A pullback in the US dollar prompted some fresh gold buying overnight and brought the metal back towards the $920 area. Yesterday's profit-taking stock market sell-off and this morning's expectations of a widening US trade deficit combined in gold's favor, but the metal appears to still be confined within its recent range and could draw its own batch of sellers as values might approach $925-$930.
New York bullion trading opened this morning's session with a near-1% gain at $921.80 per ounce, stimulated by a 0.56 fall in the greenback (to 82.24 on the index) and by a fresh rise in crude oil (showing a $1.40 gain at $59.90 per barrel). Stock index futures were mixed and the tug-of-war between the recovery-is-here versus the sucker's rally teams continued unabated on The Street. Silver rose 29 cents to $14.23, while platinum gained $16 to claw back to $1131 per ounce. Palladium was asleep at the wheel, showing no change at $234 an ounce.
For the moment, the 'time-to-trim-the-green-shoots' squad appears to have the upper hand out there. Arm wrestling or not, you could have bought Citi stock on March 5th at $1.02 and sold it last Friday for $4.02 a share. Forty-six trading days, quadruple your money.
Commodity guru Jim Rogers says it's time for a dollar crisis, now that we have had an 'artificial' rally in the currency. Rogers still prefers silver and possibly the noble metals complex to gold, should his expected economic scenario materialize in the future. Others see a stock market that has gotten ahead of itself during the last surge (one that restored nearly $9 trillion to market values) and are betting on a summer pullback.
Or, worse. Some have been heard to still be calling for a 4K Dow before this is all over. On the macro scene, economic news of the sluggish variety continued to dominate. China's exports fell more sharply than anticipated last month, while the Nikkei wilted by over 150 points overnight, in a virtual replay of Monday's Dow action.
Yesterday's Robert Prechter presentation at the New York Hard Assets conference ruffled more than a few feathers, but was a compelling argument for the case for deflation/depression. What follows are some of the highlights of Mr. Prechter's Elliott Wave-based perspectives on the macroeconomic picture. Just the raw statements, taken down as short notes. We will reserve comment on any of them. You, on the other hand, can feel free to mull these bombshells over. And over. And over, again:
What applies to the oil market, also applies to gold. EW says that the market is a psychological phenomenon of continuing cycles of euphoria, and capitulation. Some 35 best –selling books on oil were on the bookshelves at the very top of the oil market. Right now, you can go out and find gold Krugerrand advertisementsin Car & Driver (!)featuringhalf-naked women in the ad. Everyone is writing books on investing in gold. Including one For Dummies.
A depression could still be in the making here, still.People sell investments (of all kinds) in a major down wave. Contraction in the economy is a reflection of social mood waves.Commodities have previously joined in the bear market in all contractions/depressions. No speculative demand, no basic demand.
Recent (08 into 09) DOWN Percentages: CRB 58%, Platinum 67%, Copper 70%, Crude Oil 78%, Silver 61%. Commodities fell because so much credit (easy money) was in the system, driving the speculators. This is not the 70's when we sell stocks and run to buy something else (like commodities).
Right now, the correlationbetween commodities and stocks is quite clear. The reflationary mode of thinking does not apply now. The old adagewas thatstocksand commodities are inversely correlated.
We currently have a deflationary bear market in the process of unfolding. Money is made by being short. Money is made fast, literally in days.
Is gold is a hedge against hard times? Something is wrong with that assertion.The average gain in gold during 6 previous recessions was 16%. However, when economy was actually expanding, gold bullion advanced 102%, on average. If youagree that aDepression is coming, gold will do less well than you think. People sell everything in order to pay off their IOUs.
Gold is possibly not in a new bull market. Silver is certainly not. Silver normally bottoms out at the bottom of a depression. Technicals indicate that when various sectors diverge, there is a trend change underway. For example, gold made a new high but silver lagged so much, thatit did not recover even half ofits previous move.Thisis a non-confirmation. Yet, 98% of traders insilver were bullish as of March 2008. And then silver fell from $21 to around $8.
Gold is not silver. Silver IS an industrial metal, not monetary metal. In a deflation, gold might be sought after, BUT, we have never experienced gold's behavior during a depression. It is an unknown. The Dollar index has rallied after its reputed death. The Dollar will go up for several more years. Debt is becoming shunned. No $10K gold during a depression. IOUs are dollar-denominated, thus the quest for dollars,andits expected surge. At the moment, more like commodity than money.
