Good morning …
Gold traded sideways through all of Hong Kong and most of London before taking a dive below $910 as soon as the Comex opened in New York then gained a little back during the rest of the day, finishing at $915.80/oz., down $9.60. Overnight, gold is trending higher.
Platinum also went south soon after the New York open and stayed there the rest of the day, ending at $1031.00/oz., down $27.00. Overnight, platinum has shot upward.
Silver tracked gold’s path pretty closely, falling off early in New York before gaining some ground in electronic trading on the Globex later in the day, closing at $12.83/oz., down 12 cents. Overnight, silver is sharply higher.
Gold prices fell again Tuesday, bringing the grand total lost over the past seven trading sessions to $77.40. Meanwhile, silver has fallen $1.58 during the past six sessions.
Gold prices had been trending higher in recent weeks, benefiting from some safe-haven buying amid economic concerns, but they have shown weakness in the past few sessions, falling along with stocks.
Sometimes there is movement out of all assets, even safe havens, said Tom Pawlicki, an analyst at MF Global Research. The weakness we're seeing in equities could be driving gold lower.”
While we’ve said time-and-again we think gold will eventually fully decouple from the dollar and shoot to the moon, ours is not the only opinion out there.
“We had a bubble in gold fueled by exasperation and the inability to make money in stocks,” said Brian Dolan, chief currency strategist for Gain Capital. “Investors were hit by all the bubble sales pitches that suggested gold was a ‘can’t-lose proposition.”
Dolan thinks the five-year uptrend for gold will be replaced by a five-year retreat back to the $300 to $400 range that existed before this decade’s surge. He sees the rally as a departure from gold’s typical range.
While we think Mr. Dolan couldn’t be more wrong, it’s always important to get both sides of the story.
Currencies and Economic News
In the currency market, the dollar rose slightly against the euro. Late Tuesday, the euro was trading at $1.2560 vs. $1.2565 on Monday.
The greenback showed some strength on Tuesday in New York as traders turned to the safety appeal of lower-yielding currencies. The buck approached a three-month high against the euro and hovered near a six-week bet against the pound.
In economic news on Tuesday, U.S. stock indexes fell for the fifth straight session to the lowest levels in more than 12 years as home and auto sales data helped the S&P 500 close below 700 for the first time since 1996.
Given the magnitude of this crisis we may have to eventually see very cheap levels before we bottom, Deutsche Bank analysts said in a research note. The market's precipitous decline to levels considered cheap is not a reason to suggest an imminent sustainable bounce.”
MarketWatch reported that the Dow Jones Industrial Average fell 37.27 points, or 0.55%, to 6726.02, its fifth-straight decline and its eleventh in the past 13 sessions for its lowest close since April 21, 1997. The broad Standard & Poor's 500 index fell 4.49 points, or 0.64%, to 696.33, its lowest close since the Oct. 10, 1996. The S&P is off 56% from its record high in October 2007. The Nasdaq Composite fell 1.84 points, or 0.14%, to 1321.01, and has lost 14% in 12 sessions. The Nasdaq is five points above its five-and-a-half year closing low recorded Nov. 20.
Meanwhile, the number of new sales contracts on existing homes fell a seasonally adjusted 7.7% in January amid job losses and weak consumer confidence, the National Association of Realtors said Tuesday. The index is now down 6.4% from a year earlier.
And finally, please enjoy some remarks made to the Senate by Big Ben Bernanke on Tuesday.
When prodded about the government’s fiscal position he responded that the enormous budget deficit, expected by him to be about $1.8 trillion this year, is unavoidable.
We are better off moving aggressively today to solve our economic problems; the alternative could be a prolonged episode of economic stagnation that would only contribute to further deterioration in the fiscal situation, Bernanke said.
Recent economic indicators indicate little sign of improvement in the economy. The rising number of workers filing for state unemployment has moved higher suggesting that labor market conditions may have worsened further in recent weeks, he said.
And we’ll end this section on that last statement, one of the few we’ve ever agreed with him about.
In the energy market on Tuesday, crude for April delivery rose $1.50 to settle at $41.65/barrel. April reformulated gasoline finished at $1.3194/gallon.
Bulls are finding some technical hope in the fact that oil failed to close below $40 a barrel [Monday], said Phil Flynn, vice president at Alaron Trading in Chicago. [They are] also finding hope in the fact the stock market is attempting a rebound.
Energy traders also kept an eye out for what might be next from the Organization of Petroleum Exporting Countries as well as what U.S. petroleum inventories for last week will show.
Given the recent weakness in oil prices, we suspect that OPEC cannot afford to do nothing, and will have to put another cut through in order to insure that it stays in front of a rapidly deteriorating demand curve, said Edward Meir, an analyst at MF Global.
The oil cartel has already announced a reduction in output of 4.2 million barrels a day since September, equivalent to about 5% of global oil demand. OPEC members will meet on March 15 in Vienna.
The base metals all rallied on Tuesday. Copper rose 7.48 cents from Monday’s close to $1.5810/lb. Nickel gained more than 11 and one-half cents to finish at $4.3625/lb. Zinc was up 1.29 cents, ending at $0.5003/lb. Aluminum tacked on a mere quarter of a penny, closing at $0.5791/lb., while lead moved to $0.4793/lb., up about two pennies from the previous session.
Bloomberg reported on Tuesday that Pan Pacific Copper Co., Japan’s biggest copper smelter, may next month increase production from levels in the current quarter because of stronger-than-expected demand from China.
The company may ease output curbs in April compared with the 10% cut in January to March, Yoshihiro Nishiyama, executive officer for copper marketing at the Tokyo-based company, said yesterday in an interview in Tokyo.
Copper, the best performer on the London Metal Exchange this year, gained to a three-week high Yesterday on the outlook for consumption in China as a 4 trillion yuan ($585 billion) stimulus package takes effect. Premier Wen Jiabao will announce further spending today, former statistics bureau head Li Deshui said in Beijing.
“Chinese demand has suddenly surged, with orders having started before the Lunar New Year, and we’re still getting business inquiries,” Nishiyama said. “The rate of production cuts from April will depend whether the strength of the Chinese market continues,” he continued.
Chinese state stockpiling of copper may mean the withdrawal of about a quarter of the metal held in warehouses monitored by the London Metal Exchange, commodity hedge fund Ebullio Capital Management LLP said. About 100,000 to 150,000 metric tons of LME- monitored copper will probably go to China in the next three months, Managing Director Lars Steffensen said in an interview. LME-tracked copper earmarked for withdrawal tripled in a week to 55,025 tons, or 11% of total exchange inventory.
That’s what’s happening… see you tomorrow!
NEWS YOU CAN USE:
New Pacific Metals Corp. is a Canadian public company listed on the TSX Venture Exchange with a trading symbol, NUX and on the OTC Pink Sheet with a trading symbol, NUXFF. The company is exploring in China for high grade gold-polymetallic metals in the Doyao mountain range located in the Guangdong province and for Permian Noril'sk Ni/Cu + PGM (Platinum Group Elements) deposits in the Paxi Rift Belt, in the Sichuan Province. The company is well financed, has a management team with operating experienced in China and a strong shareholder base. Silvercorp Metals Inc. (SVM on TSX Exchange), the largest silver producer in China, owns 23% of the company’s shares outstanding. Learn more and request information through their profile on KitcoCasey.
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