Shortly after learning that South Africa intends to deliver 95% of full electricity supplies to struggling precious metals mines, the markets in gold, platinum, palladium, and silver all headed lower. This, despite a perfect background mix of a still sinking US dollar (73.21 on the index and above $1.532 against the euro), soaring oil (at $105.25 per barrel) and news of a possible 'fire-sale' of mortgage-backed securities by UBS ( the firm is apparently trying to aggressively clean up its books).
All things being equal, these are the very conditions that should have had gold reach the $1,000 mark even before the opening of the NY markets. Don't write the day off entirely however, as it is hard to believe that the market is on so shaky a foundation that the South Africa development could derail it just when new records are to be established. Stock index futures were showing signs of weakness spooked by crude oil values and a swooning dollar. The only bright spot was seen in the Wal-Mart same store sales looking robust.
New York spot gold traded at $980.00 down $9.20 shortly after the open, after having dipped as low as $979.50 earlier this morning. Participants are seen awaiting the US initial jobless claims numbers and pending home sales figures and they are also fixated on the greenback and oil as they navigate through this storm of March madness. Silver lost 26 cents at $20.53 while platinum dropped $37 to $2215 and palladium shed $29 to $525 per ounce.
Not a head-scratcher for the noble metals, but certainly so for the yellow one. For now. A divergence in the jobless claims numbers, just reported by Marketwatch, contributes to today's indecision and thickens the plot: Initial filings for state unemployment benefits fell to their lowest level since late January in the latest week, the Labor Department reported Thursday, even as continuing claims rose to their highest level in more than two years. Trade on that. If you dare.
Bloomberg explains the South African developments as follows:
Mines would be allowed 95 percent of their normal usage, compared with 90 percent now, Minister of Energy & Minerals Buyelwa Sonjica told Bloomberg Television yesterday from Washington.
``This will help to alleviate a perceived shortfall in platinum and gold production from the country,'' John Meyer, head of resources at U.K. investment bank Fairfax I.S. Plc, said in an e-mailed note today. The comments ``could trigger profit taking in platinum,'' John Reade an analyst with UBS AG in London, said in an e-mailed note today.
That, they did. But not just in the pgms. Look out for flighty fund money.
Today could still turn some tables upside down. we may not have a chance for the afternoon update as we will be encased in an aluminium sausage at 37000 feet for most of the day. Keep alert, mind the $975 area for a show of support and watch for more financial news (good or bad) being released.
A footnote on an important release of another kind: The CPM Group is releasing its 2008 Gold Yearbook next Tuesday. As many insiders know, this is one of the two Bibles of the trade when it comes to the facts and figures related to supply, demand, central bank activity, investor trading patterns, and other relevant data. You now have an opportunity to secure one of these coveted books for yourself, at a bargain pre-release price of only $60 a copy. We will be attending the launch event in New York and will report on the essentials later during the week.
If you are interested, (and, as a gold bug, you ought to be) simply go to : http://store.cpmgroup.com/ and secure your own copy. You will be glad you did.