Gold prices at pivot point while awaiting EU meeting

In the Lead: “This Time is Different. Yeah, Right.”

On the ‘good news’ front, a surge in German factory orders resulted in at least one commodity trading near three-week highs; crude oil bounced around the $101 per barrel level as speculators digested that bit of news while also keeping an eye on developments on the Iranian situation. There are reports that the country’s Revolutionary Guards have been placed on a war footing while President Ahmadinejad repeated that his country will not budge from its nuke programmes. US equity markets made an early attempt at gains but slipped into the red as regional bank issues presented a drag on the Dow.

Meanwhile, there is a notable absence of physical gold demand on display, especially in India where the yellow metal is trading within striking distance of all-time highs owing to the rupee having fallen hard and where price-conscious shoppers are once again crossing their collective arms. Funny, certain newsletters would have you believe the complete opposite scenario is taking place…

The downside ‘must-hold’ level in gold is also about $100 away at this point, but, if broken, it could open a path towards the $1,300 value zone in quite a hurry. The first line of defense at this point is the $1680-$1700 zone and technicians will be eager to see if that holds up. A decline of $13 per ounce was noted in platinum to $1,503 while palladium managed to still rise $4 to $636 the ounce. We covered palladium in-depth in yesterday’s report so let’s take a quick glance at the latest news of importance to platinum fans.

According to estimates by Morgan Stanley global automakers will likely use some $7 billion worth (4.5 million ounces or so) of the noble metal; about 17% more than they are thought to have demanded in the current year. Such expansion in the demand for platinum could narrow this year’s supply surplus of 295,000 ounces to only 81,000 ounces. On the back of such an improvement in fundamentals analysts polled by Bloomberg news expect that the metal’s average price in 2012 might rise to $1,845 per ounce; some 22% higher than that of 2011.

As we turn into the home stretch of this turbulent year, it might be worth taking some timeout to ponder the fact that perhaps the uncertainty and the crises we have been witnessing are anything but surprise event that should have us rush to declare that the ‘unthinkable’ is taking place. Mind you, it turns out that the Mayans never predicted an apocalypse in 2012. Really. However, one, Benoit Mandelbrot, a mathematician, and many physicists after him, have been able to ascertain that such large and violent events are in fact the most reliable constant when it comes to economics. Shocked? Perhaps a thorough reading of this article by theoretical physicist Mark Buchanan will help.

Words of infinite wisdom from Mr. Buchanan: “It seems that we’re complete suckers for the illusion of certainty and the seeming unlikelihood of the unthinkable, even though financial and economic history is one long string of crises. This time always seems different, until it turns out not to be.”

You may safely add that last sentence to your personal reading radar the next time someone tries really hard to tell you that not all bubbles are created equal, that 2011 is not 1980, that this is the “mother of all crises’ and so on…

This concludes today’s public service announcement….

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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