Gold has mini-rally after ECB loan

In the Lead “Greater Expectations”

The European Central Bank let it be known that it would help keep the credit spigots of the region’s banks open by offering some 490 billion euros in three year loans at its current reference rate of 1%. Note that the ECB did not simply dole the money out, nor did it fire up the Weimar Republic printing presses to accomplish this mission; less than 200 billion in ‘new’ money was hereby injected into the system.

Nevertheless, the gesture was good enough to spark a mini-rally (and we mean smaller than Mini-Me) in commodities overnight, complete with gold reaching for the $1,640 mark for a while, as some perceived that the ECB loans might relieve some pressure on the gold leasing side of the market for a while. However, the rally was not very long-lived or full of energy. This morning, gold retreated to the sub-$1,620 area and silver went into negative territory once again. Crude oil was only ahead by 30 cents, the euro did not rise above $1.31, and the UD dollar climbed back above the all-important 80.05 pivot point on the trade-weighted index.

New York spot metals dealings opened mixed for the midweek session this morning. Gold was down by $3 to start at the $1,612 mark on the bid-side, while silver was off by 16 cents at the $29.40 level. Gold’s half-hearted rally underscores the difficulties on the technical side of its current paradigm and it also likely points to thinning levels of market participation underway on certain metals exchanges. The condition will only intensify as we head into the next two days’ worth of trading action. After that, Santa takes over the stage and Monday will bring a market hiatus, to boot.

To be sure, the ECB “give” is not translating into anything resembling a “Santa Rally” of epic proportions, nor is it making for $2K gold by New Year’s Eve. A poll by TheStreet.com revealed that only 15% of 14,000 respondents believed that gold might finish the year between $1,200 and $1,500 an ounce. Fully one-third of the votes were seen rooting for $1,800 to $2,000 gold –as promised by a plethora of newsletters and other sources you are all too familiar with.

albeit having been “rescheduled” by one year (once again, after 2008, 2009, and 2010) is still what the crowd of gold miners sees ahead. With margins such as they are currently enjoying, where is the surprise in that kind of outlook? Now, if they can only do something about their own shares’ dismal performance, that would be most welcome by fast-becoming-disillusioned investors…

Background market news this morning showed that Indian demand is lackluster as a weak rupee makes conditions difficult for local would-be bullion shoppers. Such buyers still appear to be holding out for better bargains in the days and weeks ahead. They appear to have parsed the Reuters’ poll of 20 pros who still expect sub-$1,500 gold within 90 days and no fresh highs until -at the earliest- H2 of 2012.

Platinum fell $5 to $1,424 an ounce, but palladium gained $3 to open at the $628 figure per ounce. Rhodium remained static at $1,350 the ounce. On the noble metals’ side, analysts at Standard Bank note that Switzerland remained a net exporter of platinum for the sixth month in a row (32,814 ounces flowed out in November) but that exports to China have fallen rather dramatically.

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