The final session of the week opened against a background wherein fresh credit-rating pain fell on Spain again (this time with a two-notch punch by S&P). The country reported sliding retail sales, and worst of all, an unemployment figure some three times the percentage of that of the US – 24%. The markets remained subdued however following this latest ominous development in Europe. Players appeared focused on the imminent release of US first-quarter GDP estimates.
The data confirmed some of the dovish stance manifest in Mr. Bernanke’s press conference a couple of days ago. The US reported a 2.2% rate of growth in Q1 (against the 2.7% that was anticipated by economists). Growth was somewhat hampered by a decline in business spending and the government sector, but was at the same time boosted by strong spending among consumer and by rising exports.
The US dollar and stock index futures frowned upon the GDP estimate and headed lower. The development may give gold players another chance at trying to go for the assault on the $1,660-$1,675 resistance area provided the dollar keeps at lower levels and provided the euro does not suffer too much in the wake of the Spanish debacle.
Spot gold dealings started off with a modest, $1.30 per ounce decline in New York. Bullion was bid at $1,655.80 on the open. Silver climbed 4 cents to the $31.13 mark per ounce. Platinum added $3 at $1,568 while palladium rose $1 to $672 the ounce. No changes were reported in rhodium at $1,350 per ounce. Other commodities appeared flat with oil stalled at $104.50 a barrel, copper marking time at $3.83 (a three-week high) and aluminium advancing 1%. Chinese markets are closed Monday and Tuesday while those in Japan are on hiatus on Monday. All of the precious metals currently appear to be stuck in range-trading patterns.
Speaking of some of the base and noble metals, if there is one good thing to possibly anticipate from the emergent shift in China’s economic profile, it might be the fact that certain metals will benefit from it. The risk of a hard landing in China is still on the table and could impact the demand for copper, Silver, steel, etc.
However, the macro-level shift away from exports and capital investment toward domestic consumption and growth based on same bodes well for some very specific commodities. Among these would be palladium, nickel, aluminium, coffee, and other items related to rising living standards. Bloomberg News identifies the Chinese car market as pivotal for palladium demand, now that the country has surpassed the US one in size three years ago.
Well, Wednesday came and went, and depending on what one wanted to hear or to read, there was an ample amount of post-Fed meeting headlines to choose from, or to become further confused by. For instance, if one was leaning towards the paradigm that the Fed is slowly turning away from its hitherto highly accommodative monetary policy stance, there was this story available to parse.
In fact, gold prices at one point on Wednesday dipped to lows near $1,625 on just such perceptions. Mr. Bernanke himself underscored the unlikelihood of further, careless QE dole-outs by saying that it would be “reckless” to pursue inflation-yielding policies that might offer only “doubtful gains” to an already recovering US economy (almost sounding like a GOP poster-boy there).