As the new market week got underway, global investors were met with roughly the same conditions as those they closed books upon last Friday. A steady erosion in the US dollar on the index, continuing higher values in crude oil, further gains in global equity markets -which, in turn, added to the exodus from the dollar and the yen, and perceptions that the worldwide crunch is drawing to a close. In a nutshell, the word remains 'take on risk' and thus the developing picture in the commodities niche. Firm prices, disregard for fundamentals, infectious optimism.
Gold prices hit a six and a half week pinnacle of $960.60 per ounce overnight, mainly focusing on the lost points in the dollar on the trade-weighted index. The latter sank another 0.40 to reach 78.47 and was seen trading at 1.4283 against the euro early this morning. Earnings focus shifts to Europe as of today, and some expect the zone's common currency to come under some pressure, should results not prove as effervescent as those witnessed in the US over the past couple of weeks.
New York spot gold dealings started the last week of July with a decent $3.80 gain this morning, quoted at $955.40 after the aforementioned overnight peak - one not seen since June 11th. Market watchers remain somewhat divided in their views as to whether gold will next try for $975 and/or $990 again, or sink back towards the $930s in a somewhat overdue correction. Let's keep an eye on oil, the euro, and dollar news again this morning. The usual recipe ingredients, that is.
Much, of course, depends on risk appetite vs. risk aversion, but we can be reasonably sure that some eyes will be focused not only on Eurozone earnings this week, but also on talks that take place today between Tim Geithner and Chinese officials. The dollar cannot help but be somewhere near the centre of such talks. Gold's immediate task is to convincingly take out overhead resistance at this $960 area, and proceed without hesitation to at least the $975 level.
How the metal might pull that feat off, remains to be seen. Especially as accumulation by the gold-oriented ETFs remains elusive to most observers. Our friends at GoldEssential.com offered up a picture for the week that ended on Friday for these funds, that shows a net 7.6 tonne loss, led by the 8.24 tonne outflow from the biggest one- the SPDR Gold Trust. Fabrication demand remains on ice for the hot summer months, and retail investment demand has calmed considerably at most of our surveyed bullion dealers.
Silver was showing a 14-cent rise out of the market's starting gate this morning, quoted at $14.01 per ounce. The neighboring base metals complex was witnessing gains of from 1.21% (nickel) to 2.59% (lead) as copper led the parade with a rise to 10-month highs. Platinum added $19 to Friday's closing values, opening this morning at $5 above the $1200.00 figure. Palladium was steady at $259.00 per ounce.
Mr. Bernanke shared some thoughts about the financial mess with PBS's Jim Lehrer last night. In so many words, the Fed chief summed up his and his central bank's actions as having been aimed at averting a second Great Depression. He also opined that we will once again see a strong dollar when we (in the US) will be tracking a strong(er) economy. Mr. Bernanke offered a projection for a 1% US economic growth rate for the second half of 2009.
In a separate analysis, Goldman Sachs concurred with the head of the Fed and projected continuing dollar weakness until the cycle shifts and the balance tilts in favor of US economic growth of a larger order of magnitude than what is being observed at the present time. A repeat of a dollar-euro target of 1.45 was also on the Goldman report that Bloomberg got a hold of yesterday.
Oh, and don't forget to keep the notepad clear for the Treasury auctions and the release of US GDP data later in the week. They could both prove significant to the next turn in the US dollar.