New York gold futures ended lower on Tuesday, after rising slightly to start the week and hitting all-time price highs last week. A rising dollar, increased risk appetite and profit-taking were among the factors cited in gold’s retreat.
Silver and other industrial metals rallied, however, following sharp Monday losses that were attributed to fears of weakened demand should euro zone austerity measures slow global growth.
The dollar rose to a fresh four-year high versus the euro, which pressured crude oil lower for a sixth straight session and to a seven-month low of below $67 a barrel.
U.S. stocks also declined, with the major indexes sliding between 1.1 percent and 1.6 percent.
New York precious metal figures follow:
Gold for June delivery declined $13.50, or 1.1 percent, to $1,214.60 an ounce. It ranged from $1,206.60 to $1,226.8.
Silver for July delivery gained 2 cents, or 0.1 percent, to $18.879 an ounce. It ranged from $18.650 to $19.145.
- July platinum jumped $27.30, or 1.6 percent, to $1,690.50 an ounce. It ranged from $1,665.70 to $1,699.40.
- June palladium rose $3.40, or 0.7 percent, to $507.00 an ounce. It ranged from $498.40 to $510.50.
In notable bullion quotes of the day:
"The troubles in Europe aren’t over, and the euro will go down even further, but gold prices are not cheap, and the market is exceedingly long, so you’re getting some selling here," Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois, was quoted on Bloomberg.
"What you have is a little bit of the fear money coming out of the gold market," Charles Nedoss, a senior market strategist with Olympus Futures in Chicago, was quoted on MarketWatch. "The uptrend is still intact."
"Risk appetite improved a tad and the quest for safe-havens turned somewhat muted following a bounce in European stock markets," wrote Jon Nadler, senior analyst at Kitco Metals, Inc. "Indian gold prices fell once again overnight as ultra-high bullion prices kept would-be buyers from doing that which their German counterparts have been doing for several days; cleaning out the local gold shop." [Read Nadler’s full morning commentary.]
In PM London bullion, the benchmark gold price was fixed earlier in the North American day to $1,216.75 an ounce, falling $19.25 from the price on Monday. Silver dropped 29 cents to $18.820 an ounce. Platinum settled at $1,681.00 an ounce, declining $11.00. Palladium ended down $8.00 to $507.00 an ounce.
Oil and gasoline prices
Crude oil fell for another day "as the dollar gained against the euro on concern that European nations with high deficits will struggle to meet austerity requirements," wrote Mark Shenk for Businessweek.
"The markets continue to underestimate the strength of the macroeconomic data and overestimate the transmission from the European sovereign crisis into growth, but buying this dip carries more risk than in February as we have already seen the policy response," wrote analysts at Goldman Sachs in a note to clients that was cited on MarketWatch.
New York crude oil for June delivery fell 67 cents, or 1.0 percent, to $69.41 a barrel.
The national average for regular unleaded gasoline declined as well, falling eight-tenths of a cent to $2.859 a gallon, according to AAA fuel data. The current average is 4.2 cents lower than last week, six-tenths of a cent less than a month back, and 54.8 cents higher than the average from a year ago.
U.S. stocks ended down "as the euro touched a fresh four-year low versus the dollar, keeping Europe’s woes front and center and overshadowing better-than-expected earnings from big U.S. retailers," wrote Alexandra Twin of CNNMoney.com.
"Everyone is legitimately concerned about Europe, but I think the deeper concern is the markets themselves, that we can, without forewarning, have a flash crash. That was frightening to small investors and large sophisticated investors as well," Hugh Johnson, chairman of Johnson Illington Advisors, said on MarketWatch.
The Dow Jones industrial average lost 114.88 points, or 1.08 percent, to 10,510.95. The S&P 500 Index declined 16.14 points, or 1.42 percent, to 1,120.80. The Nasdaq Composite Index retreated 36.97 points, or 1.57 percent, to 2,317.26.
U.S. Producer Prices in April
In other economic news of the day, the Labor Department released its monthly report on U.S. producer prices. They retreated 0.1 percent in April, marking the second fall in three months. The majority of analysts were expected a 0.1 percent increase. The decreases were led by lower energy and food costs at the wholesale level.
Annual wholesale inflation rose 5.5 percent, as compared to the 6.0 percent reading from a month earlier.
by Jon Nadler, Kitco Metals Inc.
A recapture of the 1.24 level by the beleaguered euro and a small decline in the US dollar (to near the 86 level on the index) conspired to dampen gold demand during the overnight hours and the yellow metal fell to a one-week low near $1205.00 per ounce as a result.
Risk appetite improved a tad and the quest for safe-havens turned somewhat muted following a bounce in European stock markets. Indian gold prices fell once again overnight as ultra-high bullion prices kept would-be buyers from doing that which their German counterparts have been doing for several days; cleaning out the local gold shop.
