Gold, Silver, Metal Prices: Commentary – 12/18/2009


Bullion update ... Bomb Voyage In 2010?

Good Day,

The tally at the end of the afternoon on Thursday had gold prices showing a $40.40 loss with the metal quoted at $1093.80 per ounce, a price level not seen since before Thanksgiving. Previous support at $1111 was taken out, and the sellers are now apparently targeting the $1092 area as the next one to challenge. Below that mark, there is little to talk about until the $1070 level is in view. All of this came at a time when oil is apparently breaking out to higher ground, shaking itself out of its worst bear trend in nearly a decade, and is set to poke at the $74 psychological mark.

The rising bullishness that became obvious by mid-week remained in place — Mark Hulbert would say it was stubborn bullishness — and we have yet to see how and at what levels such sentiment will close out the week. However, at the end of the day, it all remains a dollar-defined game, and the greenback is flexing some serious muscles as of late.

Marketwatch notes that bets on the US currency’s demise have gone awry and investors who got ready to place nails in the greenback’s coffin have been dealt a heavy blow as: "This month, the U.S. dollar index has jumped 3.8%, lifting the gauge to three-month highs, on expectations that better jobs and other economic data have brought the Federal Reserve closer to raising interest rates. The index tracks the greenback against a trade-weighted basket of six major counterparts. Just a month ago, many investors were guessing just the opposite would happen, putting their money into investments designed to gain if the U.S. dollar fell further. "

The ingredients for this show of force are found in the rising apprehensions about Greek, Spanish, and UK debt and ratings, and in the Fed’s apparent resolve to let various acronym-laden assistance programs expire when they are set to expire. Cheap carry-trade fuel is suddenly little more than fumes. Step on the gas at you own peril, says Credit Suisse. The bank sees the unwinding of the carry trade as the single biggest risk in 2010. Let’s just call it the "Roubini Syndrome."

Whatever we call it, it remains: "The biggest time bomb," according to Tao Dong, a Hong Kong-based economist at Credit Suisse. He was referring to investors buying higher-yielding assets with money borrowed in nations with low interest rates. Such transactions may involve between $1.4 trillion and $2 trillion and "unwinding" the investments could cause volatility in currencies, commodities and emerging market stocks, Tao said."

Friday’s market session opened with a $6.90 recovery step in gold (quoted at $1104.00 bid), as the US dollar gave back 0.10 of its aforementioned gains, and slipped to 77.64 on the trade-weighted index. It held steady at 1.435 against the euro, while oil was pushing higher still, and was last seen one dime beneath the $74 level per barrel. Dollar strength and pre-weekend book-squaring could reignite the sell-off seen on Thursday at any time. The question is at what level the yellow metal might find better support.

Gold purchases in the Gulf remained ‘on hold’ last month as well as thus far in December. A combination of ultra-high gold prices and the unfolding of the local crisis made for a scarcity of shoppers in the City of Gold, and apprehensions remain high about sales prospects come 2010. Indications from locals are that $1K gold might be one good way to reignite a modicum of sales. Indian gold buyers also showed crossed arms on Friday, evidently expecting lower prices still (like the same $1K per ounce or so, that Dubai’s prospective gold shoppers are hoping for). Reports from Britain indicate that Non-Resident Indians have been flocking to UK shops to sell their gold of all kinds of late, as C-4-G (cash for gold) schemes and record prices have had them scouring those bedroom drawers and jewellery boxes.

Silver added one dime, to open at $17.23 per ounce. According to analysts at, the white metal has undergone a major bearish break(down) and if the $17.15 mark is taken out, the first path is towards the $mid-$16s and towards the $15 area as a possible secondary aim. Those of you who follow the metal closely should note that our friends over at CPM Group New York have just released their Silver Long-Term Outlook publication.

One quick glance at the table of contents and the price tag of the comprehensive study suddenly seems like it is not so bad (even if you are not sitting on an institutional trading desk (in which case, you better submit a requisition request for a copy). One good trade could easily overcome it. Platinum moved lower by $1 to start at $1426 but palladium showed a nice $5 gain to rise to $366 per ounce. Rhodium held steady at $2240 following Thursday’s sizeable pop.

Since the economic calendar offers slim pickings on this Friday, we close today’s roundup with the Top Ten Outrageous Predictions for 2010, as offered up by Saxo Bank via a Yahoo Finance piece. In what has become a mini-tradition, the Copenhagen-based bank advises that “Whilst our annual ‘outrageous claims’ should be seen as the "black swans" of the market rather than outright predictions, we do believe that the odds of these events happening are somewhat higher than what is currently priced into the market.” Without further ado, here are the highlights, in all of their outrageousness:

  1. Bunds yields will fall to 2.25%
  2. VIX will fall to 14
  3. CNY (China Yuan Renminbi) will be devalued by 5% vs. USD
  4. Gold will fall to $870 in 2010 but will rise to $1500 in 2014
  5. USD/JPY to reach 110
  6. Angry American public to form third party in the US
  7. The US Social Security Trust Fund will go bust
  8. The price of sugar will drop one third
  9. TSE Small Index will rise by 50%
  10. US trade balance will turn positive for first time in 34 years

We predict that you will have a pleasant weekend, and that 2010 will see more…wild predictions.

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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