Gold Falls to 7-Week Low, Silver Slips Under $17

by on December 22, 2009 · 0 comments

Bullion update ... New York gold futures fell on Tuesday to a seven-week low as the US dollar again rallied. Propping the greenback up was a government report showing economic growth during the third quarter, and better than expected home sales data in November. In other metals, platinum declined while silver retreated slightly, reaching a low point of below $17 an ounce. US stocks advanced.

New York precious metal figures follow:

  • Gold for February delivery declined $9.30, or 0.8 percent, to $1,086.70 an ounce. It ranged from $1,098.20 to $1,075.20.

  • Silver for March delivery ended a half penny down to close at $17.030 an ounce. It ranged from $17.190 to $16.780.

  • January platinum fell $26.60, or 1.9 percent, to end at $1,396.90 an ounce. It ranged from $1,427.40 to $1,382.00.

In PM London bullion, the benchmark gold price was fixed earlier in the day to $1,084.00 an ounce, which was a decline of $21.50 from Monday. Silver retreated 32 cents to $16.950 an ounce. Platinum was settled at $1,410.00 an ounce, falling $19.00.

Notable bullion quotes follow:


"Gold reacted to the dollar and the GDP data," George Gero, a precious-metals trader for RBC Capital Markets, said on MarketWatch. "It’s also off on year-end exits."

"The trend is your friend, and the trend right now is for lower gold prices as the dollar gains," Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois, said on Bloomberg.

"Following Monday’s give-up of Friday’s hard-fought gains, gold prices headed lower still. The yellow metal hit a fresh, six-and-a-half week low in spot levels, under $1085 per ounce," wrote Jon Nadler, senior analyst at Kitco Metals, Inc. "At least three culprits stood out in the suspect line-up like sore thumbs today as well: the dollar, thin market conditions, and profit-takers." [Read Nadler’s full commentary.]


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.

In related news, the Royal Canadian Mint released findings of third party reviews which fully accounts for the difference between its stock keeping records and the physical amount of precious metals on hand for the 2008 fiscal year.

In US precious metal coin news, do not expect the US Mint to lower numismatic gold coin prices on Wednesday. The Wednesday London AM fix will need to settle under $1,053.50 an ounce to trigger lower prices for First Spouse Gold Coins, American Buffalo Gold Proof Coins, and Ultra High Relief $20 Double Eagles.

Oil and gasoline prices

Crude oil prices rose "as investors shrugged off a stronger dollar and awaited petroleum data that are expected to show another drop in U.S. crude inventories last week," reported Polya Lesova and Moming Zhou of MarketWatch


"The hope is of course that oil demand is strong," Johannes Benigni, chief executive officer of JBC Energy GmbH in Vienna, said in an interview on Bloomberg Television. "With oil prices at $75, everyone is happy and no one really needs to touch the hot iron."


New York crude-oil for February delivery climbed 68 cents, or 0.9 percent, to $74.40 a barrel.

The national average for regular unleaded gasoline declined a half penny to $2.585 a gallon, according to AAA fuel data. That is 1.3 cents lower than a week ago, and 5.6 cents down from a month ago. The price is 92.2 cents more than a year ago.

U.S. Stocks

U.S. stocks advanced "with the Dow and S&P 500 ending just below 14-month highs, after two economic reports continued to fuel optimism about the economy in a thin trading session," wrote Ben Rooney of CNNMoney.

NAR (National Association of Realtors) reported that sales of existing homes rose 7.4 percent in November to a 6.54 million annual rate. Additionally, the government said the economy grew in the third quarter, although at a slower pace than expected. The GDP climbed 2.2 percent from July through to September.

The Dow Jones industrial average climbed 50.79 points, or 0.49 percent, to 10,464.93. The S&P 500 Index gained 3.97 points, or 0.36 percent, to 1,118.02. The Nasdaq Composite Index rose 15.01 points, or 0.67 percent, to 2,252.67.

Gold, Silver, and Metals: Prices and Commentary – Dec. 22
by Jon Nadler, Kitco Metals Inc.

Dollar Winter Fairy Tales

Good Day,

Following Monday’s give-up of Friday’s hard-fought gains, gold prices headed lower still in the early Tuesday trading hours. The yellow metal hit a fresh, six-and-a-half week low in spot levels, under $1085 per ounce. At least three culprits stood out in the suspect line-up like sore thumbs today as well: the dollar, thin market conditions, and profit-takers.