The growing lack of Asian gold demand is becoming a concern especially if the debt storm clouds blow away from Europe any time soon. Bloomberg reports that the recent sharp gains in bullion values are cutting into traditional demand from retail investors in Asia. This, according to David Wilson, a London-based analyst with Societe Generale SA., who said that: "The fundamental background suggests that this recent upward move cannot continue forever," Wilson said. "Demand is crumbling in Asia in the face of gold’s relentless upward march and the volatility in the metal’s price."
New York spot bullion values opened with further losses in all but platinum this morning. Gold was off by $15.40 at $1208.70 the ounce, and silver lost 19 cents to start near the $18.75 level. Platinum gained $6 to open at $1675.00 while palladium dropped $3 to the $501.00 mark. Rhodium showed no change at $1750.00 after a $30 decline on Monday. In ‘heard-on-the-street’ items of a curious nature: John Paulson buys 16.8 million BofA shares. What would the gold bugs say? How about: "he wants to make a buck, any which way he can?"
Gold dipped further following US housing data that showed housing starts rising last month and an unexpected 0.1% drop in wholesale prices. Inflation refuses to make an appearance while the slack in the US economy refuses to make a disappearing act. Crude oil rebounded strongly, adding $2.15 this morning, as risk appetite made a bit of a comeback following the resurrection of the euro from four-year lows.
Amid such existential fears about the euro, at least one nation is forging ahead with plans to adopt it as its base. Estonia will become the 17th nation to use the common currency, come January of 2011. Currency market technicians still see the euro as possibly slipping to the 1.20 mark, if it fails to make a substantial retracement, and soon.
Such woes do not however imply that we are to start singing the last rites for the "little banknote that could," despite the apparent panic that has gripped German gold buyers over the past week. Chief Global Economist Jim O’Neill — he of Goldman Sachs — said that it is "ridiculous" to suggest that the euro area will break up within the next year (Hello, Mr. Faber?) and predicted the currency’s decline may be almost over. Whilst also allowing for a 1.20 target low in the near future, Mr. O’Neill stated that:
"The simple misconception is people trying to equate pure economic logic with social political reality," O’Neill said in an interview from his office in London today. "The Germans and French are passionately committed to it whether the rest of us think it’s crazy or not.
Mr. O’Neill added that: "This is 60 years of history in the making, so the idea that the euro simply falls apart at first test of its credibility, I think it highly unlikely," O’Neill said. "It might well be in 20 years time it doesn’t exist but the idea that it’s not going to exist in the next year because the market is worried about Spain and Portugal’s funding requirements is ridiculous."
Do recall those words the next time you read the latest installment from your friendly hard-money newsletter- the same one that guaranteed you a dead-and-gone US dollar by Christmas of last year. The new ‘whipping boy’ is the euro and the vendors of end-of-the-world scripts will take any condition (including a massively stronger US dollar) to bolster the hyper-bullish gold price scenarios they offer.
Another bit of ‘conventional’ (for a certain niche) ‘wisdom’ was also laid to rest this week: the one about foreign interests having no interest in UD financial assets any longer. The exodus from all things American (long-term obligations, the dollar, etc.) was supposed to be in full-swing by now and the purchase of same all but invisible. Guess again, it seems.
Bloomberg found that "reverse diversification" boosted global demand for long-term U.S. financial assets to a record as the European fiscal crisis may be beginning to translate into increased demand for dollar assets. Purchases of equities, notes and bonds totaled $140.5 billion in March, more than double economists’ projections, after net buying of $47.1 billion in February, the Treasury Department said today. Treasury purchases rose by the most since June as China, the largest lender to the U.S., added to its holdings for the first time since September." Yes, that’s the same China that "stopped buying such assets and started ‘dumping’ them" that you read about recently in some…publications.
Furthermore: 1) the rise in demand for Treasuries came even as yields rose across the yield curve in March. 2) Demand at Treasury auctions from indirect bidders rose in April. 3) Treasury holdings by China rose 2 percent in March to $895.2 billion, the biggest increase since July. 4) Japan, the second-largest holder, increased its holdings by $16.4 billion to $784.9 billion in March. Holdings in the U.K. gained $45.5 billion to $279 billion, the fifth straight monthly increase.
The Organization of Petroleum Exporting Countries (you know, the people who were supposed to adopt the gold ‘dinar’ and settle everything in anything but dollars) increased its position by $10.7 billion to $229.5 billion. What do these supposedly soured-on-the-US buyers know that we do not? Nothing more special than what the US market really is, and is already known by many. Namely, the deepest, most liquid one in existence, enhanced by a stable democracy infused with the rule of law. As such, the trend is set to continue.
Happy (Careful) Trading.
Kitco Metals Inc.
In addition to bullion American Silver Eagles that are already available, the United States Mint this year will also issue 5 oz. bullion America the Beautiful Silver Coins that are duplicates of the America the Beautiful Quarters. The first of five coins will be released this summer, with the remaining four to follow in short intervals. Check the above link to visit a sister site to CoinNews for more information on the series.