Gold tried to push higher once again this morning, and actually reached just over $986 before giving up those gains and rolling back down to the $970 area. While a $109 oil price provided some initial boost to the metal, a sharp rally in the US dollar (to 73.35 on the index and to 1.532 vs. the euro) this morning (see why below) dented its fortunes for the fourth time within a week.
At last check the price of gold was down $3.70 at $969.00 per ounce. All of the background talk about intervention of one type or another bore some fruit today as the Fed decided to provide another $200 billion liquidity injection to the markets via a new, creative move called TSLF (Term Securities Lending Facility) -basically a one month loan to banks that need it, in lieu of overnight. The Dow certainly greeted the maneuver with enthusiasm, rallying some 250 points at last check. Crude oil (another beneficiary of the recent speculative mania for commodities) took it on the chin, falling from a sky-high peak to just under $107 per barrel. Silver fell 13 cents to $19.55, while the noble metals remained marginally higher - platinum gaining $10 to $2030 and palladium adding $11 to $484.00 per ounce.
The early signs of such strategic moves were in the wind for a few days now, with The ECB's Mr. Trichet putting the ball in Washington's court, saying the ECB is paying extreme attention to remarks by U.S. authorities that a strong dollar is in the interest of the U.S. economy. Fox Business indicates that: Todayâ€™s plan is a joint effort between the Fed, the Bank of Canada, the Bank of England, the European Central Bank and the Swiss National Bank. The announcement moved the market sharply higher in pre-open action and the U.S. dollar strengthened against the Japanese Yen -- a key indicator of currency demand.
Corporate Europe has become increasingly vocal in its concerns about the euro pricing them out of important overseas markets. BDI, Germany's big business lobby, says German companies are feeling the squeeze on profit margins but believe they face a strong or even stronger euro through the summer.
BusinessEurope, the Europe-wide business lobby, last complained about the ECB's tough stance on rates, which, the lobby says, is at least one reason for the surging euro.
We said when the euro was above $1.40 that we feel the pain. When the euro is above $1.50, it is alarming, said Ernest-Antoine Seilliere, president of BusinessEurope.
He was not alone. Joaquin Almunia, the Commissioner for European Economic Affairs protested that progress by the worldâ€™s main economic blocs to tackle global imbalances as they pledged a year ago had been too slow. He added: Ultimately, the marked appreciation of the euro against the dollar, the Japanese yen and the Chinese yuan does not fully reflect macroeconomic realities, and one currency should not be bearing the brunt of global adjustment alone. according to The Business Times.
Looks like someone may have taken these words more seriously this time, as -according to Bloomberg- The dollar rose the most in three months against the yen after the Federal Reserve said it will lend up to $200 billion of Treasuries and boost swap lines with European central banks in a bid to ease a credit crisis.
The U.S. currency also rebounded from a record low versus the euro as traders speculated the steps will help spur bank lending and avert a recession. Traders trimmed bets the Fed will slash its benchmark rate as much as 0.75 percentage point this month, from 3 percent.
This is the synopsis of what emerged this morning. Is the 'situation' over? Probably not. But efforts are being made to bring a resolution, and that has speculative participants taking a fresh look at just how deep they may be into positions in various alternative assets. Short of direct intervention, the coordination between central banks and the attempt at resorting to other effective measures shows resolve. Now it is up to the markets to exhibit confidence or doubt. The recent patterns tilt towards the short-lived end of the confidence scale following such moves. Could this time around be different? We will have our first answer within a week. In the interim, trading will remain choppy and prices will dart back and forth in a broader band as position adjustments come and go. Next up, economic stats coming our way Thursday and Friday.
We intended to bring you highlights from the CPM Gold Yearbook 2007 in this update, but will now have to delay such until the news of the day (no, not the Spitzer news) settle down. Expect installments on the fundamentals in the gold market to start with our next several commentaries.
***A footnote on this important release: The CPM Group launched its 2008 Gold Yearbook today. As many insiders know, this is one of the two Bibles of the trade when it comes to the facts and figures related to supply, demand, central bank activity, investor trading patterns, and other relevant data. You now have an opportunity to secure one of these coveted books for yourself, at a newly discounted price of only $75 per copy. If you are interested, (and, as a gold bug, you ought to be) simply go to : http://store.cpmgroup.com/ and secure your own copy. You will be glad you did.