Moody’s decision to downgrade Greek sovereign debt from A1 to A2, albeit still higher than Fitch’s and S&P’s, added to credit jitters this morning and supported strength in the US dollar (last seen at 1.428 against the euro). And, while few talk about oil anymore (as related to gold) it is worth noting that black gold has not only not fallen along with bullion, but has managed to remain extremely resilient. Could it be a case of "Old Man Winter" or is there something more to this? Like, say, Iraq/Iran, and/or Nigeria? Stay tuned – it is probably a combination of those factors.

Spot gold dealings opened with a $5.30 loss in New York this morning, quoted at $1086.00 per troy ounce as the US dollar hovered above 78.10 on the trade-weighted index. The bulk of the decline’s structure was made up by predominant physical selling however. "A failure to surmount the $1,098-$1,100 an ounce resistance area could lead to disappointment, and could spark fresh liquidations", analysts at observed. Support is now thought to be found only around the $1,072.60-$1,070 (Oct 14 rally high), then the $1,050 level, and, ultimately near the $1,026.50 (Sept 17 rally high) mark.

Elliott Wave analysts remain of the opinion that the recent correction is perhaps less a correction than the start of something more…ursine in nature: "The selling pressure in gold is, for now, unabated. Prices declined beneath last Thursday’s $1094.55 low in a continuation of the decline that started at the $1227.20 peak (Dec. 3). The next area of support is wide, in the $1022-$1071 area. As we’ve discussed, eventually gold should come under the wave A (circle) low at $680 before the wave structure can be counted as complete. Any bounce will encounter initial resistance at $1143. The main trend in gold is now down and should remain so until wave C (circle) can be counted as complete."

Fresh US GDP data threw a bit of a hot-cold mix onto the markets this morning. According to Marketwatch: "The U.S. economy grew at the fastest pace in two years during the third quarter, but the revised annual growth rate of 2.2% was much slower than initially reported, the Commerce Department estimated Tuesday." Thus, Q3 data –seen as dollar-supportive and bullion-hampering, was offset by YTD data –seen as not-so-dollar-friendly. What’s a trader to do? Probably keep reaching for the eggnog. This day is too young to draw any conclusions just yet. Gold quickly erased its early morning losses on the news, only to fall back into the "red zone" about ten minutes later…

Silver opened with a 12-cent loss, quoted at $16.85, and, it too, appeared to be aiming towards lower support areas (in the low $15’s presumably) that would hopefully elicit some bargain hunters to focus on it rather than holiday cheers at this time. Platinum lost $7 on the open, falling to $1408 per ounce, while palladium fell $4 to start at $357 per ounce. No change was reported in rhodium as it remained steady at $2340.00 per ounce.

Three, internationally-flavoured news bits this morning: 1) India will likely lose the crown of top global gold buyer this year (you-know-what is to blame). 2) Platinum frenzy is gripping China, to the point where analysts believe it will outperform gold in that country 3) Canada‘s Royal Mint has figured out where its missing gold went: most of it was simply mis-counted.

Okay, time for some year-end wisdom. One of the best observations comes to us from our friends over at RBC Wealth Management. You might use the sections in red to remind your favorite newsletter scribe that all is not what is appears to be, screaming from the rooftops notwithstanding. Certainly not as regards the ‘defunct’ US dollar:

"In these final illiquid trading sessions as we lead up to the end of the year we have time to ponder on some of the issues that have been constantly highlighted as meaningful in the most extraordinary of years. As a friend of ours pointed out to us only this week the USD looks to be ending 2009 a mere four — yes 4 — cents lower against the Euro than where it was at the end of 2008, and 4 cents higher than where it was at the end of 2007, and against the Swiss franc the difference is only two cents. Against the Yen the Dollar is almost exactly where it was at the end of 2008. In other words — against the world’s major currencies the Dollar has really not weakened at all when taken on a two year on year basis.

The other year-end musing comes from Capital Economics in London (yes, the team that foresees sub-$1000 gold in 2010). Referring to the Lost Decade in Japan and the recent crisis in the West, the team says that the jury might be out on what kind of decade we face:

"Although the policy response in the West has been quicker and more effective in some respects, the similarities between Japan’s Lost Decade and the crisis from which many Western economies are now only gradually emerging seem much larger than the differences. The good news is that Japan’s Lost Decade was not a complete write-off. Average economic growth was positive and not that far under Japan’s relatively low sustainable rate. However, a similarly prolonged period of below-par growth in the Western economies could still disappoint many in the years ahead."

Remain on alert for wacky price swings, oddball chart moves, irrational bets, and other assorted market high jinks. Ah, the holidays. Play them safe. Many shiny bits are highly flammable.

Jon Nadler
Senior Analyst

Kitco Metals Inc.
North America 

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Check out additional market resources at Bullion Prices, the Coin Melt Calculator, and the US Inflation Calculator.

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