Gold barely reacts to proposed EU solution

In the Lead: “Apocalypse (Not) Now”

Call it profit-taking, call it book-squaring, call it news-based trading, the result is the same: Volatility remains an integral part of the metals’ markets and to a degree that is not comforting to traditional buyers of same. Back in the day, a metals trader might go home and tell ‘wild’ tales of a $1 gain in silver or of a $20 move in gold to incredulous family members. Nowadays, it’s as routine an event in either metal, or either direction, as brushing one’s teeth.

Platinum advanced $3 to the $1,564 mark and palladium continued its monster rally with a 3% rise to $652 the ounce. Rhodium remained slightly lower at $1,625 after having slipped $25 yesterday. In the background, the US dollar narrowed earlier losses to trade at 78.20 on the trade-weighted index and dollar-bullish traders are seen as still having the upper hand at the moment, despite minor setback against the euro this week. Black gold gained nearly $1 and traded near $101 per barrel while copper staged a 2% advance. Once again, the tallies showed palladium leading the pack of gainers in percentage terms.

Partially lost in the wave of news from Europe was the fact that the US economy added 120,000 jobs last month and that (more importantly) the joblessness level in America fell to a 30-month low at 8.6%. Critics were quick to point out that the shrinkage in the unemployment rate was due to more than 300,000 people having stopped searching for jobs. However, such critics were remiss in noting that US firms continued to hire folks at a modest but steady clip.

America’s labor force has increased by about one million positions in the period August-October. Add to that the fact that the latest ISM data revealed a modest gain in November (rising to 52.7% and remaining above the 50% dividing line for the 28th consecutive month) and the following words of a couple of Fed officials make some sense. Philly Fed President Plosser opined that the US is not headed back into recession, while St. Louis Fed head Bullard said the recent data suggests that monetary policy makers should not rush to ease further but should instead adopt a wait-and-see attitude. US economic growth came in at the 2% level in Q3 and might rev up to 3-3.5% in 2012, thus making a QE3 maneuver questionable.

As we head into the weekend, we turn to the market-related musings coming from Standard Bank. Analyst Steven Barrow leaves us with words of wisdom (and possible strategy) to keep handy in coming days:

“There’s a huge week coming up next week, including the EU summit and monetary policy meetings from the ECB, MPC, RBA, BoC and RBNZ. There’s also the first dollar auction from the ECB under the new lower-rate structure…Our general bias is still to be somewhat risk averse on a longer-term basis but, notwithstanding today’s payrolls, risk aversion might not return rapidly…The question is whether to start positioning for more risk aversion this side of year-end given that liquidity is so thin and, for a short-time at least, Eurozone policymakers might persuade the markets that they are on top of the problem (as the central banks seemed to do on Wednesday). With this in mind, it is probably not best to try getting involved on either the long or the short side of risk assets right now. If we see some sort of huge risk-rally into year-end, with euro/dollar around 1.40, for instance, it might be very tempting to act this side of the New Year.”

“This side” now entails but 19 opportunities to “get it right” in the near-term. Tick…tick….tick….

Have a pleasant weekend,

Jon Nadler is a Senior Metals Analyst at Kitco Metals

About the Author
Jon Nadler

Jon Nadler is senior metals analyst with Kitco Metals Inc. in Montreal.

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