Gold lows near $1,650 force bear market questions

In the Lead: “Shooting The Bull”

Following a $44+ slide to near two-month lows and a further overnight dip to lows near $1,650, gold prices attempted to stage a modicum of stabilization and recovery this morning, mainly on the back of a slightly weaker US dollar. Europe continues to present a vexing and continuing problem for the yellow metal despite the fact that Spain managed to sell a tad more debt than had been anticipated at an auction this morning and despite the fact that German economic data came in above expectations as well.

The principal structural issues plaguing the region remain very much rooted and are unnerving investors without any letup. The single best reflection of the turmoil for the moment remains the euro’s inability to get convincingly back above the $1.32 mark and the concurrent quest for greenbacks among the aforementioned anxiety-ridden investing crowd. That crowd has been liquidating stocks and commodities at a fast and furious clip on days when the mood turns gloomier than gloomy and the fear factor dominates.

Lingering liquidations were still in sight as the precious metals markets opened for business in New York this morning. Gold spot prices fell $1 to start at $1,664.30 the ounce while silver dipped two pennies to open at $31.27 on the bid-side. Don’t look now, but there is at least another market observed (and participant with positions, we might add) who allows for the possibility that the eleven year old gold bull market could be drawing to a close. Economist and trader Dennis Gartman will take a lot of ‘incoming’ from certain camps for his seemingly heretical views at this juncture. He does not appear to be perturbed by that prospect. Here is why, in his own, plain English:

“Since the early autumn here in the Northern Hemisphere gold has failed to make a new high. Each high has been progressively lower than the previous high, and now we’ve confirmation that the new interim low is lower than the previous low. We have the beginnings of a real bear market, and the death of a bull.” Yes, you may still be hearing “it is but a flesh wound’ type of statements from chartists who would point to the lack of “damage” on the long-term gold price trace up to now.

But, where is there an accounting for the psychological damage that has been inflicted since September? Nowhere. Okay, perhaps there is such an accounting in Gartman’s most recent writing: “So much damage has been done to the psychology of the market in the past week and so many late longs have been caught off guard that we think wholesale liquidation, and perhaps forced liquidation, shall be the outcome.” Heavily PR-flavored propaganda from certain vested-interest quarters wants to point to ETF gold accumulations as a harbinger of mega-high gold prices next year and beyond.

Not so fast, opines Mr. Gartman: ““Buying of that sort should have sent gold prices soaring. One of the oldest rules of trading is simply this: a market that cannot or does not respond to bullish news is a bearish market not a bullish one.” We might add to that the fact that the intensification of the European crisis –the wet dream of fiat currency morticians everywhere- should have been the single most perfect storm to allow for $2K gold this quarter. What happened?

This morning, platinum advanced $5 to $1,491 and palladium showed no change with a quoted bid at $658 the ounce. Rhodium fell nearly 7% to $1,425 this morning. Background price indicators flashed a half-percent loss in copper and a 0.62 percent gain in black gold. The dollar was off by 0.10 on the trade-weighted index with a quote at 79.55 at last check. All eyes that are not fixated on Europe (not many) will be on the Fed’s last meeting of the year today. The remainder of the market crowd will be parsing US retail sales figures and business inventory data. A slew of other metrics of importance will come their way on Thursday, including those related to US industrial production for November.

Thursday’s numbers will also contain initial jobless claims filings numbers. The US labor front continues to show rather encouraging trends. Based on a survey of U.S. employers by human resources firm ManPowerGroup, the US Q1 net employment is expected to grow 9% from a year ago, which would amount to nine straight quarters of employment growth and an improvement from the 7% year-over-year rise in Q4. For the moment, better employment conditions are also making for (slightly) better retail sales. American consumers loaded up on autos and electronics last month but did not frequent eating and drinking establishments too much.

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