Gold follows other metals on the path of a downward correction
The apparent scenario is gold's great slump due to the ever strong dollar and falling oil, however this is not the case, as gold's fall is minor to that of other precious metals. Stock and commodity markets were engulfed yesterdays by a typhoon of profit taking and squaring positions and investors fled the market.
Anticipations have not been optimistic concerning the Greek crisis, as there is much doubt hovering above the ability of Greece to recover from its deficit, add to that the morbid symptoms that other euro zone countries are showing, raising fears of an EU deficit epidemic. Not forgetting the credit tightening policy in China, where various sectors are being slowly affected by this policy, with the industrial sector being affected the most.
The Dow Jones slipped 2.02% yesterday, while Asian stocks fell brusquely this morning with Hang Seng trading with losses of 2.10%. Across the continent, DAX and FTSE 100 shed more than 2.50%, while CAC 40 slumped 3.64%.
Losses were incurred not only by stock but also commodity markets, where S&P GSCI dropped 17.36 points and closed at 535.67, while RJ/CRB slipped by 6.50 points to close at 271.60 points. The main culprit behind this slump in commodity markets was falling oil, which plummeted from levels above $86 to around $82 per barrel. The greenback on the other hand climbed above 83.60 today, climbing closer May 08, 2009 levels; while the euro retreated to the lowest level since April 22, 2009.
These factors combined, created the perfect environment for profit taking from silver, platinum and palladium. Apart from being precious, these metals are used in the industry and also considered commodities. New York trading yesterday saw silver drop 5.00% and close at 17.86, while platinum lost 3.02% to close at 1669.00, suffering from a loss of $52. Palladium was no exception, as the metal shed $24 or their equivalent of 4.44% to close at $516.00 per ounce.
The main drop occurred in the American session, while in London had only slipped down mildly. Platinum fell from 1720.00 to 1712.00 in London's fixing, while silver fell to 18.71.
Investors' surge to invest in precious metals, due to the havoc in the financial markets, prevented metals from a significant fall yesterday. Silver and palladium have been dropping today as well, as at exactly 2:26am EST silver fell by 0.56% to 17.76, while palladium dropped 1.36% and currently trading at 509.00. Humble demand helped platinum regain some of the losses it incurred yesterday, as it rose slightly today and is currently trading at $1673.00.
Gold lost 0.85% in New York trading yesterday after recording this year's lowest of 1193.30. The yellow metal closed at 1172.20 yesterday, while today we see more movement to the south with a current trading price of 1169.60. A rise can be witnessed in the gold/silver ratio, as also in the case of gold/platinum and gold/palladium ratios.
Gold's drop against the dollar was relatively small to the retreat other metals felt against the greenback. Gold closed at 897.92 euros which is close to its historic peak, while currently trading near the peak, with the same scenario repeating in the case of the pound, Swiss franc and other major currencies.
The bearish movement gold had made, was the effect of an appreciating dollar and speculative profit-taking, while the metal remains demanded in the markets. Safe haven and alternative investment demands have cushioned gold's fall, while other metals plummet.
More bearish movement from precious metals is mostly probable, with gold being no exceptions, due to the growing dollar index and speculative profit-taking. The general trend, though, remains bullish and we expect metals to ascend after the current correction.