Gold dipped Thursday as a stronger U.S. dollar weighed into the mix and oil prices slipped, conditions that generally reduce the yellow metal’s appeal. Silver and platinum also declined. On a positive note, no drastic shifts in prices were seen. U.S. stock moved lower as well.
In New York precious metals trading futures:
Silver for September delivery fell 11.5 cents, or 0.8 percent, to $14.645 an ounce.
Gold for December delivery matched the drop on Wednesday, losing $3.40, or 0.4 percent, to $962.90 an ounce.
- October platinum declined $29.70, or 2.3 percent, to $1,263.40 an ounce.
Notable bullion quotes of the day follow:
"The firmer dollar is putting slight pressure on gold," Ralph Preston, a Heritage West Futures Inc. analyst in San Diego, was quoted on Bloomberg. "Gold’s direction will be all about the dollar and where it goes from here."
"While we remain broadly bullish, gold may struggle to gain significantly in the short term," James Moore, an analyst at TheBullionDesk.com, was noted on MarketWatch.
"August still remains likely to offer a more compelling buying opportunity than that which is at hand at the moment," Jon Nadler, senior analyst at Kitco Metals Inc., wrote earlier in the day." [Click to read Nadler’s full commentary].
In London bullion, the benchmark gold price was fixed $3.50 higher to $964.00 an ounce. Silver remained unchanged at $14.67 an ounce. Platinum was fixed $3.00 higher to $1,278.00 an ounce.
Gold, considered a hedge during times of high inflation and economic uncertainty, tends to follow oil and move opposite to the U.S. dollar. A rising greenback makes dollar-denominated commodities, like bullion, more expensive for holders of other world currencies.
Oil and gasoline prices
Oil fell slightly Thursday "from a seven-week high after crude stockpiles in the U.S., the largest energy-using nation, increased as refiners reduced processing," wrote Christian Schmollinger and Ben Sharples at Bloomberg.
New York crude-oil for September delivery lost 3 cents, or 0.04 percent, to close at $71.94 a barrel.
Prices at the pump jumped another 2.5 cents from Wednesday, according to AAA. The national average for unleaded gasoline climbed to $2.610 a gallon. The price is 9.4 cents higher than last week, six-tenths of a cent higher than a month back, and $1.25 lower than a year ago.
U.S. stocks declined Thursday "on the eve of the closely watched July jobs report — with investors bailing out of tech, financial and commodity shares in a step back from the big rally of the past month," wrote Alexandra Twin of CNNMoney.
The Dow Jones industrial average lost 24.71 points, or 0.27 percent, to 9,256.26. The S&P 500 Index declined 5.64 points, or 0.56 percent, to 997.08. The Nasdaq Composite fell 19.89 points, or 1 percent, to 1,973.16.
Gold prices not only did not give up maintaining the low $960s early this morning, but advanced to a high of $971.40 ahead of the NY opening. The market started Thursday’s session with a $5.50 gain per ounce, quoted at $968.30 at 8:20 am. About two hours into the trading day, bullion did fall back to the $963.00 area, following a more substantial decline in crude oil (off $1.50 to $70.47) and a larger advance in the US dollar, to very near the 78-mark on the index.
A sizeable correction has thus far been avoided in gold, but mainly the brave, wearing anti-gravity boots, have been notable buyers above $962 this week. August still remains likely to offer a more compelling buying opportunity than that which is at hand at the moment. Analysts at HSBC have raised their average 2009 gold price forecasts from $875 to $925 but allow for a ‘very wide and very volatile’ trading range for the yellow metal for the remainder of this year.
Our good friend, James Steel, HSBC’s chief commodity analyst feels that further gains [in gold] could be capped by negative market fundamentals such as "weak jewellery sales and ample scrap supply are freeing gold for investment, reducing the possibility that gold will sustain rallies over $1,000 an ounce."
A 24-cent rise was observed in the silver pits at the start of this morning’s session, bringing the white metal to within striking (9 cents) distance of $15.00. Silver also pared gains later in the session, trading near $14.74 at last check this morning. Platinum opened unchanged at $1283.00 and palladium started the day by adding $1 to $275.00 per ounce. Profit-taking set in as the morning wore on, and platinum showed a $16 decline to $1267 while palladium fell $3 to $271 per ounce. Bullion Desk analysts expressed concerns about the level of longs in that market, but allowed for a potential $300-$310 spike in the noble metal.
Other market observers warned that the increasingly successful CFC auto programme in the USA could engender a ‘buyers’ strike’ come October or November, and added that the current efforts -while successful- are nothing more than a compaction of a trend, and that buyers are now pushing new car values higher than they would otherwise be at this time. Car dealers remain in hog heaven, for the time being, having forgotten the summer of 2008 in a hurry.
