US gold futures gave back early gains on Thursday and declined for a second session as the dollar climbed to a more than six-month high against the euro. The yellow metal retreated 90 cents. In other commodities, silver fell 22.8 cents, crude oil lost 3 cents, but platinum gained $1.80.
The major US indexes tumbled, with technology stocks leading the decline.
New York precious metal figures follow:
Gold for April delivery ended down 0.1 percent to $1,084.80 an ounce. It ranged from $1,074.40 to 1,096.90.
Silver for March declined 1.4 percent to finish at $16.212 an ounce. It ranged from $16.015 to $16.755.
- April platinum rose 0.1 percent to close at $1,493.90 an ounce. It ranged from $1,486.00 to $1,526.40.
In PM London bullion, the benchmark gold price was fixed earlier in the North American day to $1,088.00 an ounce, which was a decline of $6.75 from Wednesday. Silver fell 12 cents to $16.620 an ounce. Platinum was settled at $1,517.00 an ounce for a loss of $2.00.
Notable bullion quotes follow:
"The Fed is running out of tools," Frank McGhee, the head dealer of Integrated Brokerage Services LLC in Chicago, said on Bloomberg. "We expect the U.S. to be the last economy to be able to raise interest rates. Gold is down to a point that was oversold, so we’re seeing buyers come back."
"The precious metals have been struggling with dollar strength so far," Saxo Bank senior manager Ole Hansen, said on Reuters.
"The US currency was once again seen knocking at the euro’s “1.40” door this morning, and was threatening to break it down (and, it did- at 8:33 AM in New York)," wrote Jon Nadler, senior analyst at Kitco Metals, Inc. [Read Nadler’s full commentary.] "Things could get interesting, in a hurry, on such a break. Gold had more or less mirrored the euro several times in recent months."
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.
Oil and gasoline prices
Oil futures retreated slightly, "as stocks on Wall Street fell after weak tech earnings and mixed U.S. economic reports rekindled concerns over energy demand," wrote Polya Lesova and Nick Godt of MarketWatch.
"The fundamentals are still weak and nothing suggests to me that demand will pick up tremendously," Clarence Chu, a trader with options dealer Hudson Capital Energy in Singapore, said on Bloomberg.
New York crude-oil for March delivery ended at $73.64 a barrel.
The national average for regular unleaded gasoline fell a half penny for a second straight day to $2.690 a gallon, according to AAA fuel data. The current average is 4.3 cents lower than last week, 8.2 cents more than a month back, and 84.8 cents above the price of a year ago.
U.S. stocks fell, as "technology led a broader selloff Thursday, with profit warnings in the chip and telecom sectors dragging on the Nasdaq and exacerbating investor jitters in the aftermath of last week’s big decline," wrote Alexandra Twin of CNNMoney.
"The market coming into the year was overdone on the upside," Allen Greenberg, head of trade execution at the Chicago Board Options Exchange for BNY ConvergEx, said on MarketWatch.
"It seems to me the market was stabilizing until the president and his guys started really bashing the banks."
The Dow Jones industrial average fell 115.70 points, or 1.13 percent, to 10,120.46. The S&P 500 Index declined 12.97 points, or 1.18 percent, to 1,084.53. The Nasdaq Composite Index retreated 42.41 points, or 1.91 percent, to 2,179.00.
by Jon Nadler, Kitco Metals Inc.
Gold prices remained within a $1084-$1094 range during the overnight hours, as the after-effects of yesterday’s Fed and Presidential rhetoric continued to make their presence felt in the market. This morning’s spot dealings opened with small gains, with gold quoted at $1089.30 per ounce — a rise of $2.10 as against the US dollar just marginally lower on the index (at 78.66) and a mild rise in crude oil to $74.18 per barrel.
The US currency was once again seen knocking at the euro’s "1.40" door this morning, and was threatening to break it down (and, it did- at 8:33 AM in New York). Things could get interesting, in a hurry, on such a break. Gold had more or less mirrored the euro several times in recent months. Analysts at GoldEssential.com noted that more bargain hunting after the dollar’s strong advance over the last few weeks and continuing strong physical demand from overseas (Chinese buying ahead of the New Year, mainly) may yet spark some recovery in gold towards $1,100 an ounce before the end of this week.
They also added that the threat of a large-sized pool of put options at the $1,100 an ounce mark was now off the market’s chest following Wednesday’s February COMEX gold option expiration, after it elicited the necessary selling. Resistance is currently found up ahead of $1,100 and $1,107-$1,110 respectively. Initial support is thought to be found around the $1,081-$1,080 level per ounce. Analysis tendered by VM Group/Fortis Bank Nederland notes that: "Growth in gold ETF demand has been conspicuous by its absence. The market-leading SPDR ETF in the US ended 2009 with 1,134t of gold, only slightly below its all-time high, of 1,134t. However by the 20th of January its holdings had slipped back to 1,111 tonnes." We will soon have more for you on the VM Group’s report on precious metals’ fundamentals.
