Gold looking at recording worst quarter since 2008

In the Lead: “Medium Rare”

Friday’s market action in precious metals got off to a bit of a mixed and rocky start as the US dollar continued its ascent on the trade-weighted index and as traders began to square books and close the trading logs on a quarter that will still go down in the record books as the worst one since 2008. The yellow metal has lost about 11% on the month in a negative performance reminiscent of October of that somber year.

Gold suffered its seventh worst week in 40 years with its recent plunge. Spot gold opened with a very tentative $4.80 gain that turned to a $4.60 loss within the first half-hour of trading. Silver never really got going to the plus-side this morning; it opened with a loss of 38 cents that turned into a drop of 75 cents within the same timeframe.

Platinum initially gained $4 only to turn that into an $8 loss and palladium deepened its initial $3 loss into a $6 one. The noble metals’ complex was apparently preoccupied with the overall sense of malaise that has gripped the rest of the commodities’ sector and it largely ignored news reports that indicate the return to full production of automakers Toyota and Honda. As well, US auto sales are expected to show a return to pre-Japan-quake levels when they are released on Monday. Stay tuned and keep the foot on the gas pedal.

Speaking of peeling away, the prices of so-called “rare earths” – a niche much touted at many a recent hard money conference- are peeling off faster than the autumn leaves. After having reached records earlier this year, the rare earths are returning…to Earth as firms such as GE and Toyota have begun closing their wallets in the wake of sky-high prices and are seeking substitutes. China has apparently hit a wall in trying to lift prices on the stuff to levels that were nausea-inducing.

Would-be investors were mesmerized with wild promises of rare earths ‘moonshots’ and they were duped into thinking that this space was the next "big thing." Turns out, the elements in question are anything but…rare. It also turns out that the depletion date for these metals is the year…sit down now….2800. Okay, we might run out of tantalum in the year 2105 and out of indium in 2040. However, gallium should last, oh until about 14,830 give or take.

Neodymium, for example, is more abundant in the Earth’s crust than lowly lead is. BTW, the “zero date” for platinum is 2170. Better secure that engagement ring for your granddaughter now…not later. Here is a quite colorful “eye-opener” on the supply of some of these exotic elements, courtesy of Wired magazine:

Much of the Friday morning commodity trading focus remained on the surging greenback (up 0.50 to 74.39 on the index while the euro slipped to under $.135) and on slipping crude oil (down $1.1 to 81.05 per barrel) and copper (down 1.4% this morning). In fact, black gold was itself on track to record its worst quarterly performance since the above-mentioned year of crisis. Copper has fallen 25% since Aug. 1 while silver received a 40% haircut from high to low this month. More like a complete shave. Europe-related growth concerns are keeping the selling pressure on in the commodities’ niche.

The commodities’ space also got hit this morning by news that China’s manufacturing sector shrank once again, making for a third month of such a decline. Not only that, but the Chinese government’s Public Enemy No.1 – inflation – showed a continued ability to rise (at least at the factory level) and the metric reignited fears that more tightening courtesy of the PBoC could be in the policy pipeline. Ask a bunch of global investors where they see China in five years’ time and the response they give is anything but that which you continue to read in various commodity-propagandizing newsletters.

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