Crude oil prices declined marginally, bringing the price of a barrel down to $71.69 each. Rising inventories and advances in equity markets were underscoring the disconnect that oil has been exhibiting from its fundamentals. But, who cares about fundamentals of late? Not this market, according to Commerzbank analysts, who see a possible spike to $80 per bbl, followed by a cave-in, down to $50 per bbl in short order. Copper prices declined following the drop in the Institute of Supply Management index and prompted Citi analysts to observe that ‘the metals have run a long way, very fast.’
"A five-day rally in the price of copper came to an end on Wednesday on profit-taking after the metal reached its highest level in 10 months. Copper has almost doubled this year on optimism that government stimulus packages will revive the demand for commodities. The metal climbed to US$6,235/t, the highest since Oct 2. Wang Zhouyi, an analyst at China International Futures (Shanghai) Co, commented that metal prices are "looking a bit overextended, and the huge rally in the past few days has really surprised. Many investors are expecting a large correction ahead, so some are taking the opportunity to reduce holdings." – this, according to the Mining Journal.
So, there you have it. A plethora of pundits pointing to poor principal pillars in plenty of players’ pits. Copper, oil, gold, palladium. Now, go stand in the way of momentum funds, if you have the money. Or, the chutzpah. Thus far, this morning, only platinum and palladium sellers tried to exhibit such a thing…
Market watchers who had expected the Bank of England to gently do away with asset purchases were handed a surprise this morning, when the institution announced that it was expanding its bond-buying programme by 50 billion pounds, given the degree of severity of the UK’s economic contraction. The BoE left interest rates at half of one percent, and expressed little concern about inflationary pressures at this time. This, despite OECD projections that Britain will lead the (G-7) pack -inflation-wise- in the coming year.
Further to the right on the world map, the ECB also left rates alone this morning, citing improvements in the union’s economic picture. The body is keeping rates at one percent, and expects a bit (0.3%) of growth during this quarter, albeit the IMF warns that the region will be the economic laggard among the world’s major economies, come 2010. Against this QE and interest rate background picture, the dollar moved slightly higher on the index (to 77.85) while the pound lost some ground.
Finally this morning, news from the labor front indicates that even though expectations of a ten percent US unemployment could become reality before the economic contraction is history, the pace at which American employers are cutting staff is showing signs of slowing. For the week ending August 1st, applications for jobless benefits fell by 38,000 to 550,000, making it the fifth week of sub-600,000 filings. As they say, things are ‘less worser.’ But not yet anything that can be called ‘more better.’
Things will be looking a whole lot better for overseas commodities markets in the event restrictions on trading do materialize in the U.S. At least, that is the opinion of one big commodity guru. Bloomberg was told this morning that:
"U.S. proposals to place curbs on commodities trading will drive business overseas, particularly to Asia, said Jim Rogers, chairman of Rogers Holdings.
"It is remarkable because America is shooting itself in the foot again," he said in an interview in Singapore today. "It’s going to drive the business away and the rest of the world is going to welcome it with open arms." U.S. Treasury Secretary Timothy Geithner is urging Congress to rein in the $592 trillion derivatives market with new U.S. laws that are "difficult to evade." Opaque financial products contributed to almost $1.5 trillion in writedowns and losses at the world’s biggest banks, brokers and insurers since the start of 2007, according to data compiled by Bloomberg.
"The end result is going to be Singapore, or Hong Kong, or Shanghai or who-knows-where" will be "quite happy to take that business," he added. As the U.S. contemplates tighter regulation, China’s interest in commodities is accelerating, Rogers said. The world’s most populous country already accounts for about one- third of global copper usage. It also accounts for about one- sixth of wheat demand and one-fifth of soybeans, according to the U.S. Department of Agriculture.
"The three commodity exchanges in China are booming," he said. "Dalian trades more soybean contracts than Chicago does already, and that’s with a blocked currency, a closed market. Can you imagine what’s going to happen if and when they open that market up to foreigners? It’s going to explode."
* Travel to, and participation at the ANA World’s Fair of Money (where, curiously – or not- much of the money on display looks like it was made from paper) might preclude the publication of an afternoon closing comment today.
Happy Trading.Jon Nadler
Kitco Metals Inc.
Websites: www.kitco.com and www.kitco.cn
Check out additional market resources at Live Bullion Spots, the Silver Calculator, U.S. Mint Collector Bullion Price Guide, and the Inflation Calculator.