Thursday's recovery in Chinese equity markets gave new meaning to the term 'hot & cold' as investors piled money onto the same table from which they has swept it just the day before. Chinese central bank comments stressing the efficacy of 'market tools' in order to guide lending and money supply were interpreted as 'Hey, go play in the market some more' and that's exactly what profit-hunters did. Even if they can expect the authorities to tighten lending selectively, in small increments, as time goes by.
While at it, they sold the dollar and the yen, and bought back a bit of the commodities they so liberally sold over the past couple of days. The SGE gained nearly 2% after Wednesday's 5%-7.4% free-fall. Reaction to the biggest one-year rise in Japanese industrial production (8.3% in Q2) was strangely tepid, over in the currency markets.
Gold trading started the day in New York with a modest $2.40 rise, with the metal quoted at $931.80 per ounce as the trade observed a 0.33 decline in the US dollar on the index (down to 79.28) and an attempt in crude oil to bounce back following yesterday's massacre. Black gold rose 82 cents to $64.17 per barrel. Base metals enjoyed a better day on the heels of rising risk appetite, and gained anywhere from 1.5% to 2% this morning. Not that anything has changed in the fundamentals for any of the above.
Silver opened with a 12-cent gain this morning, quoted at $13.39 per ounce. Minor recoveries were also seen in platinum (up $6 at $1177.00) and palladium (up $2 at $255) but the bounces were largely seen as technical in nature, absent fresh news from the world of transport. Honda's earnings beat estimates soundly, while VW's net crumbled by 83% on Q2. Not much else to watch today, although stock index futures were aiming higher.
Bullion sales from the largest gold ETF continued, with another 10 tonne-plus disposal being registered yesterday. Emirates Business reports that the recent upswing in sentiment in the [equity] markets and the accompanying gains in the US dollar have diluted gold demand for hedging purposes. The World Gold Council in its report said that the first signs of inflation, which is expected to support the demand for gold as a hedging tool, is yet to emerge. There are expectations that gold my now head towards a long talked-about support level of $915 an ounce, a price that is expected to trigger demand and bring in buyers wanting to buy jewellery. said the article.
Others were not quite so sanguine about 'expected' demand for baubles in the wake of the current drop in gold. UBS analysts in London concluded that: We need to see sustained strong Indian demand to start thinking about calling for a strong support in gold, and suspect that this will only be seen a lower prices, or in a month or so. For the time being, gold's close under the 60-day MA indicates a turn-down in the longer-term trend, and a turn towards a support target near $918 an ounce. The $950 and $965 areas remain in place as ceilings needing to be decisively broken.
Finally, as this new-found fondness for bubble prevention takes hold, (see China and its lending moves, see the CFTC and its call for limits in commodity trading) so is the ringing of various alarm bells by the parties with vested interests in the game. Goldman Sachs opines that curbs on speculation might 'disrupt' liquidity in the markets as well as the markets themselves. Thus, we learn that all types of traders now want the stamp of 'exempt' pasted on their forehead if the CFTC does go ahead with restrictions.
Tell you what, while these curbs are engineered, why not also curb some dubious practices in the bullion business? There are plenty of firms who would love to sell you high mark-up/ high profit-margin so-called 'rare' or 'semi-rare' coins with the lure that such items will be exempt from government confiscation, and/or that such and such small coins (sold with the equivalent of a 30 or 40 percent premium above gold content) will come in 'handy' when the hordes rule the street and barter among themselves. We suggest a different metal for that wild, but oh so easy to sell by aggressive phone staff scenario: Pb is its chemical symbol.