as some see that (in their mind) the country just does not have “enough” of the yellow metal in its vaults. Much of such (pure) speculation is apparently intended to stoke small retail buyers into…buying on the back of a “What’s good for the goose…” proposition. Let the speculative debates rage on. Facts will come later, as they usually do.

The verbal posturing on the subject of central banks and gold is really no different than the one being noted on the topic of the gold bubble. Does it or does it not exist? Many people will quickly dismiss the very question with the proposition that “This time, it’s different.” Were that only to be the case. Well, if such questions do preoccupy you, then you might be well-advised to take a closer look at the chart that Minyanville’s Todd Harrison dug up in his latest piece on the market. A colorful, graph that one is, to be sure; but also quite full of certain peaks that resemble the rocky ranges of Tibet. Peaks with names such as “Japan” and “NASDAQ” and “China” and “Crude” make an obvious appearance. And, yes so does gold’s summit – to virtually the same altitude as all the other preceding ones.

Platinum also recovered at good chunk of its losses from yesterday, climbing $23 to the $1,845 mark. Palladium rose $9 to start the session at $758.00 per troy ounce. No changes were noted in rhodium this morning; it was bid at $1,850.00. A rare, triple parity between gold-platinum-rhodium was on display on Kitco’s price tickers early this morning at the $1,850 mark. What to buy? What to sell?

Well, there is a school of thought (bolstered by facts) that would argue that platinum-group metals ought to be the logical choice at this juncture. Analysts at Standard Bank (SA) reported this morning that the production of such metals remains very much at risk at the moment. A major producer (Zimplats) could lose its mining license after having failed to come up with ownership transfer plans as the August 31 deadline came and went.

Impala’s Zimbabwe operation might thus not produce 350,000 ounces of platinum and 280,000 ounces of palladium (plus 30,000 ounces of rhodium) in the coming year. Such figures represent respectively 6%, 5% and 4% of the global supply of these three vital metals. Ponder that. Countervailing such a potential disruption in supply (for platinum at least) is the specter of the US and EU economies going into another dip. In that case, the current small deficit of 76,000 ounces seen in the platinum market could turn into a surplus; but not if an operation such as the one mentioned above ceases to supply the metal to the market.

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