Gold beginning to see “January effect” dissipate

In the Lead: “Here's the Beef!”

Gold prices fell back to under the $1,600 pivot point once again as US dollar strength (and euro weakness that pushed that currency to a fresh 15-month low) combined with renewed jitters about Europe overcame the effects of geopolitical tensions arising out of the Iranian situation and sellers pressured commodities lower.

New York spot gold lost nearly $15 to ease back to the $1,597 level while spot silver traded at lows near $28.75 after maintenance of the $29 level proved difficult. At the very least, the New Year-flavored euphoria and “January effect” we saw on Tuesday and Wednesday has dissipated to a certain degree this morning after a few additional “reality checks” were made by market participants. Volatility is apparently set to continue despite the turning of the calendar’s pages.

The greenback climbed nearly 0.85% on the trade-weighted index (highs near 80.85) in the wake of the aforementioned euro-centric fears and on the back of a really robust improvement in US jobless claims figures ahead of Friday’s all-important Labor Department employment report. Filings for unemployment benefits dropped by 15,000 to 372,000 in the latest report released this morning. RDQ Economics opines that another component in the US labor landscape — the better-than-anticipated ADP employment report data — is offering yet another signal that the US economy is on the mend, slowly but surely.

France encountered higher yield demands as it went to auction this morning and market players are getting nervous about next week’s Italian and Spanish bond auctions. France, it is said, may have dodged an S&P downgrade bullet but it is not yet out of the woods on that front. Coming days will be quite telling. Meanwhile, the idea that Greece might face a disorderly default perhaps as early as March has also rattled market nerves after it was floated by Prime Minister Lucas Papademos yesterday.

Renewed anxieties surrounding European bank capitalization levels and the not-so-hot reception that France’s bond auction received conspired to push the common currency to $1.284 this morning. Not helping the euro much either, the Hungarian forint touched record lows against the euro as that country struggles to obtain a standby IMF loan without preconditions. As we have recently seen, such declines in the euro have frequently translated into gold price weakness, and this morning was no exception. Then again, the ‘sell everything’ syndrome manifest this morning also pushed copper down by 1.1% and crude oil down by .90% per barrel.

Over in the platinum-palladium-rhodium complex the going proved tough as well despite yesterday’s excellent US car sales metrics. The Big Three posted solid December sales figures and much-improved 2011 tallies as well. Total US auto sales are now expected to come in above the 13 million figure-that’s a roughly 10% gain over the numbers we saw in 2010.

For a fascinating – albeit quite technical in language – report on the emerging field of nanometals and related PGM applications, you might wish to read this latest press release from Nanomarkets. Platinum declined $10 to the $1,407 bid level while palladium eased by $7 to the $642 bid figure per ounce. US stock futures losses in the early morning translated into a 107-point decline within the first 15 minutes of trading today. Financials (BofA, Citigroup) and miners (Freeport McMoRan) took it on the chin in early action to the downside.

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