US gold futures on Tuesday rose for a second straight session as the US dollar fell against other world currencies. The greenback was pressured lower by talk of a European bailout of Greece, which raised the euro and lifted investors’ interest in commodities.
For the day, New York gold gained 1.0 percent, silver surged 2.3 percent, platinum climbed 1.4 percent and crude-oil rallied 2.5 percent.
The news of a potential Greece rescue was not only cited for helping commodities, but US stocks as well. Major indexes advanced from 1.2 percent to 1.5 percent.
New York precious metal figures follow:
Gold for April delivery rose $11.00 to $1,077.20 an ounce. The yellow metal ranged from $1,062.10 to $1,083.80.
Silver for March delivery jumped 35 cents to close at $15.435 an ounce. It ranged from $15.015 to $15.595.
- April platinum gained $21.40 to end at $1,502.40 an ounce. It ranged from $1,473.40 to $1,513.30.
In PM London bullion, the benchmark gold price was fixed earlier in the North American day to $1,071.25 an ounce, which was an increase of $7.25 from Monday. Silver climbed 6 cents to $15.200 an ounce. Platinum was settled at $1,496.00 an ounce for a gain of $19.00.
Notable bullion quotes follow:
"With European woes easing somewhat, the dollar is retreating and demand for investment assets including gold is coming back," Hwang Il Doo, a KEB Futures Co. senior trader in Seoul, said on Bloomberg. "There are some investors seeking bargains, but the strength in gold appears temporary."
"As far as gold is concerned, it is getting a boost today from the stronger euro and a weaker dollar," Douglas Keller, analyst at Harvest Capital Services, said on MarketWatch.
"A slew of stories related to the early departure from a Sydney summit by the ECB’s Jean-Claude Trichet gave rise to speculation that something of a big announcement could be in the making regarding Greece this week. The euro found a bit of hopeful energy in the unfolding saga," wrote Jon Nadler, senior analyst at Kitco Metals, Inc. "The US dollar was thus the subject of a quick profit-taking… Gold market players took advantage of the aforementioned conditions to quickly try and execute some badly needed repairs." [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 an interesting story related to gold and coins, German company Global Metal Agency today announced it is taking orders for the biggest gold coin in the world. The Global Liberty coin is limited in quantity to three, and contains .9999 fine pure gold, weighing exactly 3,333 troy ounces, or 103.6 kg.
Oil and gasoline prices
Oil futures rallied "receiving a boost from news that Germany is mulling a plan to rescue Greece, a report that pressured the dollar and lifted prices for commodities," wrote Nick Godt and Polya Lesova of MarketWatch.
"The overall market is up because the euro has strengthened on speculation that the European Union will do something to assist the Greek government with their deficit," Andy Lipow, president of Lipow Oil Associates LLC in Houston, said on Bloomberg.
New York crude-oil for March delivery jumped $1.86 to close at $73.75 a barrel.
The national average for regular unleaded gasoline rose eight-tenths of a cent to $2.652 a gallon, according to AAA fuel data. The current average is nine-tenths of cent lower than last week, 9.1 cents less than a month back, but still 72.8 cents higher than the average from a year ago.
U.S. stocks gained "Tuesday afternoon as growing bets that European officials will rescue Greece from its debt problems reassured investors following a four-week selloff," wrote Alexandra Twin of CNNMoney.
"The markets are smelling a deal for Greece, and for that reason we’re seeing some stabilization," Robin Marshall, director of fixed income in London at Smith & Williamson Investment Management, which oversees about $20 billion, said on Bloomberg. "It’s hard to see there not being one, given the potential fallout and contagion effect."
The Dow Jones industrial average gained 150.25 points, or 1.52 percent, to 10,058.64. The S&P 500 Index advanced 13.78 points, or 1.30 percent, to 1,070.52. The Nasdaq Composite Index rose 24.82 points, or 1.17 percent, to 2,150.87.
by Jon Nadler, Kitco Metals Inc.
A slew of stories related to the early departure from a Sydney summit by the ECB’s Jean-Claude Trichet gave rise to speculation that something of a big announcement could be in the making regarding Greece this week. The euro found a bit of hopeful energy in the unfolding saga and players were certainly looking forward to whatever the man nicknamed "Mr. Euro" might have to say on the subject that has been obsessing markets for the better part of the past two months. The US dollar was thus the subject of a quick profit-taking sale or five, and sank by 0.50 to 79.94 on the trade-weighted index this morning, as the New York metals markets opened.
Gold market players took advantage of the aforementioned conditions to quickly try and execute some badly needed repairs and pushed the metal to a high of $1080 prior to the opening of the New York session this morning. Short-covering emerged above the $1074 level but there are plenty of nerves still manifest and perceptions that the proverbial deceased feline rebound is what is being witnessed here and now. Indian buyers decided once again to cross their arms overnight, and were seen as awaiting subsequent easier-on-the-eye gold price tags. Chinese physical offtake was still quite decent as locals stock up ahead of the Year of the Tiger next week. Questions remain for the period thereafter.
