After bouncing off of the $975.00 level overnight, gold prices stabilized in the middle of a $10 range and were seen marking time prior to the release of US employment/unemployment data. In the background, the US dollar was already anticipating the numbers not to look very encouraging and broke over $1.54 against the euro while also falling to 72.70 on the index. Crude oil remained above $105.50 continuing to benefit from the influx of speculative fund money. OPEC has actually made it a point to tell the world not to point to it as the culprit for the current oil price.
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?
New York spot gold opened higher, gaining $11.00 to $984.90 per ounce as fed funds futures suddenly showed a 34% chance of a full-point cut in rates later in the month. There is still an opportunity here for gold to break for the four-digit mark and perform its own 'spring forward' act one day before the real event. Silver rose 46 cents to $20.60 but the noble metals continued their descent on a combination of the South African power contingency plan and a sharp rise in the yen. Platinum fell the contract limit in Tokyo after traders cashed in more than a few chips. NYMEX showed spot platinum at $2119, down $42 and palladium up $3 at $520.00 per ounce.
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. Ditto for Richard Fisher's words 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 rising price-related apprehensions seen among gold fabricators 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.
Late word is that the Fed will address heightened liquidity pressures with raise of term auction facilities to $50 billion each, come March. Looks like there is additional liquidity injection ammunition out there for the Fed to use. More telling is the fact that it needs to use the extra ammo. $100 billion dollars' worth of it.
The February jobs report shows a loss of 63,000 positions while unemployment was at 4.8% (lower than expected, but probably implying that some have given up looking for work)- the dollar promptly headed south shortly thereafter.
Look for widening trading ranges as volatility is here to stay. But, so is the prospect of $1000 before spring break.
***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.