Gold falls as uncertainty reigns in US, EU and China

In the Lead: “Autumn Leaves (and other things) Are Falling”

Gold and other precious metals prices opened sharply lower this morning as a duo of news from China and from Europe rattled the commodities’ space and sent speculators scurrying towards the exit doors in large numbers. Friday’s commodity niche optimism morphed into gloom as Chinese economic growth figures and potential French downgrades surfaced and landed straight in the middle of the markets.

Spot gold fell $30 to open at $1,641 while spot silver slid 106 pennies to start today’s session off at $30.74 per ounce. Platinum and palladium were not spared either; the former declined $29 to $1,520 and the latter dropped $16 to $601 the ounce. Crude oil fell only marginally, but copper prices fell 2.35% as the news we will cover below made their impact felt nowhere more than in commodities.

The irony that gold ought to actually be moving much higher on account of such troublesome news items has not been lost on some observers. These are some of the very conditions that many a hard money newsletter vendor has been scaring the readership with, for years now. Analysts at Standard Bank (SA) rang a bell of worry this morning when they noted that it is becoming disconcerting to see “that precious metals are failing to garner much interest from safe-haven demand, which reminds us of several weeks ago, when cross-asset liquidations saw gold and silver lose considerable ground. Once again it appears that regardless of the general risk-off sentiment, precious metals look set to suffer the same fate as equities and other risky assets. In addition, as highlighted yesterday, we can expect a period of heightened volatility in the build-up to this weekend’s EU summit.”

It may have taken a while, and a bunch of indecisive moves, but the ‘congestion’ in the precious metals markets appears to have been ‘resolved’ to the downside this morning. The risk of a renewed bout of selling that we pointed to in yesterday’s posting was indeed dependent on how much of an attraction the US dollar might represent for safe-haven seekers and what such a quest might be based upon. That also became clearer this morning, as a one-two punch of rather unsettling news hit the speculative crowd and sent many under the greenback’s relatively safe umbrella. The back gained 0.20 and climbed to 77.33 on the trade-weighted index.

Underscoring the interrelatedness of today’s world, it was reported that China’s economy grew at “only” 9.1% in Q3. While that is a figure that many a country around the world cannot even dream of these days, it is still a pace of growth that is the slowest since 2009. More importantly, the slowing was attributed in large part to the seemingly interminable European debt situation, showing that what happens (or actually does not happen in this case) a world away can and does have consequences in China.

However, the internal picture in the country is not all that rosy, either. We reported last week that the nation’s sovereign wealth fund had invested large sums in the top four Chinese lenders. Analysts have gleaned that the move reveals the level of apprehension that officials are thought to have about the country’s banks.

China’s rate of expansion has been running at a rate some five times higher than that of the US but apprehensions of a hard landing or of a slowing to a rate that – for China – implies trouble have reasserted themselves this morning. Early signs of an unpleasant runway event to possibly come have been discerned in falling land prices in several Chinese cities.

Money supply growth and lending activity showed signs of expanding at their lowest level in a decade and since 2009, respectively. Some China watchers argue that that country’s jarring touch-down may already be underway and that the 40 to 60 percent cratering in year-on-year real estate sales is the all the prima facie evidence of an imploding Sino-bubble that one needs.

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