Gold gives up gains as Greece contemplates sailing away

In The Lead: “Sail Away”

Credit Suisse joined other financial firms today in predicting that “China's commodity-demand peak has passed.” Credit Suisse warned that China will “no longer serve as a driver in the global commodity super-cycle.” The Swiss firm also said that demand for commodities is set to trend lower as “China's growth rate cools and its economic focus switches to consumerism.” Since March, and well before, we have been telling you in these columns that, as China goes, so do most commodities.

Among the factors that might negatively impact commodities, Credit Suisse listed “the end of the infrastructure-building frenzy, a housing market boom that now appears to be in its twilight stage, and the dying out of the "golden age" of government stimulus to help drive growth.” CS analysts said "We see China's trending growth pace as likely to slow to 7%-8% over the coming decade, while the driver of growth is likely to shift to consumption, which demands fewer commodities."  In Latin, the above would be prefaced by a bold “Nota Bene.”

Stocks were flat on Tuesday and the Dow lost less than 2 points but Facebook lost more…face on the day. Some 8.5 percent’s worth, to be precise. FB is starting to look more like the face from the Edvard Munch painting that sold for $120 million last week (and obviously enjoyed a better “reception”).

The yellow metal thus fell by 2% to an intra-day low of $1,560.60 on the bid-side as the US dollar picked up some serious safe-haven-flight flavored steam and gained more than eight-tenths of a percent to climb to 81.65 on the trade-weighted index. The 82 level on the same index represents a potentially major break-out point for the greenback, if and when it is overcome. Meanwhile, the beleaguered euro breached the $1.27 support figure (one not seen since January as a matter of fact) amid indications that the European region’s crisis is at risk of spiraling into deeper trouble.

The OECD picked up on these ‘vibes’ and sounded a stern note (many have called it a warning) when it issued its semi-annual global economic report yesterday. The somber report came on the eve of today’s gathering of the EU’s leadership in Brussels and it revised previous estimates for the Eurozone’s GDP downward; by the OECD’s calculations the region will shrink by 0.1% economically this year and grow at only a 0.9% pace next year. Just six months ago those numbers were projecting 0.2% and 1.4% growth for the same periods respectively.

Mincing no words, the organization’s Chief Economist, Pier Carlo Padoan, wrote that “The risk is increasing of a vicious circle, involving high and rising sovereign indebtedness, weak banking systems, excessive fiscal consolidation and lower growth,” and that “Such a downside scenario "may materialize and spill over outside the euro area with very serious consequences for the global economy."  The OECD factors in the decent-but-still-anemic growth levels underway in Germany (1.2%) and France (0.6%) and the offset factor that the USA’s rate of current growth represents, but it is also cognizant of the 1.7% and 1.6% rates of economic contraction manifest in Italy and in Spain respectively. Thus, the report concludes that “Recovery in healthier countries, while welcome, is not strong enough to offset flat or negative growth elsewhere."

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