Gold Prices Rally Toward $1250, Silver Advances

New York gold lifted toward $1,250 an ounce on Thursday, gaining just over $11 to finish at its highest price this week. A falling dollar, safe-haven appeal and bargain buying were among cited factors for gold’s rise.

Metals were mixed as group. Silver jumped 1.5 percent. Platinum and palladium fell 0.4 percent and 0.9 percent, respectively.

In other markets, crude oil futures prices rose slightly while U.S. stocks finished lower with major indexes dropping between 1.4 percent and 1.7 percent.

New York precious metals figures follow:

• Gold for August delivery rose $11.10, or 0.9 percent to $1,245.90 an ounce. It ranged from $1,228.00 to $1,249.50.

• Silver for July delivery gained 27.7 cents to end at $18.736 an ounce. It ranged from $18.170 to $18.810.

• July platinum declined $5.50 to $1,561.50 an ounce. It ranged from $1,541.00 to $1,573.00.

• September palladium lost $4.35 to $470.00 an ounce. It ranged from $461.90 to $479.00.

In notable bullion quotes of the day:

"We’re seeing the flight-to-quality bid back in gold," Matt Zeman, a trader at LaSalle Futures Group in Chicago, was quoted on MarketWatch. "Again people are swooping into buying when it’s basically on sale."

"The Fed doesn’t have a lot of bullets left in terms of resources to add stimulus to the economy through monetary policy," Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said on Bloomberg. "The amount of liquidity sloshing around the system will underpin the gold rally."

"Beware of month-end related potholes as well as sharp turns. $20 moves [in gold] should not surprise just when action appears to be most lethargic," noted Jon Nadler, senior analyst at Kitco Metals, Inc." [Read Nadler’s full morning commentary.]

In PM London bullion, the benchmark gold price was fixed earlier in the North American day to $1,236.25 an ounce, adding $9.75 from the price on Wednesday. Silver dropped 53 cents to $18.380 an ounce. Platinum settled at $1,549.00 an ounce, declining $26.00. Palladium fell $19.00 to end at $466.00 an ounce.

In United States Mint coin news, figures were published Thursday which show strength in Mint bullion product sales. American Silver Eagles are approaching 18 million in sales this year with more than 2.5 million sold this month. One-once American Gold Eagles have topped 600,000 this year with nearly 80,000 purchased during the month. For further details, read the CoinNews article Bullion Coins Reach for Records.

Oil and gasoline prices

Crude oil prices "bounced late to close slightly higher on Thursday, breaking two straight days of losses, as the possibility of a storm developing in the Caribbean by the weekend overshadowed a less optimistic economic outlook from the Federal Reserve," wrote Gene Ramos of Reuters.

"There’s a real balance of bullish and bearish factors," Kyle Cooper, managing director at energy consultant IAF Advisors in Houston, was quoted on Bloomberg. "The economy doesn’t look like it’s taking off."

New York crude oil for July delivery rose 16 cents, 0.2 percent, to close at $76.51 a barrel.

The national average for regular unleaded gasoline jumped 1.2 cents to $2.753 a gallon, according to AAA fuel data. The current average is 4.6 cents more than last week, 2.7 cents less than a month back, and 7.7 cents higher than the average from a year ago.

U.S. Stocks

U.S. stocks ended down "as investors mulled mixed reports on the economy and a sell-off in bank shares as Wall Street reform talk move toward a close," noted Alexandra Twin of CNNMoney.com.

"It’s such a weak environment," Wasif Latif, vice president of equity investments at USAA Investment Management Co., which oversees $45 billion in San Antonio, was quoted on Bloomberg. "European issues seem to be far from over. There’s concern about financial regulation. Minus the government stimulus, data showed there’s not a whole lot going on in the economy. The drop in retailers indicates they got ahead of themselves. There’s de-risking."

The Dow Jones industrial average fell 145.64 points, or 1.41 percent, to 10,152.80. The S&P 500 Index lost 18.35 points, or 1.68 percent, to 1,073.70. The Nasdaq Composite Index declined 36.81 points, or 1.63 percent, to 2,217.42.

Gold, Silver, and Metals: Prices and Commentary – June 24, 2010

by Jon Nadler, Kitco Metals Inc.

Hen(e)ry Hawks Routed From Roost?

Good Morning,

The Fed’s inaction on interest rates gave further indications that it is still preoccupied with falling prices rather than the opposite. The unsurprising announcement came on the back of coincidental statistical data release showing a 33% cratering in new home sales.

Coupled with an anemic private sector payroll situation, the above factors prompted the FOMC to reaffirm its ‘extended period’ stance. A stance of a different kind was once again exhibited by dissenting Fed policy maker Thomas Hoenig, who warned that the asset bubbles being created by virtually free money could have unwelcome consequences.

Worries that the European market theatre drama could make a limited-engagement run on the US stage were also expressed during the Fed meeting, albeit the effects of such a contagion were deemed as ‘modest’ if in fact the US were to become infected. More of a concern for the US central bank is the potential for a misfire in the global economic recovery’s engine, at this point.

