Gold gains slow after EU deal announced

In the Lead: “Europhoric Men In Black”

Jobless claims filings were also on tap this morning. The data shows that initial requests for benefits fell by a modest 2,000 cases to 402,000 in the latest reporting period. Dire warnings and smug predictions as to why the ‘double-dip’ is knocking on the door any minute, and as to the Fed getting the champagne bottle ready with which to launch QE3 will have to be kept in the nearest freezer for the time being. But, hey, such is the nature of recommendations. To wit: Goldman Sachs gave Olympus a "Buy" rating on Oct.12, after which…the company lost half its value. The firm is firmly convinced that gold will advance in 2012. Contrarians, rejoice.

Spot metals dealings opened with gains this morning, but such advances were more sizeable in the industrial metals than they were in gold. With the US dollar being much lower on the trade-weighted index and with risk appetite having probably turned voracious after the EU announcements, one might have expected the yellow metal to try to test the upper reaches of its recent upward correction (near $1,750). But, as they say, it’s never too late to try.

In any case, the gains that gold achieved over the past couple of sessions now appear to have slowed as the semi-resolution of the European crisis does imply the waning of some safe-haven searches and the quest for making a buck in certain other assets possibly reasserting itself. We did find it a bit curious that gold’s advances on certain recent days were “lumped in” with the “rising risk appetite” explanation. Bullion should be (or has been, historically speaking) all about trying to maneuver around risk. Ah, but that was in the good old days when “sharky” hedge funds were not throwing all kinds of money at all kinds of (ETF) walls to see what sticks…

New York trading had gold starting the day off at $1,727 per ounce with a gain of $1.50. Silver climbed to $33.75 and posted a 39 cent advance. The much-promised narrowing of the gold-silver ratio to 30, or 20 to 1 appears to still be nowhere in sight as the two are orbiting around the 51:1 level. Platinum rose above the $1,600 mark and was ahead by $18 at a bid of $1,611 the ounce. Palladium moved $17 higher and touched the $664 level. The noble metal is now nearly 20% higher than the recent lows very near $550 recorded only some three weeks ago.

Gold’s 30-day gain stands at roughly 4% as of this morning. The yellow metal diverged from the rest of the complex around the 9 o’clock hour as some profit-taking arose indicating some sighs of relief in the wake of the EU summit, and some players looking for buck-making opportunities elsewhere (as in the stock markets). We might well have a $1,700 to $1,750 range to contend with but it is too early to make meaningful bets on same. Players first need to learn how solid the ‘ice’ is that has formed at the $1,700 pivot point recently.

We leave you now with the formal words of EC President Herman Van Rompuy as uttered after the big summit last night – gilded with the warm glow of optimism and forward-looking:

“The Euro Summit decided to reflect ‘on a further strengthening of economic convergence within the euro area, on improving fiscal discipline and deepening economic union, including exploring the possibility of limited Treaty changes.’ The full European Council will revert to the issue in December on the basis of an interim report by myself in close cooperation with Presidents Barroso and the President of the Eurogroup. The report will be finalised by March 2012.

“We do not want to repeat some of the errors from the recent past. In taking today’s decisions, we lay the foundations for our future. All Members of the Euro Summit are determined to follow this path.”

Them’s soothing words. See the Dow add 261 points in the first seven minutes of trading.

Until tomorrow,

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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