Progress to the upside continued in gold prices overnight, stimulated by the tandem decline in the US dollar and the yen. Both major currencies lost ground against the euro as equity markets were in the midst of their longest winning streak in six years' time. Investors are still pinning bets on the emerging signs that a global recovery is underway, and that such signs are not mirages in an otherwise arid economic landscape.
The risk appetite theme has now dominated the investment scene for the better part of two weeks, and the greenback is now at just a few ticks above 1.42 against the euro. Thus, we can write about gold etching a six-week high into the record books this morning, despite a second daily leakage of bullion from the balances held by the much-vaunted (and tracked) gold ETF. Some analysts feel that such outflows are possibly being offset by corresponding purchases of OTC or futures vehicles.
Currency traders we polled see a plausible run towards 1.46 for the European currency, but also warn that a sharp correction could ensue from that level. In any case, the aforementioned conditions engendered a continuation of the positive tone in the bullion markets and the yellow metal reached a high of nearly $958 per ounce in overnight dealings. Buyers remain cautious for signs that the envelope might be reaching into overbought territory and that profit-takers could make an appearance prior to the closing of the logbooks when tomorrow's session draws to a close.
New York spot prices opened with 0.32% gains in gold, which was quoted at $954.10 on the bid side. This, as participants observed a small upward tick in the dollar, quoted at 78.81 on the index, and a 32-cent dip in crude oil, last seen at $65.08 per barrel. The oil market continues to also stack a lot of chips on the corner labeled economic recovery' and it is doing so despite obviously unhealthy fundamentals. The question remains whether or not gold can stage a successful breach above $960 towards $975 at this point. Such an achievement is still predicated on more than (transitory) fund participation and a further and not insignificant weakening in the US dollar. Faites Vos Jeux, S'il Vous Plait...
Silver - another market in surplus - opened with a 3-cent gain, quoted at $13.73 per ounce this morning. Platinum rose $4 to $1177 and palladium gained $1 to start the day at $254 an ounce. Carmaker Porsche was showing its chief executive the door (complete with a $71.2 million soothing package -part of which he plans to give to charity) while the grandson of the firm's founder - another Ferdinand - was seen as taking the helm and returning the nameplate back to the 'family' fold. Carmaker Ford posted a $2.26 billion net income for Q2 - but such glory came mainly as a result of debt restructuring and not stellar auto sales levels.
In 'who would have thought' news this morning, two little items that would have been placed in the sci-fi column just a few months ago. First, the one about human trials of a swine flu vaccine beginning in Australia (the pandemic story appears to have fallen off the headlines faster than Palin's resignation story). Then, how about the fact that despite the very loud noises coming from Beijing about US bonds and such, guess who is having trouble flogging its own debt? Yep, China. Nearly $2 billion in Chinese debt instruments failed to arouse would-be buyers at auction recently. Guess who else is experiencing similar difficulties? India, Vietnam, and the Philippines. Ah, the lure of stocks. Again. And the lack of better bets than US debt offerings. Remember, next week is Treasury auction time.
Keep a keen eye on equity markets later on, as the earnings parade slowly dissipates and investors become preoccupied with the reality at hand. Such as a four-year supply of unsold McMansions in the Olympus of US real estate - the Hamptons. This, despite prices having taken a monumental beating there already. Schadenfreude for some, pure chagrin for others. And the tables keep turning...
Happy Thursday to All,