Such renewed apprehensions were seen denting European as well as US stock futures this very morning. A similar set of worries undermined crude oil prices as the trading day got underway.

Risk appetite thus became truncated and the dollar picked up in value, edging closer to 86 on the index. However, the same type of safe-haven bid did not materialize in gold for a change this morning.

New York spot metals dealings opened under liquidation pressure as the dollar’s strength finally restored some of the inverse relationship (vis a vis gold) that had been lacking for several weeks now. Thus, gold opened with an $8.10 per ounce decline at $1229.20 amid global growth jitters and further position-squaring as the month draws to a close. On the technical side of things, the bulls may still be flying the ruling banner, but several worrisome momentum studies previously cited in these columns were further corroborated by Monday’s observations in Merv Burak’s weekly posting (here on Kitco).

Merv noted that "the [gold] momentum indicator has been continually showing a loss of strength on each successive move into new highs since reaching its peak in 2006. This latest gold move into new highs has not yet been confirmed by the momentum indicator. It remains below its level from the previous Dec high. The momentum cannot keep losing strength on each move. At some point it must either start to improve by moving above previous peaks or the strength of the moves will go negative."

He also cautioned that "the other indicator that is not all that positive is the daily (or weekly) volume action. The daily volume going into this week’s high prices is considerably below the volume that moved gold into its highs in mid-May or into its previous highs last Dec. Moving into new high territory with decreasing volume activity is never a bullish sign."

US jobless claims fell more than expected, and so did durable goods orders. The data set engendered pared losses in both crude oil and gold shortly after it was released, once again underscoring the extent to which sentiment related to growth or contraction in the economy remains firmly in the driver’s seat of markets and on participants’ minds.

Silver opened with an 18 cent per ounce drop, and was quoted at $18.33 bid this morning. A hefty $28 fall in platinum and a fairly sizeable $11 decline in palladium were on tap for the start of the trading day. Meanwhile rhodium remained steady at $2390.00 the ounce after having gained a modest $10 during the previous trading day. Overnight gold purchases in India were fairly scarce once again as locals appeared to be holding out for more sizeable declines in gold prices before taking the wallet-thinning plunge. Perhaps this morning’s dip in the yellow metal to under $1230 might offer some inducement to shoppers.

Other shoppers (of the US variety) are already being lured with price cuts by Wal-Mart and other retail giants, but they still appear not to be taking the bait due to the jobs picture and an uncertain mood. Such consumption anemia was just one of the worry factors that were manifest in the ‘fine print’ of the Fed announcement on Wednesday. Whether or not the anticipated price hikes to be baked into Chinese-sourced products in the wake of the yuan’s quasi-de-pegging from the greenback will materialize or be ‘subsidized’ by chain store ‘incentives’ remains to be seen. America needs to get shopping as economists see it, and the Fed concurs.

Gold miners all over Oz sported huge but perhaps premature grins this morning as Ms. Julia Gillard –the country’s first female PM– took office and pledged to repair damaged relations with them. The proposed-and highly controversial 40% tax on mining profits is seen as having cost PM Kevin Rudd his job as the mining industry ‘leaned’ on every conceivable channel to avert it. A blitzkrieg of anti-tax ads and other opinion-shaping devices were unleashed in order to prevent such a measure from becoming reality.

The country’s largest industry can now declare ‘success’ in this battle, but only for the moment, and only as it applies to having removed one knight from the chess board. The Aussie government’s pledge to bring the country’s budget into surplus by 2013 by definition implies that some form of super profits tax is still in the cards for the miners. It is about how much, in what form, and when — not IF. Especially since Ms. Gillard has appointed the principal advocate of the "Henry Tax" –Mr. Swan as her Deputy PM. The ‘swan’ song for this tax scheme, well, all that can be said is that it has not (yet) been sung.

Today’s summation comes from jovial George. Gero, that is. Fellow (but much more optimistic) Hungarian. RBC resident guru. Always curious. Says he:

"Thinning volume, book-squaring and today’s options expirations could lead to more volatile gold prices as well as just the lack of buyers in the summer."[We] can’t find new bullish news," says George Gero, vice president of global futures at RBC Capital Markets. "We hit $1,250 three times. But the technical picture is still $1,175 support and $1,250 resistance for now."

Meanwhile, the editor of Stock Traders Daily, Thomas Kee Jr. observes that safe haven plays are possibly running on fumes:

"A short while ago, it did not seem that interest rates would remain low for very much longer. Now, US treasuries have almost become a speculative instrument. This is a major concern. We all understand why investors are looking for a safe haven. The risks are real, investors had been afraid of Europe, and the United States will probably never default, unlike other countries.

Europe’s fears are taming, for a while, and that should have brought with it a lesser demand for Treasuries. I now consider a flight to safety to be quite speculative. Every blip on the radar sees a rash of money into US treasuries. Immediately, there is a bubble in both the treasury market and the gold market (GLD). My analysis tells me that this is largely due to smaller investors at this stage in the cycle."

Happy (Careful)Trading. Beware of month-end related potholes as well as sharp turns. $20 moves should not surprise just when action appears to be most lethargic.

Jon Nadler
Senior Analyst

Kitco Metals Inc.
North America