Gold opens Q4 on an optimistic note

In the Lead: “Go Tell The Spartans: We Don’t Buy in Dubai”

Following its worst monthly performance in three years, gold enjoyed a successful attempt at starting the new one off on the right foot this morning. In various gold-oriented forums the “all-clear” signal has already been sounded and the declaration that the bottom (and a “V” shaped one, at that) has been put into place is plainly visible and audible. However, reflecting the recent, four-week-long meltdown in prices, UBS analysts reduced their spot gold projected prices for the 3 and the 1-month average by 7.1% and 9% respectively.

The UBS-projected one-month gold price average is now expected to remain near $1,775 the ounce. For silver, the reduction in expected prices is much larger; 30.4% off the previous estimate and a $32 average price. Managed money slashed its net-long positions in gold futures and options by 19% in the CFTC reporting week that concluded on the 27th of September.

Friday evening EW analysis tendered the opinion that “The trip back to the bottom of the trend channel and the target line at $1,038 will probably be a fast one. The wave four of (five) low near $1,300 may be a first stop. A rise above the $1,669.70 high may constitute some further jockeying with the upper trend channel line before the sell-off commences full force. It’s not uncommon for these lines to be re-examined [revisited] before prices reverse full bore. But $1,688-$1,743 should serve as resistance to any further upside.”

Spot metals dealings opened October’s first trading session with gains in gold and in silver but with declines in platinum and palladium. The yellow metal picked up $36.50 on the open and it traded at the $1,661 mark per ounce on the bid-side. Opening gains turned more moderate in the first hour of action and bullion traded nearer the $1,650 area while silver halved its $1.30 starting advance.

Despite fervent PR attempts to minimize the overall situation in metals, the reality is that both gold and PGM oriented ETFs did witness net outflows in the month that just passed. And, despite equally fervent efforts to spin certain regional gold sales trends, the reality is that – Indian festival season coming up notwithstanding – at least the UAE region has some problems with selling gold like it once used to.

The World Gold Council shuttered its UAE office earlier this year, in a ‘review of operations.’ Local and London traders on the other hand, have attributed the closure to the difficulties gold producers have encountered in selling baubles to folks in an area that normally comprises as much as 17% of the world’s bullion trade and as much as 5% of its global demand.

The culprit appears to be…$1,900 gold, and not much else. The region’s jewelers have been advised to “catch up with changes in the market.” One might as well read that as turning to lower carat offerings, hollowing out decorative pieces, using cheaper alloys in their designs, and so on. Would-be gold customers in Abu Dhabi and in Dubai have been seen switching to ‘poor man’s gold’ in the wake of stratospheric gold price tags.

The white metal had opened $1.30 per ounce higher this morning, quoted at $31.27 the ounce. At 9:10 New York time the gain was 53 cents and the quoted bid was $30.50 per ounce. Silver suffered its worst cave-in since 1980 by shedding 28% in value on the Comex. Copper got clobbered to the tune of 14% and finished the month with a ‘performance’ not seen since October of 2008. Let’s not mention crude oil.

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