Gold falls after Fed minutes and new India reporting requirements

In the Lead: “Great Expectations May Lead to Great(er) Disappointments”

The white metal opened with a 3.4% or a 111-cent loss this morning, and it was bid at $31.55 per ounce. Platinum fell $29 to $1,608.00 and palladium slipped $5 to $647.00 the ounce. Robust car sales results by Chrysler (up 35%) and a quite decent showing by Ford (up 5%) and GM (up 12%) once again should provide support for the PGM complex, but for the moment, the mood is all about the Fed and its reluctance to please. To be fair, the annualized auto sales level shown in March (14.3m units) was below the 15m average that was seen in February and it was also just below analysts’ consensus. Copper declined 2.26% and crude oil lost 1.05% while US equity futures indicated that a grumpy mood was going to be defining the trading day ahead.

Analysts at Standard Bank (SA) report that they are “seeing that the platinum market has tightened up following the recent strikes in South Africa. We also believe that although the palladium market is likely to experience much greater structural deficits than platinum in coming years, at the moment, above-ground stock for platinum is lower than that of palladium (in terms of days consumption). This, at least in the next few months should support platinum, especially if more production is lost in South Africa.

The above is also consistent with our [their] view that we see good value in platinum below $1,600—$1,550 (less than 5% from the current price) and palladium around $600 (about 10% from the current price).” Such fundamentals prompted industry notable Brian Gilbertson to declare that he is “very, very bullish on platinum-group metals” in this Mining Weekly video interview. It is well worth your time to watch it.

The US dollar built on its early gains in the wake of the ADP private employment report which showed that 209.000 jobs were created last month in the USA. ADP also revised its February employment metrics to the upside. The trend plays into the hands of the now less accommodative stance that more and more are beginning to realize the Fed is adopting. So did the report on Tuesday that orders for goods produced in U.S. factories rose 1.3% in February, according  to the Commerce Department.The ECB left interest rates unchanged this morning and the euro fell to 1.314 against the US currency.

There is something else however at play behind the US dollar’s muscle-flexing that just the shift in Fed-think. Many dollar morticians when they send out newsletters laden with fear and loathing about the fate of the US currency and that of America, simply ignore a basic set of manifest facts. Marketwatch columnist Kirk Spano, founder of Bluemound Asset Management, writes that “the fear of imminent collapse of the dollar belies a simple, yet major, misconception about the dollar. It is not like other currencies. The value of the dollar is impacted by far more than balance-sheet numbers, which is why the U.S. balance sheet can be substantially more flexible than those of other nations.”

Last week, in a post entitled “Word Power” we noted that the gold specs showed just how “over-dependent they are on practically every word that Mr. Bernanke utters (or does not utter) when he makes a speech. The mere mention of the fact that ultra-low interest rates are helpful to an economy that is trying to grow, and that such growth is what will stimulate US jobs creation, sent gold prices soaring by nearly one percent in early trading in New York, touching $1,680 in the process.”  

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