Monday's sell-off in gold and silver continued into Tuesday, however this time around the metals ignored the successful breach of the $50 level in oil and appeared to focus exclusively on the fresh surge in the US dollar. The greenback rose to 83.78 on the index on the back of continued weakness in the euro and on Bank of Tokyo-Mitsubishi UFJ's projections of further gains being likely in the near-term. The US currency rose against 14 out of 16 of its rivals this morning. The dip to under $840 in gold failed to excite buyers in India overnight, as they appear to be holding off for better values ahead of the start of a mini-season for weddings after mid-month.
The survey of Eurozone Purchasing Manager's Index fell to a fresh, ten year low as all signs point to a rocky start to the new year in the Old World. The ECB has all the clues it needs in order to cut rates. The rate of inflation in the region fell to a 26-month low of 1.6% last month, further unnerving central bankers fixated on particular targets. In the interim, the makings of a colder than usual winter were underway in Europe, as Russia's Gazprom halted has deliveries as a result of its debt dispute with the Ukraine. Russia supplies a quarter of Europe's gas, and the Balkans appear hard-hit in the midst of a brutal cold spell. Strong-arm tactics, these. Let's just call them extortionist.
Over in China, there were warnings of social unrest by a state-run magazine which sees the global crisis enveloping that country as well. So much for the idea of ChIndia being immune from global economic turmoil. Japan's Toyota will pull the plug on all of its domestic factories for eleven days in February and March, in order to account for evaporating demand for cars.
New York spot gold dealings started Tuesday's session under continuing liquidation pressure, opening at $843.10 with a loss of $15.20 per ounce despite the aforementioned rise in crude oil on the back of the Russian quarrel with the Ukraine. Dollar strength was seen as the primary drain on bullion prices by players at this time. More on the statistical front for demand: Dubai gold sales fell 15% last month as high prices deterred buyers there as well.
While not the 81% or 40% drops seen in India and Abu Dhabi, the decline confirms the price-sensitivity that is part of the fabric of regional gold demand. Silver fell 30 cents to $10.92 per ounce. The noble metals showed a mixed opening, with platinum falling $3 to $940 while palladium staged a $5 advance to $189 per ounce. The opening bell had all of the indications of a stormy session, as the US dollar got to within striking distance of the 84 mark on the index and as oil fell to just under $50 per barrel.
Crystal ball-gazing season is upon us, as it is at the end of one year and the start of another. Time to look at various lists and see where the modern-day Nostradamuses of the precious metals world envision their objects of affection during the course of 2009. You have seen our projections for the low/high/average numbers for gold and silver on December 31st. See article here: http://www.kitco.com/ind/nadler/dec312008A.html
Our average price target found its way into the Bloomberg Annual Metals Survey, which we now bring you in its entirety:
Jan. 6 (Bloomberg) -- Gold, the best-performing metal in 2008, may appreciate for an eighth year as investors seek a refuge from declining interest rates at the same time that central banks inject more cash into the banking system.
The metal will average $910 an ounce in 2009, 4.3 percent more than last year, according to the median forecast of 20 analysts, traders and investors surveyed by Bloomberg. Silver and platinum, which averaged at least 12 percent more in 2008, will decline this year, the survey showed.
Gold prices may strengthen after about $29 trillion was wiped off equities last year, the Federal Reserve cut interest rates to as low as zero and governments sought to end the worst financial crisis since World War II. The metal was one of only four commodities to rise when the Reuters/Jefferies CRB Index fell 36 percent, the worst year in a half-century.
People fear inflation, they fear the credit crunch and they fear currency losses, and gold is the perfect insurance against all of that, said Frederic Panizzutti, a senior vice president at Geneva-based bullion refiner MKS Finance SA, who forecasts gold will average more than $900 in the first half of 2009. Panizzutti was the most accurate forecaster in the London Bullion Market Association’s 2008 survey.
Average gold prices have risen for seven consecutive years, the longest winning streak since at least 1949. While the return of 5.8 percent through 2008 was the smallest since 2004 in dollar terms, gold rose 11 percent in euros and 44 percent in British pounds, data on Bloomberg show.
The plunge in equities spurred some investors to buy precious metals. Gold in the SPDR Gold Trust, the largest exchange-traded fund backed by bullion, reached 780.23 metric tons on Dec. 29, up from 627.88 tons at the start of the year. The total is equal to almost four months of supply from mines.
Gold producers were among the top performers in the 162- member Bloomberg World Mining Index last year, which fell 61 percent. Royal Gold Inc., the Denver-based owner of rights to gold sales from companies including Barrick Gold Corp., rose 61 percent. Randgold Resources Ltd., the Jersey, Channel Islands- based owner of two gold mines in Mali, advanced 60 percent.