Analysts at Standard Bank (S.A.) observe that: "The euro’s problems continue, with Greece the centre of attention, [while] the dollar remains the natural beneficiary of Eurozone uncertainty. From a currency perspective, there could be more downside pressure on commodities — especially on gold. The fact that the Fed confirmed yesterday low interest rates are here to stay should still see overall support to precious metals in place despite the current sell-off. The futures market now assigns a 61.4% probability to rates being raised in November."
Silver showed initial gains of 3 cents this morning, quoted at $16.62 per ounce. Platinum advanced for a change, adding $4 to $1507, while palladium rose $8 to $421 per ounce. Rhodium slipped $20 to $2310 this morning. We will hold off on the pre-weekend prognosis while watching what kind of a market day the dollar has today. Jobless claims in the US fell by 8,000 on the week, while durable goods orders climbed 0.3% last month — the data helped the greenback in the initial minutes after it was released.
The outcome of the Fed meeting –as regards interest rates at the moment– came as no surprise to speculative players in various asset markets. What was meaningful (and appears to not yet have been digested by such players) in the Fed’s announcement content however, was something else. It was the fact that The Federal Reserve panel in charge of interest rates declared for the first time that the U.S. economy is in "recovery."
With that acknowledgment, the Fed took several steps to prepare investors for the removal of the hitherto aggressive monetary stimulus. The end-game for the dollar carry trade is, thus, firmly on the market radar even if certain segments of the participating investing crowd choose to consciously ignore it by continuing to place bets that are so…2009 in character.
As for President Obama’s fierce rhetoric, the take-home phrase of the night –in this writer’s opinion- was the one that conveyed the sense of urgency about the need to get things going in the US- economically speaking.
Mr. Obama warned that: "China’s not waiting to revamp its economy, Germany’s not waiting. India’s not waiting. These nations aren’t standing still. These nations aren’t playing for second place. They’re putting more emphasis on math and science. They’re rebuilding their infrastructure. They are making serious investments in clean energy because they want those jobs." "Well," he then added -and drew the loudest applause- with the soon-to-be-sloganized: "I do not accept second-place for the United States of America."
The Washington Post has summed up the thrust of those twelve words by noting that: "No president has ever delivered so direct a strike to the soft underbelly of contemporary American conservatism, or one that resonates more with Americans’ hopes for their nation."
Someone else will not accept second place on another list, and that is the one that ranks the global gold production sources. Yes, that would be China, indeed. The South China Morning Post reports that: "[The] Mainland’s gold output jumped 11.34 per cent to a record of 313.98 tonnes last year, securing the country’s position as the world’s largest producer of the yellow metal."
That 11.34 percent jump in Chinese gold output comes from more than 700 producers that are widely scattered across the huge nation. These spectacular gold production gains (making for a third year at the top for China) did not come without a cost, however. Sina.com informs that: "at least seven peasant miners have died of black lung disease and hundreds more have been diagnosed with the illness after working in gold mines in northwest China’s Gansu Province."
Taking a page from Nouriel Roubini’s ‘mother-of-all-bubbles’ arguments, billionaire George Soros has now labeled gold as the ‘ultimate bubble.’ and has given rise to fresh fears that the metal could soon tumble. The UK’s Telegraph reports that: "Mr. Soros, arguably the most famous hedge fund manager in history, warned that with interest rates low around the world, policymakers were risking generating new bubbles which could cause crashes in the future. In comments delivered on the fringe of the World Economic Forum, Mr. Soros said: “When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment. The ultimate asset bubble is gold.”
What does that mean for metals market speculators (note that core gold holders are not to be lumped into that crowd, by all means)? Well, the Financial Post feels that the greener…make that whiter…pastures are in certain other metals: "All hail the new king in the world of precious metals: platinum. After a year in which everyone seemed to be backing the truck up for gold, investors are turning their attention to platinum, an outperformer versus gold in 2009 that continues to offer better prospects for price appreciation.
In the past month alone, platinum and its near cousin palladium have climbed as much as 12% and 15%, reaching a peak last week after getting a huge boost from the launch of two exchange-traded funds in the United States. In the first 10 days of trading, the newly-offered ETF Securities Physical Platinum Shares (PPLT/NYSE) and Physical Palladium Shares (PALL/NYSE) have attracted more than US$500-million in assets."
Happy Trading. Watch that dollar.
Kitco Metals Inc.