Good morning …
Gold traded above $950 through most of Hong Kong before hitting the skids at the London open then, except for one blip upward late in New York, fell for the rest of the day, finishing at $925.40/oz., down $14.20. Overnight, gold is little changed.
Platinum also traded higher in the Far East before a gradual all-day sell-off in New York pushed the metal near its intraday low, ending at $1058.00/oz., down $14.00. Overnight, platinum has fallen further.
Silver followed gold’s path to a T, closing at $12.95/oz., down 16 cents. Overnight, silver down sharply.
In its longest slump since October of last year, gold fell for the sixth straight session on Monday as some investors sold the yellow metal to cover losses in equity markets.
As things get a little uglier in the stock market, we might see some selling of gold for margin calls, said Frank McGhee, the head dealer at Chicago-based Integrated Brokerage Services. There's some weight on gold now.
Even so, the recent slide in gold prices will likely attract new investors looking for a store of value. Keep in mind, the metal is still up more than 6% this year and close to all-time highs, while the S&P 500 has dropped more than 21% and is at its lowest level in 12 years.
Gold is a good placeholder of value, said Tom Hartmann, a commodity analyst at Altavest Worldwide Trading Inc. in California. If one is scared about their cash sitting in the bank or short-term stock volatility, then perhaps gold would be a place to tuck away some money.
To which we would add: yup.
Currencies and Economic News
In the currency market, the dollar rose against the euro. Late Monday, the euro was trading at $1.2565 vs. $1.2668 on Friday.
The dollar gained ground on the euro after European Union leaders refused over the weekend to consider a coordinated bail-out package for troubled Eastern European economies.
The foreign exchange market's perception of the summit should be clear: The EU again has proven that it is unable to manage a coordinated response to the crisis, wrote strategists at Commerzbank.
Worries about the depth of the global downturn, spurred by more bad news about major financial institutions, also contributed to dollar’s performance against other world currencies on Monday.
Markets are frazzled and confidence has been rattled once again, wrote David Watt, senior currency strategist at RBC Capital Markets. Given recent trends it is no surprise that (the) U.S. dollar is in favor.”
Now for a recap of the flurry of economic news that hit us yesterday:
The U.S. government said Monday that it is revamping its bailout of insurance giant AIG, committing up to another $30 billion of taxpayer money and increasing its stake in the company up to 77.9% in an effort to keep the firm from failing on its financial contracts. The new addition brings the total bail-out assistance to AIG to $163 billion, a government official said.
According to a story published by MarketWatch, U.S. manufacturers said business worsened again in February for the 13th straight month, but the pace of the decline didn't accelerate as expected. The Institute for Supply Management said Monday that its monthly purchasing managers' index rose to 35.8% in February from 35.6% in January. Economists were expecting the ISM to fall to 34%. None of the 18 industry sectors reported growth in February. Production fell at a slower pace in February, but employment sentiment dropped to 26.1%, the lowest reading in the 61-year history of the index. Readings over 50% indicate more firms are reporting improving conditions than are reporting declines.
Not surprisingly, there was a relentless sell-off of equities on Monday as well. The Dow Jones industrial average plummeted below 7,000 at the opening bell and kept driving lower all day, finishing at 6,763 — a loss of nearly 300 points. Its last close below 7,000 was May 1, 1997. Each of the 30 stocks in the index lost value for the day.
And the Standard & Poor’s 500 stock index, a much broader measure of the market’s health, dipped below the psychologically important 700 level before closing just above it. It hadn’t traded below 700 since October 1996.
“As bad as things are, they can still get worse, and get a lot worse,” said Bill Strazzullo, chief market strategist for Bell Curve Trading, who said he believes the Dow might fall to 5,000 and the S&P to 500.
In the energy market on Monday, crude for April delivery fell $4.61 to close at $40.15/barrel. April reformulated gasoline finished at $1.3725/gallon.
Crude’s plunge of 10.3% marked the biggest one-day percentage drop for a front-month contract since Jan. 7.
The market is fearful to hold anything long at this point for fear of demand drying up, said Zachary Oxman, senior trader at Wisdom Financial. The market seems to be destroying the new longs from last week and putting in some new reversal short trades.”
Oil is falling because of the concerns over the latest AIG bailout and the economic turmoil that is being caused by it, said Phil Flynn, vice president at Alaron Trading. Also we are seeing a flight to Treasurys and the dollar because of the fears of instability in Europe.”
On the supply side, Iran's oil minister said Sunday that the Organization of the Petroleum Exporting Countries has no plans to cut its oil production again at the cartel's March 15 meeting, Dow Jones Newswires reported, citing Iranian media.
The base metals were all down on Monday. Copper lost 3.19 cents from Friday’s close to $1.5062/lb. Nickel lost almost 16 cents to finish at $4.2471/lb. Zinc fell just under a penny, ending at $0.4874/lb. Aluminum dropped one cent and a little change, closing at $0.5768/lb., while lead moved to $0.602/lb., down more than a penny from the previous session.
At the annual Prospectors and Developers Association of Canada conference, analyst Andrew Keen presented his outlook for the copper market on Sunday. He said that the . global market for refined copper will likely show a surplus of 500,000 metric tons in 2009, with prices expected to average $1.65/lb over the year.
However, he predicted a much smaller surplus, of 140,000 tons, by 2010.
Although the price prediction is slightly higher than current levels, Keen said he expected that the outlook for declining mine supply of copper would prop the metal up, and likely produce a rebound in demand and prices in 2010.
“The current cycle has indicated that demand is relatively resilient, copper mine supply is heavily interrupted, inventory rises to date have been reasonably modest.”
In his comments on the outlook for copper, Keen was particularly critical of the mining industry's performance in finding big new copper deposits and bringing new mines into production, even after four years of “booming” prices.
“But, most important, in the copper market today, we think that exploration has failed,” Keen said.
Copper prices rose to above $4/lb in mid-2008, buoyed by strong demand for the industrial products, particularly in emerging markets like China, but prices fell sharply in the latter part of last year, as global economic activity slowed.
That’s what’s happening… see you tomorrow!
NEWS YOU CAN USE:
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