Gold trends lower as dollar pushes bull-run to 13 days

In The Lead: “The Bear Facts”

If you think that is merely heavy lipstick on a terminally ill pig, then consider the virtual flood of dollar obituaries which have been coming our way for the past six years, and how they might appear to today’s readers in light of what has not happened. You get the point. In what may have sounded like trite remark at the time, this writer told Bloomberg’s Tom Keene (in an early January interview) that “gold will go where the dollar does not.”

That point is that, gold prices, aside from all the unpleasant happenings in Europe, closed at their lowest level of 2012 after having probed even lower (around $1,540) during the trading day on Tuesday. The point is that silver (also purported to be around $80 by now, for sure) tested price zones very close to $27.00 an ounce instead of vaulting three times higher. The point is that the dollar’s aforementioned streak has now been updated and that its 13-day long advance has now been classified as the longest winning one ever since the trade-weighted index has been created.

The point also is that, as was the case in 2008, this is the perfect environment for gold to show its mettle and to attract serious amounts of worried global money, and, yet, it is failing to do so. In fact, this May has been so cruel to bullion prices that analysts can now talk about the worst semi-monthly performance in the yellow metal in seven year, and not just since 2008.

If there is any “comfort” to be found by disillusioned gold and silver investors who had loaded up on the metals in anticipation of that which never came, it would be the fact the misery loves company. Commodities as a group fell for a tenth day on Tuesday, putting in their worst losing sequence since 1998. Oil, for example, traded near $92.50 per barrel early this morning.

Copper fell to the lowest level since January. Last week, according to Standard Chartered, investors pulled another quarter billion dollars or more out of this fast-sinking niche. A huge portion of recent gains in this space was attributed to the ear of “easy money” courtesy of the Fed. Now that questions have arisen about the continuation of that kind of largesse, well, you can see the (initial) results; pain and devastation.

Peter Major, an analyst at Cadiz Corporate Solutions, a unit of Cadiz Holdings Ltd., said by phone from Cape Town: “Commodity prices were unrealistically high as a direct result of a combination of easy and cheap money from quantitative easing and the threat of inflation. The market is efficient and it looks ahead. Mining houses have been weak for four or five months now; investors definitely saw weaker prices going forward.” Does that sound somewhat familiar? It should, to the regular readers of these columns.

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