Precious metals built on Friday's gains during the overnight hours, but their advances were uneven as well as uncertain as the hour of NY's opening approached. The US dollar was poised to reach a five-week low against the yen, while trading just above the 78.05 mark on the trade-weighted index. Crude oil continued a few notches above the $74-per-barrel marker, while the euro appeared comfortably resting near $1.43 on the price tickers this morning.
Against this background, the spot metals markets in New York started off in mixed fashion, as well. Gold opened with a $1.90 gain, quoted at $955.60 per ounce. Silver continued to outperform, advancing 28-cents to start at $14.43 an ounce. Platinum fell $8 despite the indefinite postponement of the threatened labor action against Impala. Improved wage offers were cited for the striking of the strike.
Palladium rose $1 to open at $280 per ounce. Unless the gold market receives fresh news on the bullish front, the risk of easing back towards the $925 are remains reasonably present. This is (likely) because we sent a price 'up' for the week gold prognosis to our friend at the Bloomberg survey...The addition of nearly 32,000 ounces to the SPDR gold ETF's balances -following a prolonged period of inactivity-might not be sufficient to stir the bulls just yet. Recent stats from the Gold Council reveal that ETF inflows fell to 56.7 tonnes in Q2. Compare that to the 465.10 tonnes that were added during Q1.
The same bag of assorted good and not-so-good news greeted market participants as they returned to their trading posts and positions for this last week of August. As such, those who did return to their screens, were woefully thin in numbers as the powerful lure of late summer vacations is still exerting the primary influence here. Fear not, schools are set to start soon, and the change in daily patterns will finally usher in the end of the summer doldrums. Let's do a quick survey of the aforementioned bag and see what it contained as of early this morning:
- Premier Wen of China pulled a big alarm bell out of his bag and flatly warned against 'blind optimism' as regards economic growth in his country. Said he: The foundation of economic recovery is not stable, not firm, and not balanced, and we certainly cannot be blindly optimistic. Something that the Chinese stock market's year-to-almost-date marathon has certainly not been reflecting.
- Eurozone industrial orders took a 3.1% forward leap, surprising economists who had expected a rise of about half that magnitude. Never mind what kind of (stimulus) smoke and (car scrapping program) mirrors were employed to get such results. Growth is growth. Question is, how long-lasting it might be. ECB officials warned -in Premier Wen's style-that none of this means at all that we do not have a very bumpy road ahead of us.
Aside from the above, we learned that the new and anticipated limits by the Commodity Futures Trading Commission have so far affected exchange-traded products including the largest agricultural, natural gas and broad-based commodity funds in the U.S. Clearly, this is a new level regulation aimed at these funds, said Bradley Kay, an ETF analyst at Morningstar Inc. in Chicago. Individual investors no longer have a safe way to play the commodities market.
Exchange-traded funds have drawn increase scrutiny from the CFTC amid concern that the funds are distorting commodity prices. What it could mean to commodity ETFs down the line is still up in the air, said Tom Lydon, president and chief executive officer of Global Trends Investments and editor of ETF Trends, in an e-mail today. It's too soon to say if any are going to just close because of this.
Limits or not, the current sentiment-based climate in other parts of the commodity sector reveals that there remain some skeptics among the perma-mega-bulls. They stand their ground despite incessant calls for fresh new highs that are supposed to materialize in gold and silver as far as their counterparts are concerned.
With equities on the turn and potentially headed for an autumnal slump if some ultra bears are to be believed, the primary beneficiary will be the US dollar. Julian Jessop, chief international economist at Capital Economics, says that he continues to expect a stronger US dollar to drag gold down to $850 per ounce by year-end.
In turn, analysts at GoldEssential.com have dissected the recent COT gold reports and have come to the conclusion that current price levels are still finding their origin in excessive long positioning and thin market participation. As such, we feel that a sustained run higher ($1,000+) is still very unlikely, and that any additional strength eventually has a high risk of running into extended consolidation, with that latter still carrying the capacity to send prices significantly lower.
This concludes this morning's quick pre-mortem on the New York session. The rest (of the day and the week) is subject to the expected fallout following fresh data on US housing, GDP, and the pulse-check on consumers. The clunker programme is now history, and wanted ads are out for new rabbits, which are needed to stage appearances from the very deep top hat currently present on the US economic scene.
We will be back with an analysis of one aspect of same (manufacturing), later this afternoon.
Until then, Happy Monday.