Gold, Silver, Metal Prices Commentary – April 27, 2010


Bullion update ... How God Worked

Good Morning,

Gold prices held firm near the $1150 price level overnight but dollar strength in the wake of more eurozone uncertainties about just how and when it is that Greece might get the aid it has requested, prevented the yellow metal from straying too much higher than $1157 the ounce.

Gold market participants have taken note of a rising tide of scrap gold flowing into the market in the wake of the near 4% gain in spot bullion prices over the course of the past month. As things stand right now, the size of the strength in investment demand has practically been offset by the sale of old gold.

The dollar continued to make headway on the trade-weighted index as the feeling of possible contagion from the Greek debt debacle itself spread like a typical flu bug in a kindergarten. Stocks in Portugal and Spain fell on such apprehensions, but the real action in equity markets overnight was in…China. No, the SGE’s 2.1% slump was not on account of PIIGS, but rather on that of local…piggies whose hot-to-trot casino plays in the real estate market have prompted the Beijing government to basically say: "Yo, that’s about enough!" and could have it ready to send a few regulatory scuds in their direction at any moment.

Tuesday’s bullion market sessions got off to a bit of a bumpy start as the greenback was making steady progress towards 81.70 on the index and as the euro once again broke under the 1.33 mark on the aforementioned debt virus doing its thing on investors’ emotions. A near $1 drop in crude oil did not help matters for the metals either. Thus, gold gave back Monday’s hard-fought gains, and then a bit more…The release of the Case-Shiller index home price data (guess where house prices actually went up, year-on-year?) added to selling pressure in gold and in oil while the greenback touched 81.80 at last check.

New York spot gold opened at $1149.10 with a $3.90 loss and more substantial declines were observed in other metals. EW short-term analysis indicates that gold might push above $1172 and possibly as high as $1183 (or above) followed by what it terms a ‘very steep decline.’ Silver fell 16 cents to start at $18.12 the ounce. EW analysis for the white metal opines that push beyond $18.64 could lift silver as high as $19.50 before the current pattern draws to a close.

Meanwhile, platinum players did not wait for such patterns to complete and, for the moment, the played profit-taking poker and sapped $22 from the noble metal’s price on the open. Spot bid was indicated at $1719.00 per ounce. Things appeared quite similar in palladium, which fell to a one-week low at $550 after losing $14 at the start of the session.

No action was reported in rhodium. In automotive news, FoMoCo reported a $2.1 billion in first-quarter earnings (its fourth consecutive one, and its best in six years, during a time when many were writing the obituary of the US auto industry). The company expects continued ‘solid’ profits in 2010 and is forecasting higher unit sales.

Here’s one firm for which the financial crisis proved to be a case of ‘we’re better off today than when this thing started.’ GM, on the other hand, as part of its own comeback, and with an eye on the future, will invest $200 million into a motor manufacturing plant in Ontario that currently employs 1200 of our fellow Canadians.

There will be plenty of newsworthy material on tap this trading day, as not only does the Fed commence its two-day ritual of interest rate and other policy-oriented discussion, but we get to hear from a string of Goldman executives who will be paraded before a US Senate Subcommittee on Investigations. The gentlemen will try to explain just what went on with certain mortgage-linked investments a while back. Investments, such as one bearing the name of Timberwolf Ltd. (a mere $1 billion in size) that was christened as "one shi**y" deal by the former head of sales and trading at…Goldman.

This just in: the potential ‘scapegoat’ at the centre of the SEC’s action against Goldman, Mr. Tourre, plans to deny the allegations against him. This throws a bit of a wrench into the works, but should make the upcoming action (both on Capitol Hill and in the Manhattan courts) all the more ‘entertaining.’ If you are into that kind of thing…

Whether or not we will get any real insights into much more than ‘who-may-have-said-what-and-who-may-have-done-that-other-thing’ out of the Goldman hearings, remains unclear. We probably will not, and what’s done is done. The real lessons may still be found in the process of how and why the firm got into this predicament.

For a cogent insight into the incredible juggernaut that Goldman turned into over the past decade, look no further that David Weidner’s piece on this morning. In it, you will learn how "Between 1998 and 2008, Goldman more than doubled in size. Its roll of employees rose to 30,522, up from 15,361. Its principal investments grew to $13.96 billion, up from $1.4 billion and its leverage ratio rose to 26.2-to-1, up from 24.7-to-1. In other words, Goldman morphed into an uberbank, and its size and the risk the firm took on grew with it."

As well, Mr. Weidner will offer you a glimpse at the real issue — the fact that "The problem with fast growth — for any company not just Goldman — is that it’s hard to manage." The result? "There were too many new faces. It was a new business even the smart guys didn’t fully understand. For all of the firms chasing Goldman, it was Goldman that, in the end, had to chase, or at least stay a step ahead of other firms. Goldman was successful, but that success came at a cost. The identity of the firm was lost. A bank that was once the gold standard of American finance succumbed to the temptations of quick, easy money."

Question du jour: Will any of this change, anytime soon? Nah. A small news item (also on Marketwatch, late yesterday) should give you a hint:

"Democratic efforts to reform how the nation’s bank are regulated received a major setback Monday after Republicans voted unanimously to oppose a key procedural motion put forward by congressional leaders that would have allowed for a debate on the financial institution bill by the full Senate."

The "Party of ‘No Way’ sez: "Party On, Wayne!" Or Lloyd, or Joshua, or Craig, or…

Jon Nadler
Senior Analyst

Kitco Metals Inc.
North America 

Websites: and

In related gold bullion news, the United States Mint on Thursday will release its 2010-dated American Buffalo coins. For more information, read the CoinNews article: 2010 Buffalo Gold Bullion Coins Available April 29.

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