Gold prices undertook a fresh attempt at recapturing the $900 level overnight, as the post-Fed dollar sentiment shifted back towards selling and as crude oil values inched back towards $135 after Libya said it might cut back on production as it views the markets as 'oversupplied.' The Fed changed the language in its most recent statement to signal a more hawkish stance on inflation. Specifically, the Fed cautioned that 'in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.'
While the inflation hawks have clearly won at this week's meeting, the central bank deemed it was a bit too early to signal an actual rate hike given still fragile conditions in the financial sector and the economy. With the euro still looking like it will be the first beneficiary of a rate hike this summer, the dollar retreated to near 72.60 on the index and thus gold made up yesterday's losses and added another 1% to them ahead the start of today's session. One could say that the absence of a Fed rate hike timetable specification had the same effect on the dollar and on gold as an actual cut in rates in months past.
The gold market opened with an $18 gain this morning in New York, trading at $900.00 per ounce as the euro climbed back to 1.57 against the greenback and as participants awaited final Q1 GDP, existing home sales, and initial jobless claims figures to be released. Resistance near $915 could cap this advance and players are also mindful that the metal has pierced the $900 mark but twice thus far in June, following which it traded in a more comfortable band of from $870 to $890 an ounce. Silver rose 34 cents to $17.08 while platinum got a $57 boost this morning, rising to $2060 and palladium climbed $7 to $469 per ounce. Continuing jobless claims jumped 3% while initial ones remained unchanged last week.
First quarter GDP was revised to 1% - a rate of growth which was higher than the feel in the real world and puts the US economy on a 2.5% expansion track over the past year. What recession? Well, don't tell that to the average US worker who is angry enough at his President to squarely lay blame for rising fuel prices on him and curtail spending while socking away the $600 stimulus cheque sent to him by Uncle Sam.
What's next in the world of commodities? According to some who have made good money trading the complex, the street we are on is not marked 'one-way' although it still leads to Eldorado:
Commodities face a ``correction'' after a seven-year rally, which will help ease global inflation, noted investor Dr. Marc Faber said.
``Commodity prices will come down in the next six months to one year,'' Faber, publisher of investment newsletter the Gloom, Boom and Doom Report, said at a briefing in Taipei today. Commodity prices will resume their gains after the correction, he said, with demand for oil doubling in the next 12 years.
``Some inflation pressures will abate'' as commodity prices decline, said Faber. ``It doesn't mean I am bearish about commodities. I think commodity bull markets will last'' about 20 years, he said. Dr. Faber said he's negative about the dollar in the long term, though the U.S. currency may ``strengthen somewhat'' in the short term.
Gold bugs can rejoice in the absence of any so-called nine o'clock 'dump' by putative sinister forces today. Watch the closing levels and keep an eye on oil and related legislative hearing findings. The focus shifts back to economic conditions and geopolitics as well as to the ECB as the rate ball is now in their court.