Gold prices once again remained 'in the zone' overnight, unable to break to either side of the (narrowing) range we have now had in place for quite some time. The market was on the beat on a $953-$958 path during the overnight hours while oil and the dollar provided little impetus for more sizeable moves. Oil was trading a hair above $68 early this morning, apparently unfazed (as yet) by the discovery of a 3 billion barrel deposit by BP in the Gulf of Mexico. The dollar was off marginally, quoted at 78.65 on the trade-weighted index.
ADP employment data offered a bit of a departure from the recent string of positive numbers seen in the US economy. Private sector payrolls fell by 298,000 last month - a number larger than had been expected. Key labour market reports are still to come before the long weekend starts. Oil regained some composure, and the dollar added small bits to its earlier gains in the wake of the ADP figures. Dow futures once again did not look too healthy.
New York spot trading started with a minor ($1.10) loss in gold this morning. The metal was quoted at $956.10 per ounce on the bid side. Silver fell 15 cents to open at $14.87, while platinum suffered a more sizeable $23 loss to start at $1202 per ounce. We have not seen platinum dip under $1200 since late July. Palladium was off by $8 at this morning's session start, quoted at $280.00 an ounce. That metal spent half of last month between $265 and $275 per ounce. The slowdown in the automotive world resumed just one week after the cessation of the CFC program in the US. Dealers are once again reporting vacant showrooms.
At least one of the questions that is currently being asked out there, is whether gold might break its recently established cozy relationship with stocks and go back to its 'old ways' this fall. The ever-shrinking triangle pattern within which the yellow metal has been trapped for the past two months has a growing number of trading houses envisioning a breakout.
Note that breakout does not automatically imply a break up. It is simply a break - one way, or the other- out of the triangle formation. Odds makers can have a field day with this one. Every one of the analyses that offers a scenario for gold prices to make new highs also hedges by allowing for the possibility that a breakdown could also occur. Such suspense remains conspicuously absent from most hard-money communiques. That camp expects -no, make that-demands a major rally. We remain in the 'agnostic' camp.
Investors continued to unload equities in most markets (except China's) overnight. Sellers were seen emerging in growing numbers following yesterday's slide in the Dow. Japan's Nikkei average lost nearly 250 points, the Hang Seng dropped nearly 2%, and assorted magnitude losses were recorded from Frankfurt to London this morning as well.
Underlying the rush for the exit doors is the apprehension that the speculative fever which has in good part defined the tremendous bounce in global equities since this spring, was just that: speculation on the breadth and depth of the economic recovery. There are also fears about the integrity of the financial system - at least parts of it. Banks have been under investor selling pressure recently, despite a growing number of them announcing the repayment of TARP funds.
More and more US banks are checking out of Hotel Geithner of late. On the other hand, the FDIC's Sheila Bair sees potential trouble brewing in the commercial real estate mortgage sector. Thus, after nearly synchronized and near-50% run-ups in certain markets, investors appear ready to perhaps sit it out on the sidelines for the September-October period. That's a big 'perhaps' but it is shaping up in that direction, thus far.
Back to stock-watching and observing further gyrations on the metals. Unless, of course, you are heeding the alarm bell of Russian Professor Igor Panarin, who says that events are continuing to confirm his doomsday prediction first made over 10 years ago, that the United States will completely collapse like the Soviet Union before the end of 2010, and warns that the chaos could begin to unfold in as little as two months. In which case, you are already setting up tent in Fiji.