The expected negative US economic news hits various markets with all of the impact it was though to engender. All, but gold that is. For the second time this week, the yellow metal misfired when given the opportunity to blast past the $1,000 mark. To be fair, the US dollar took the US jobs data and also turned it on its head, rising instead to over 73 on the index and to $1.53 against the euro. Crude oil did not seem to wish to give up the $105.00 level for the moment, despite the contractive economy and resulting lower demand the employment figures suggest.
Stock markets did not fare so well overnight, with the Nikkei and the Hang Seng losing 432 points and 3.6% respectively. European markets fell in concert, losing more than 1% on average on US slowdown apprehensions. Another $2.3 billion in subprime loss write-downs was seen flowing into the Senne river, as the Fortis financial services group experienced a Manneken Pis moment. We do not need to go into the gory details of the Carlyle Capital story. Let's just say: What capital? Finally, the Dow shed another 144 points on the economic news - at least one market that went into the 'right' direction today, but also one that is within 150 points of a potential tipping point to lower terrain.
New York spot gold tried going higher, reaching as far as $988.90 per ounce but was unable to carry through and sank to lows near $968 before last being seen at $972.00 bid. Silver rose 2 cents to $20.16 and (miraculously) remained in positive territory, but the noble metals continued their free-fall on a combination of the South African power contingency plan and a sharp rise in the yen overnight. Platinum fell the contract limit in Tokyo after traders cashed in more than a few chips. NYMEX showed spot platinum at $2025, down $136 (!) and palladium was down $28 to $489.00 per ounce. How flighty can speculative money be when news turns? See for yourself. Most people could see it coming, but stuck with positions even beyond the South African announcement of plans. Most of this week felt like watching movies full of twists and turns.
Whether or not the US jobs number is seen as a confirmation of an unfolding shallow recession, the mid-March rate cut by the Fed is seen as a fait-accompli by many. Meanwhile, ECB president Jean-Claude Trichet reiterated his position that excessive volatility in foreign exchange markets is bad for economic growth and that he supports a strong dollar policy in the US. His words, for the moment, fell on deaf ears among currency traders as they were seen pushing the envelope towards a $1.55 euro target. Maybe they got the word later. Ditto for Richard Fisher's (Fed official) caution that the markets should not assume that the Fed will keep this rate cut pace up in a string of knee-jerk reactions to dire economic news.
Speculators continue to be emboldened by the fact that the US Fed keeps jawboning about the desirability of a strong dollar but keeps undermining its value at the same time, with its relentless rate-cutting campaign. This, while it is aware of the fallout and the task it will have on its hands later on this year as it attempts to grapple with rising inflation. Prices of all kinds of 'stuff' have risen dramatically as speculative funds have opted out of the greenback during this difficult period in the US economy.
Inflation pressures could ease if in fact the US slips into a deeper slump and demand for commodities drops across the board. The precursor of just such an adjustment was somewhat in evidence in today's counterintuitive moves in metals. Add to that, the rising price-related apprehensions seen among gold fabricators, which, of late, are not unique. Yesterday, word in the markets was that major textile mills are actively balking at having to pay the current price for cotton. Meanwhile, thefts of copper wire, tubing, automobile catalytic converters, etc. are rising sharply as the metals within them have become too costly for the bad guys to ignore. Better hide that jewelry at home real well. There is a buck to be made out there on scrap. Or two. Or more.
Do not expect next week to be a picnic or to give much opportunity to rest between economic figures releases and the appetite of funds to grab and/or let go of positions in commodities. For the moment, the four-digit gold price has been moved forward on the gold bug calendar. Some are even suggesting that fresh buying days near $945 could be in the cards. Why not? It is a plausible as $1000 was this past week.
***A footnote on an important release of another kind: The CPM Group is releasing its 2008 Gold Yearbook next Tuesday. 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 bargain pre-release price of only $60 a copy. We will be attending the launch event in New York and will report on the essentials later during the week.
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.
Happy Trading. Pleasant Weekend.
PS - We are speaking at MIT tonight to an Investor's Business Daily group before heading off to NYC next week. See you on the airwaves.