What do you hold?Some gold, some short-term T-Bills, Some Swiss Money Market instruments. The current Problem: credit inflation has come to a halt. Markets are reflecting a devaluation of the outstanding credit. The risk and lost value is being shifted to taxpayers, but not being paid. CPI is actuallydeclining, first time since 1930s. Inflation? What inflation? The Fed is NOT printing money, it is simply offering credit. The trillions in IOUs out there are seen as wealth, but such wealth is imploding. A DEflationary Depression, is what we might have here. Do not get caught up in countercyclical mumbo-jumbo. Do NOT bet on hyper-inflation.
Gold topped out with 96% bullishness in March 2008. Gold was an Armageddon trade.
As far as gold's macro scene is concerned, it's still Mumbai, we have a problem out there. The planet's largest bullion consumer appears to be on course for a full year import tally that might defy description. But, described it must be. Commodity Online's Daniel Lawrence takes on the task and reports that:
Gold imports by India, one of the largest consumers and importers of the yellow metal in the world, could drastically fall to around 200 tons during 2009 if the current trend continues, says a bullion research outlook released by Commodity Online India Limited (COIL) on Tuesday.
“India managed to import only around 32 tons of gold during January, February, March and April, 2009. Dull imports have resulted in exports of scrap gold from India to destinations like Dubai,” says the COIL report. COIL publishes Commodity Online, the largest integrated global commodities portal.
Global economic meltdown, uncertainty in stocks and commodities markets and volatility in gold prices have had a major impact on India's gold imports in 2009. In January, gold import by India was a paltry 1.8 tons against 18 tons in January 2008. In February and March, gold imports by India fell to zero levels, the worst in the last one decade. In April, gold imports picked up momentum, largely thanks to the ongoing marriage season and gold buying religious festivals like Akshaya Tritiya. Bombay Bullion Association said last week that April India gold import was around 30 tons.
Based on India's gold import in the last four months, and looking at the probability of imports in the coming seven months, the bullion research analysis from Commodity Online says that India will have the lowest gold import in 2009 in the last eight years.
”We expect gold imports by India to be sluggish in 2009. There will not be much momentum in gold sales and imports in the country thanks to the high gold prices, volatility in markets and global economic conditions,” says Nitin Khanna, bullion research head at Commodity Online. Khanna predicted that gold imports by India could stand around 200 tons this year if this trend continues. He said gold imports and sales will gain in the months of August, September and November thanks to festivals like Diwali and Onam. “However, current bullion trade scenario suggests that countries like China will import more gold than India,” he said.
Following are the Commodity Online research findings on India gold imports:
**In the last eight years from 2000, gold imports by India every year have been between 400-800 tons. In 2008, India's gold imports dipped by 45 per cent to touch 450 tons.
**India managed to import only around 32 tons of gold during January, February, March and April, 2009.
**Buying of gold jewellery has fallen sharply in the last four months leading to a slump in the yellow metal's imports.
**Bombay Bullion Association assessment says gold sales and demand have dropped to negligible levels because of high prices and gold and jewellery sector is reeling under a crisis because of high prices and retrenchments across sectors.
**Current gold prices in India are hovering around Rs 14,000 for10 grams. Bullion traders expect gold prices could zoom to Rs 15,000 per 10 grams in the coming months, leading to a dip in gold imports.
**Fall in gold demand has been thanks to high prices of the yellow metal. Gold prices have moved up as investors found heaven in the yellow metal on fear of deflation. But even though investment in gold looks attractive, many investors have been struggling for survival after they lost money in commodities and equity markets.
**Gold prices could zoom to higher levels because of the dollar-euro movements on weak economic fundamentals.
**One major reason why gold imports by India are plunging is because Indian banks have a lot of carryover gold stocks from last year resulting in lower imports.
If India's gold imports fall to 200 tons in 2009, it will be less than half of the yellow metal the country imported in 2008.
Final item for the morning: Several GM execs sold all of their shares, and FIAT will dictate which US Chrysler dealers stay or go. And so, the wheels keep coming of....