There is every reason to believe gold’s going higher and a lot sooner than most people think, said Randgold Chief Executive Officer Mark Bristow, head of last year’s best performing company in the FTSE 100 index, which it joined last month. Our estimate is that new gold supply is going to be reduced by 15 percent over the next three years.
Governments across Europe are selling more debt to fund bank bailouts and revive economies mired in their worst slump since the Great Depression. The U.S. Treasury Department estimated it will auction as much as $2 trillion of debt this fiscal year, which began Oct. 1. Euro-region nations will borrow as much as 880 billion euros ($1.2 trillion) this year, according to Royal Bank of Scotland Group Plc.
The flood of cash may undermine confidence in currencies, spurring investors to buy gold, said Mario Innecco, a futures broker at MF Global Ltd. in London. Innecco correctly predicted two months ago that gold would trade at $850 to $950 by the end of December.
People will flee away from paper currencies because central banks are throwing everything at the market to try to revive things, Innecco said. People will flee to gold.
The incoming administration of President-elect Barack Obama will seek as much as $850 billion in new spending and programs, congressional officials have said. China unveiled a 4 trillion- yuan ($585 billion) economic stimulus plan in November and European Union leaders are drawing up packages worth about a combined 200 billion euros.
It’s to some extent a trade war, said Marc Faber, publisher of the Gloom, Boom & Doom Report. You cheapen your currency so you export problems to somebody else, but since the whole world is engaged in trying to lower the value of their currencies, it may very well happen that all currencies lose value against the hot currencies like precious metals.
Michael Jansen, an analyst at JPMorgan Securities Ltd. in London, said gold should average $800 this year. A deep recession will likely mean a clear lack of demand from jewelers, and fewer mining companies are seeking to buy gold to cancel forward sales, he said in a Dec. 11 report.
The so-called global producer hedge book stood at 585 tons at the end of June, the lowest since 1987, according to London- based consultant GFMS Ltd. Miners can agree to sell future production at current prices to protect against losses caused by sudden declines, a strategy known as hedging.
The risk of deflation is higher than that for inflation, particularly in the first half, Jansen said in his report. Some investors buy gold as a hedge against rising prices.
U.S. inflation will drop to 1.1 percent in the first quarter, compared with 1.95 percent in the preceding three months, according to a Bloomberg survey of economists. Prices will drop 0.45 percent in the third quarter, the survey shows.
Gold will go to a new record in 2009, said Philip Klapwijk, chairman of GFMS and the second-most accurate forecaster in the LBMA survey. There really is scope for a major collapse in confidence in the U.S. dollar. In 2010, we could see 10 percent inflation in the U.S.
Silver, platinum and palladium are all likely to average less this year, Bloomberg’s survey showed. The metals, more reliant than gold on industrial demand, tumbled last year as economies weakened.
Silver will average $12 an ounce, compared with $15 in 2008. The metal, used in applications such as photographic paper, fell 23 percent through last year.
Platinum, mostly used in jewelry and autocatalysts, will probably average $975 an ounce this year, compared with $1,574 last year. The metal slumped 59 percent from a record $2,301.50 set in March. Palladium, also used to remove noxious fumes from exhausts, will average $220 an ounce, down from $350.90 last year.
European car sales plunged 26 percent in November, the biggest monthly drop since 1999, while sales in the U.S. fell 37 percent to the slowest annual pace in 26 years.
Automakers account for about half of global platinum and palladium consumption, according to estimates by Johnson Matthey Plc, a London-based metals refiner, trader and researcher. The figures take recycling into account.
The following is a table of gold, silver, platinum and palladium forecasts. The table shows estimates in dollars per troy ounce.
Company Gold Silver Platinum Palladium
Dallas Commodity Co. $1,200
MF Global $1,200 $18
Gold & Silver Inv. $1,025 $19.5 $950 $250
Adrian Day’s Asset
Management $990 $13.5
Standard Chartered $985 $11 $1,000 $203
HanMag Futures Corp. $950
Midas Management $950
Bullion Desk $921 $16.25 $1,080 $256
Heraeus $910 $10.15 $945 $230
Religare Commodities $910
NH Investment & Futures $900
R.W Wentworth & Co. $900
Samsung Futures $840
Korea Exchange Bank $825
Fortis and VM $825 $12 $900 $180
Barclays $820 $9.80 $1,020 $210
JPMorgan $800 $9.80
2009 Forecast: $910 $12 $975 $220
2008 Average: $872.25 $14.97 $1,574 $350.90
If price performance rather than the percentage of gold owned in your portfolio is your main concern, the above can serve as a reasonable but not foolproof tool in gauging the range that people in the industry believe the metals will trade within for the coming year. Of course, none of these figures come with any guarantees attached, but they do come with disclaimers not to trade based on such educated guesses, or to take them as recommendations. But, that has never stopped many from taking these tables as gospel, and these words as unquestionable prophecy. Not much to be done about that. People tend to believe that which they already do.