Gold’s roller-coaster continued as the yellow metal basically gave up all of Monday’s gains on Tuesday and touched lows near the $1,560 level once again overnight.
Options expiry-related selling and more risk-aversion in the wake of once again soaring Spanish and Italian bond yields kept the pressure up on bullion values and enabled the bears to remain in firm control of the market.
Note that the decline came despite a fifth nation — Cyprus — having joined the "Bailout Club" and despite US consumer confidence falling to its lowest level since January.
Tuesday afternoon’s spot settlements showed gold at $1,572 down $13 and silver bid at $27.11 down 43 cents per ounce. Platinum fell $17 to $1,423 while palladium declined $13 per ounce to the $593 level. The US dollar actually lost 0.10% on the day but the euro remained unable to pop above the $1.25 mark for very long, and it was last seen trading at $1.2467 against the greenback. Meanwhile, crude oil held steady at just above $79.50 and the Dow eked out a 67-point gain on the day.
US durable goods orders recorded a 1.1% jump in May with transportation orders climbing by 2.7%. Commercial aircraft bookings rose 4.9% on the month. Core capital goods orders were up 1.6% last month. In all, this was a pretty decent Commerce Department report and one that added to the US dollar’s ability to remain above the 82.50 level on the trade-weighted index.
This morning’s opening action in metals brought fresh selling in the complex with platinum and palladium getting hit especially hard. The former was down $21 at $1,402 and the latter fell $18 to $576 — just $13 above its one-year low. Gold spot declined $10 to $1,562 and was itself trading but $80 away from one-year lows. Silver lost 52 cents to touch $26.60 on the bid; a major pivot-point. More on gold’s moving averages follows below.
Physical gold offtake remains largely in suspended animation mode owing to Indian buyers remaining largely sidelined.
Reuters News reports that sales "data from three major Mints in Europe and North America showed on Tuesday that gold coin sales fell in the first quarter as the strong demand for small investment products that helped send gold to record highs in 2011 eased."
On the other hand, physical buying of another kind-that by ETFs-is also just barely notable. The year-to-date net accumulation by exchange-traded gold investment vehicles has only totaled a very modest 26 tonnes. That tonnage is but a fraction of the rates at which the precious metal was flowing into these instruments prior to last year. The bigger worry is related to the fact that, on the technical charts, gold has broken the medium-term uptrend which had been manifest since 2009.
The recent breach of certain pivotal moving averages (the 150, 200, and 300 DMAs) and the double "Death Cross" (that of the 50DMA under the 200DMA and that of the150DMA under the 200DMA) also has market participants on edge. However, the penetration of the less often tracked 300DMA at $1,649 (as shown in the chart below) is what has some technicians up at night and applying the "bear market turn" label to the yellow metal for the first time in several years.
Image courtesy StockCharts.com
Tuesday marked the release of the CPM Group New York’s Platinum Group Metals Yearbook 2012. The review contains the most definitive and current data on the sector and is an indispensable resource tool for any individual investor interested in this unique niche. You would do well to seek to acquire a copy of the yearbook. Here are some thought-provoking teaser details from the compendium of CPM statistics:
Turning over to the palladium market, the CPM team notes the following highlights on the fundamentals’ side:
Finally, on the topic of rhodium, the CPM analysts revealed the following market developments:
All eyes and ears will now focus on the upcoming and once again pivotal (some say final) meeting of the EU’s leadership in Brussels.
Dire statements such as Italian PM Mario Monti’s "Europe has one week to save the union" and Spanish PM Rajoy’s "Spain cannot finance itself at this point" continue to clash with other assertions such as Ms. Merkel’s "I don’t see a total debt liability [Eurobonds] as long as I live" and are making for a high-stakes game of political poker while the debt fires continue to rage on.
Mr. Monti has threatened to resign if Eurobonds are not going to be hatched at this meeting, but, at the same time, he is also willing to sit at the negotiating table late into Sunday night if need be. This is fast turning into the finals of the UEFA soccer battle being actually played out in Brussels tomorrow. It is doubtful that this time around the Merkel-Monti duo will take a fast plane to Warszaw to root for their boys. They truly have bigger fish to fry. The tensions however will be as high on the grassy field as they will at the round table.
Until Friday, keep your eye on the… ball(s).
PS – Of course, as has by now become fashionable, the potential for the EU to unravel has also engendered Nostradamus-like predictions of a global recession, depression, bank runs, and economic chaos. The same TEOTWAWKI visions — also as usual — come with the promise that great fortunes could be made trading on such misery by those who are astute enough to take advantage of the situation.
Senior Metals Analyst — Kitco Metals
Senior Metal Analyst
Kitco Metals Inc.
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