New York spot metals dealings opened with a good pop in all of the major metals we track here at Kitco. Spot gold offered a $15.30 gain on the open, starting the day off at $1076.70 per ounce as against the gains in the euro (last seen at 1.376) and the losses in the greenback. Silver climbed 35 cents to open at $15.33 an ounce.
Platinum rose $25 to the $1495 level, while palladium added $10 to reach $414.00 per troy ounce. Rhodium was bid at $2230 this morning. White metal ETF holdings continue to offer a boost to prices as the latest tally (for last Friday’s ounce flows) comes in to us from GoldEssential.com: PLATINUM: Combined holdings: +21,657 (+21,657) ounces or +0.67 tonnes, totaling 28.74 tonnes.
PALLADIUM: Combined holdings: -190 (-190) ounces or -0.01 tonnes, totaling 47.02 tonnes.
In all, it has been a good day, thus far. Closing price levels (with attention focused on, and around the $1074 pivot point) will be on the minds of participants, as will any possible ECB/Greece-related microphone time in Europe. On the radar still, is Chinese bank lending statistical data.
Polled analysts expect to hear that loans made by Chinese banks last month may have amounted to as much as the total of the previous quarter (!) – a situation which could spark more aggressive reining-in action by the country’s officials. That, would not be a very commodities-friendly development.
While Marketwatch’s Peter Brimelow observes that dyed-in-the-wool gold bugs continue to chant ‘buy’ slogans even in the face (or especially because) of last week’s bloodletting in the markets, some of the very analysts he polls find that: "The chart damage done last week was horrible." Martin Pring noted in his Weekly InfoMovie Report that gold "has completed an upward sloping head and shoulders pattern and has just violated the major up trend line…that suggests to me… a more protracted correction."
But wait, there is more: The Australian-based service The Privateer’s famous $US 5X3 point-and-figure chart turned down and now looks dreadful. Others, meanwhile observed that: "The HUI chart stinks — not much more can be said than that. It has to get back above 400 to generate the least bit of bullish enthusiasm."
Citigroup (CIRA) analysts released a commodities strategy research paper last week, and, boy, are they likely to be on the receiving end of some irate commentary. Curiously (not), the Citi folk have seized upon the same developments on the fundamentals side and trading positions-make up in this market which we have been pointing to (with some alarm) oh, at least since September the 1st of last year.
Namely, the research paper indicates that this gold market has recently been dominated by, and has become severely addicted to, investment (read: mostly speculative) whilst: "There is no support at current prices from mine and scrap supply (which is rising), or fabrication demand (which is plummeting), in our view.
Furthermore, the report identifies the degree to which the gold price surge in November and up to early December was almost exclusively a US dollar-based event, and how, therein lies the rub (or the makings of what we have seen since the second week of January). Citi says: "USD weakness and increased money supply has been the main driver of investment demand and speculative flows, we believe, and any strength in the USD is the main risk to prices."
The Citi analysts go on to point out that: "The strength of investment demand over the last few years has been reflected in physical bullion and ETF demand although both are showing signs of dissipating. Investment in physical bullion has slowed sharply. ETF holdings are stable at high levels, as concerns about a global banking crisis abate."
Most importantly however, the paper points to the same mountain of speculative paper positions which has been identified in these columns quite some time ago, and about which alarm bells have clearly been rung here: "Non-commercial net long positions are at 5x the average levels seen over the last 17 years. We see this as the major risk to gold near term."
The report concludes that: "While long-term drivers of physical gold investment remain, we believe the level of inflows seen in the last 3 years are unlikely to be sustained given the worst of risk aversion and USD depreciation appears to have passed. Recent speculative activity in gold seen through increased paper trade and a surge in CFTC net long positions is a greater risk if USD show signs of strength as we believe these positions could be quickly liquidated.
The study also contains a price projection table that shows average per ounce gold prices through mid-2014 and indicates a semi-annual progression in gold prices, as follows, starting with this year’s mid-year projection: $1,124 / $1,162 / $1,121 / $1,071 / $1,020 / $971 / $920 / $871 / $820. A gradual slope, that, but one that returns to the "long-term" figure, which is indicated as "$700" — by Citi’s analysts.
Tomorrow, we will bring you the supportive as well as potentially outright bullish factors that the Citi report has identified. Yes, there are some. And, we might add, that, regardless of the above (unless you are a major market ‘playa’) the core "one-tenth-of-it-all" insurance gold position that we have always and forever advocated for anyone with assets worth protecting against the unforeseen, remains as essential as water and air.
Happy Trading. Back to the Trichet and Beijing broadcast channels for now.
Kitco Metals Inc.