Gold, Silver, Metal Prices Commentary – August 18, 2010

by Jon Nadler, Kitco Metals Inc. on August 18, 2010 · 0 comments

Gold, Silver, Metal Prices Commentary - July 28, 2010Mild profit-taking became manifest this morning and thus gold prices and other precious metals prices turned slightly lower upon the New York session’s opening.

Spot bullion opened unchanged-to-slightly-lower, very near the $1225.00 level it finished at, on Tuesday afternoon. Later in the session, the market sold off a bit further, drawing closer to the $1220.00 price level.

At this juncture, the Wednesday morning decline could end up representing the largest retracement in prices in about three weeks. Unless, of course, the spec funds make yet another valiant- and this time, successful- attempt to overcome the $1230.00 level later today, or in the week.

Not a possibility to be dismissed, at all. Managing Director Pratik Sharma of Atyant Capital opined in a Street.com video segment that the gold trade is still rather ‘crowded’ (with the likes of Paulson and Mindich) despite a recent (Q2) small exit by billionaire investor George Soros.

Spot silver prices started the midweek session off by losing one dime per ounce, quoted at $18.43 bid. Platinum and palladium slipped a bit, with the former losing $4 to open at $1,535.00 and the latter dropping $8 to start at $486.00 the ounce. Once again, no change was reported in rhodium, trading at $2,070.00 per troy ounce on the bid-side. The Dow fell about 50 points this morning, pressured by rather underwhelming results posted by Target and by Deere.

In the background, crude oil was edging closer to $75.00 per barrel, following bearish stockpile statistics issued by the API. The US dollar was off marginally, losing 0.10 on the index, to trade at 82.13 at last check. The euro was slightly weaker but still trading above $1.28 amid once again resurfacing regional debt-related apprehensions, while the loonie was single-handedly helped higher by the $39 billion takeover bid by giant BHP Billiton for the Potash Corp. (which said ‘No, thanks’ for the moment).

Citing overbought conditions in the wake of the yellow metals’ recent surge, German research firm QCR as well as Commerzbank analysts opined that it might perhaps be time for a corrective pause in prices. As well, strongly rising inflows of scrap gold were mentioned as possible dampeners to gold’s recent upward thrust. No matter (unless you are of the contrarian ilk), pervasive enthusiasm for a continued gold parabola remains unabated, and at relatively quite high levels (perhaps not all that good of an omen).

Speaking of omens (and of reliance thereupon), there is a lot of chatter on the "Internets" about the "Hindenburg Omen" as applicable to the stock market. Without getting into too much technical detail, the principle it references basically gauges how many stocks are trading at either 52-week highs or lows and tries to extrapolate whether or not a new bear market might be upon us. In the words of Barron’s stock editor Bob O’Brien however, we must "keep in mind that the Hindenburg Omen has accurately predicted fourteen of the last three bear markets…" Nice little factoid, Bob.

A little factoid that — on the other hand — might bear notice amid all of the gold bullishness; the global hedge book rose in the second quarter. For the first time since early 2009. At the largest rate in eight years. Owing largely to a spike in fresh Aussie hedging activity. Naysayers will dismiss the event since on a graphical representation basis it amounts to but a blip, but such a small turn might yet portend a larger trend.

Meanwhile producer de-hedging did continue during the period in question (a phenomenon that has undeniably helped gold prices achieve higher levels than would otherwise been possible during the past five or so years), but the fact of the matter is that there is very little left to unwind. At what point the need for protection overrides confidence in ever-rising bullion prices, remains to be seen. That it will come about is probably not subject to speculation.

Agenda-driven speculation however, sadly, is still abundant in the hard-money newsletter and commentary universe. Unfounded, uneducated, but still pure, speculation. The type that offers you emphatic (as if verified) assurances that "China bought gold and silver assets" while reducing its US dollar holdings recently.

China did buy something indeed, within the scope of its asset reshuffle; it was South Korean debt. $3.4 billion worth of it. This concludes today’s installment of ‘not everything you read on the Internet is true.’ Not that too many are listening to the truth; 20% of US adolescents are hearing-impaired (likely, as the result of the long-term use of earbud listening devices) while an as yet unknown number of adults are evidently hearing and vision impaired- by such tainted sensationalism as noted above.

On the other hand, real headlines (as spectacular as any made-up ones) have once again resurfaced and they focus on the topic of automobile catalytic converter thefts. No fewer than nine exhaust-cleaning devices were cut away from parked vehicles in the Pittsfield Township in Michigan last week. Catalytic converters- along with GPS systems, tires, and in-car audio/video are among the top most stolen auto parts of late.

The lure for the bad guys? The cocktail of platinum, palladium, and rhodium that is normally found in such converters. Replacing a stolen drum for your car? About $1,000. Perhaps metals recyclers and refiners ought to look for etched serial numbers on such items and verify that the vehicle in questions has in fact been taken out of service…

Meanwhile, over in India, the World Gold Council and local jewellery purveyors are trying to stem the "disquieting trend of youngsters being disillusioned with gold jewellery" by wrapping the yellow metal in…another metal; rhodium. Albeit selling for nearly twice the current price of gold, the unique and alluring noble metal — as a plating for relatively light-weight gold baubles- has managed to capture the attention of the hip young crowd that is slowly becoming estranged from gold. A spoonful of sugar…

"Industry players acknowledge the fact that there are significant shifts in buying patterns. "Earlier, gold sales accounted for 80% of our sales, while diamonds and other precious gems and metals accounted for the remaining 20%. The latter segments have grown 100% in recent times, bringing gold’s share down to 60%", says John Alukkas, managing director of Kerala-based Jos Alukkas group." reported the Economic Times of India.

Happy Bling.

Jon Nadler
Senior Analyst

Kitco Metals Inc.
North America 

www.kitco.comand www.kitco.cn
Blog: http://www.kitco.com/ind/index.html#nadler

Original article link: You Want Some…Rhodium With That?

Editor’s Note: Meet the Kitco Team at the upcoming Kitco Metals eConference September 12-13, 2010. A not-to-be missed event featuring Ron Paul, Marc Faber and other industry heavyweights. The eConference is free with Pre- Registration www.kitcoeconf.com.

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