The dip in gold prices to levels under $900 that followed the NY futures market close continued during the overnight hours but was overcome by safe-haven buying following reports that Israel had rehearsed an aerial attack on Iran's nuclear facilities. The news promptly turned oil prices higher as well, after they had fallen sharply on the heels of China's announcement of major domestic fuel price hikes that go into effect today. A threat to cut oil flows to the EU by Venezuela's Hugo Chavez also factored into oil's price equation early today. The US dollar took a turn lower, losing .43 on the index, to 73.06 at last check.
Friday's New York trading session opened with a $5.00 gain in bullion, quoted at $903.00 per ounce following a London AM fix of $900 and as participants focused on oil and geopolitical developments in the absence of data from the economic calendar (only weekly leading indicators were slated for the day). Silver rose 15 cents to $17.47 while platinum recouped some of Thursday's losses with an $18 gain to $2059 and palladium climbed $4 to $473 per ounce. Poor US auto sales estimates drove the noble metals to lower levels during the week. Gold may well close the week out with a 3% gain after losing about 2% last week. Much still depends on where oil goes from here and how Iran responds to the mock attack by Israel. Closing levels will be important watch items today as well.
Also from the world of platinum, Johnson Matthey's Platinum Today reports that:
The Tokyo Commodity Exchange will cooperate with the Tokyo Stock Exchange to develop exchange traded funds (ETFs) and Multi Commodity Exchange will now commence future trading in platinum. Platinum is now actively traded at Tokyo Community Exchange in Japan and New York Commodity Exchange as the metal is increasingly used as a catalytic converter in Japan.
According to reports from Reuters, TOCOM Chairman Masaaki Nangaku believes that the launch of commodities ETFs will have a good impact on developing the sector. Further reports from the Economic Times revealed that Joseph Messey, Chief Executive Officer of the Multi Commodity Exchange MS, said that platinum needed to be added to the offering.
We were missing the presence of an important metal like platinum and now, since we have received approval, we are looking to start future trading activity soon, he explained.
With the presence of a precious metal like platinum, investors will now have more opportunities for investment and the industry can hedge their requirements, he added.
Pre-Fed meeting trading floor chatter has begun in earnest and it points to rising expectations that the central bank will leave rates as they are (currently at an 88% probability level) and that it will also push potential rate hikes back a few months as the economic picture sorts itself out in the US. Marketwatch echoes the speculative crowd's latest sentiments and cites a few contrarian factor as well:
Surging commodity prices and strident warnings from Federal Reserve officials about inflation have some in the market betting that the central bank will increase interest rates as early as this fall, according to closely watched federal funds futures contracts. Yet, five other indicators flatly contradict that outlook, suggesting that the central bank will instead opt to keep borrowing at currently low levels to prevent the ailing U.S. economy from experiencing even more pain.
Analysts point to at least five reasons the Fed won't rush to raise rates: 1) lending rates show the credit crunch continues; 2) the banking system is still fragile; 3) rates hikes in election years are rare; 4) the economy, especially housing, still poses a threat; and 5) flattening the yield curve could pressure bank profits.
Falling home prices and continuing bank losses, along with market rates for short-term loans, are likely to hold back the Fed. That's despite the message telegraphed by the bond market's favorite interest-rate indicator: fed funds futures, which are used to determine market odds of a move in interest rates by the Federal Reserve.
Keep an eye on oil as it follows geopolitics and digests the China announcement. Positioning ahead of the weekend and ahead of the Fed summit may limit the range but some breakout behavior in various markets can be expected as we approach the middle of next week.