Gold, Silver, Metal Prices: Commentary – 12/11/2009


Bullion update ... Friday The 4th Part II

Good Day,

The US dollar had eased back to under the 76-mark on the trade-weighted index as risk appetite staged a comeback very early on Friday morning. Said appetite was fueled by a near-20% rise in China’s industrial output last month, as against levels seen one year ago. Such news soon lifted equities and commodities in overseas markets and set the stage for a recovery in gold prices following their now one week-old slump from a record.

China’s economy also took a step back towards inflation for the first time in 10 months, while other signs are starting to also look like spherical latex objects — according to Bloomberg: "Industrial output, money supply growth and fixed-asset investment are not only restored to pre-crisis levels but are approaching overheating territory," said Isaac Meng, a senior economist at BNP Paribas SA in Beijing. The central bank may raise lenders’ reserve requirements in the first quarter of 2010 "to mitigate the inflation and bubble risk," he said."

Overnight bullion trading saw gold oscillate between the $1133 and $1143 price markers, and largely following oil values, which rose to near $71 on the back of the Chinese news and statistics showing hefty demand for black gold from the country. New York spot dealings opened the final session of the week sporting an $8.60 gain, and were quoted at $1138.40 per ounce. Silver opened with a ten-cent gain, quoted at $17.45, while platinum started the day with a $15 rise, at $1438 per ounce. Palladium rose $3 to $367 per troy ounce, while rhodium held steady at $2050 this morning.

Midway into the trading morning, a hefty rise (gaining over 0.68, to rise up to 76.69 on the index) was noted in the greenback, immediately following the release of US retail sales, which rose by a better-than-expected 1.3% in November, making for the third such increase in the past four months. Profit-taking and book-squaring also contributed to a sharp, $19.50 drop in bullion prices to a low of $1110.40 bid before 10:30 NY time.

The gold market also failed to find psychological support in the fairly positive news that the sale of 30 tonnes of Russian gold was going to be conducted internally next week, without being offered up to the open market. Silver dropped to $17.05, platinum fell to $1411 and palladium slipped to $360 per ounce. The session felt very much like a replay of last Friday’s jobs numbers-induced meltdown. The $1070 target reappeared on traders’ radar screens, bargain hunting, or not.

More analysts feel that the next week or two could also bring additional pre-year-end profit-taking in the yellow metal. "Traders and analysts said with the year-end approaching, gold isn’t likely to resume its rapid rise and could in fact be hit by further profit taking. Gold volumes are thinning ahead of the holidays." noted the Wall Street Journal this morning.

Also in the Wall Street Journal, you may find the opinion of "Ralph Preston, senior market analyst with Heritage West Financial, who commented that $1.45 for the euro will be a “critical” chart area for the gold market. If the European currency falls below this, it could prompt another wave of selling in gold that could carry the metal down as far as $1,070, Preston said." Finally, analyst opinion over at Capital Economics in London is that gold prices will average less than $1K in 2010 and that the metal might fall to under that level, as early as this month.

Finally, the weekly price tally will likely show a significant ($100+) net loss in gold since last Friday, and also show not insignificant net losses for the holdings of gold in the metal-oriented ETF vehicles. "Investor holdings in the by monitored gold-backed exchange-traded funds were seen decreasing 19.807 tonnes in the week from December 3rd up to and including December 10th, in-house calculations based on official data showed on Friday. Four of the ten monitored ETF’s announced an outflow over the reported period, whereas one reported a physical inflow. Five reported "no change", although one announced a small decline that did not represent an actual physical flow."

Quite a bit of media noise has been made this week about gold’s true causes possibly having been hijacked by the "angry white right" and propelled by certain political commentators. Since it is TGIF, and we have had a tumultuous enough week, perhaps now might be the time to lighten up a bit. However, unless you have a sense of humour, watching the following video may not resonate well with you.

Stay tuned, but skip the commercial breaks. And make sure you have a very nice weekend.

Jon Nadler
Senior Analyst

Kitco Metals Inc.
North America 

Websites: and

Check out other site market resources at Bullion Prices, Silver Coins Values and the US Inflation Calculator which easily finds how the buying power of the dollar has changed from 1913-2009.

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