The Doctor of Doom, for one, envisions the region “up in flames” sometime soon. Precisely how such an event would send precious metals into “orbit” (for more than a few hours, if at all) remains unclear, but the good Doctor figures that a conflagration in the Middle East would automatically prompt Mr. Bernanke (himself!) to turn up the RPMs on American printing presses and thereby deal the buck a fatal blow. That, by a long-shot, remains a prognostication firmly entrenched in the realm of…theory. Hedge funds do not act based on theory. When their sophisticated computer programs flash “sell” it does not much matter who is about to blow someone up or where; it is time to bail. Period.
At any rate, last night, one market strategist was quoted as saying that “We’ve done a lot of chart damage these last two days, especially today. Yesterday and in prior sessions, we were bouncing off of the 100-day moving average, which is in the $1,700 area. Today, we plowed through the 100-day, 50-day and 200-day [moving averages].” Silver fell out of bed once again and lost more than $1 on the session, to settle at $32.95 the ounce on the bid-side after having touched lows under the $32.50 level.
The noble metals complex got hit quite hard as well on Tuesday, with platinum falling $50 to $1,611 and with palladium leading the losses in the precious metals niche with a 5.5% drop to $665.00 per ounce. PGMs fell right in line with the broader markets and the euro, although their losses were particularly pronounced following the news of a restart of production at Impala Platinum.
That news, combined with the downbeat Sino-European economic jitters proved quite damaging to prices. Carmakers are apparently bracing for a more pronounced decline in European auto deliveries with some of them forecasting a potential 5% fall-off in sales this year; the fifth such annual contraction in a row. This is just one of the effects of the European financial crisis in action but some local auto executives are optimistic that a turn-around might come as early as the end of this quarter.
The recent string of signs that the global economy –with the possible exception of the US and a few other isolated instance- is slowing finally caught up with the markets on Tuesday. Commodities experienced their largest decline of the year-to-date after the realization that China and Europe are both experiencing economic difficulties and will thereby demand less “stuff” sank into the minds (and the computer sell-programs) of the speculative crowd.
Just one week prior to the sell-off the same space was as crowded as a Tokyo subway with bullish bettors – the highest number of them since September of 2011. Commodity analyst Edward Meir noted that the “impetus, the momentum, is [now] damaged for commodities” and he expects them to decline 10% from their recent highs by April. To say that sentiment has shifted 180 degree in one week is to state the obvious.