Gold prices managed to add nearly $10 in overnight Asian trading and returned to the $920 value zone after a string of losses for the week the magnitude of which has not been seen since 1990. While some there was some scattered buying of gold by fabricators and investors who had waited for this price break for quite some time, the platinum market was not so lucky as Tokyo trading of the metal saw it falling by the daily limit.
Analysts fear that the platinum price may fall to the mid-1700's next week as a perceived US economic slowdown is expected to cut into automotive-related demand for it. The metal was quoted at $1846.00 per ounce and palladium traded at $431.00 per ounce. Meanwhile, silver also recouped some of its stunning recent losses and gained 50 cents to rise to $17.30 per ounce.
As various markets wound down and prepared for a hiatus on Friday and [in Europe] on Monday, a feeling of relative calm was becoming palpable among participants whose nerves and pocketbooks had been traumatized by the incessant turmoil unfolding in currencies, stocks, and commodities of late. Much of this feeling arose an after-effect of Ben Bernanke's gamble in signaling that the frontal assault on interest rates may have reached its final stages with Tuesday's accommodation.
While Mr. B's nickname still refers to a rotor craft, some have recently added the Bailout moniker to the list as he threw the life preserver to Bear Stearns. These two actions may have finally gained him some respect and confidence among the people who make a living trying to second-guess him. We now bring you excerpts from two noteworthy pieces in today's financial media. The idea is to consider the background conditions that have brought us to this juncture and to ponder what is possibly coming next. A long weekend pause such as we are heading into, may be the best time to take stock and think about the issues.
Bloomberg's Pham-Duy Nguyen (who usually polls gold analysts for their weekly opinion) writes in an incisive article today that:
The biggest commodity collapse in at least five decades may signal Federal Reserve Chairman Ben S. Bernanke has revived confidence in U.S. financial firms. Investors who had poured money into gold, oil and corn, seeking a hedge against inflation and a weak dollar, sold commodities to raise cash or buy stocks. The Reuters/Jefferies CRB Index of 19 commodities tumbled 8.3 percent this week, the most since at least 1956, after touching a record on Feb. 29.
``Bernanke took care of the commodity bubble,'' said Ron Goodis, the retail trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. ``Commodities are coming back to earth. The stock market looks OK, and Bernanke is starting to look a little better.''
Concern that the central bank would let inflation get out of control eased after the Fed cut its key interest rate by 0.75 percentage point on March 18, less than the reduction of at least 1 point that investors had expected.
``Clearly they've gotten some stability,'' said Keith Hembre, a former Fed researcher and chief economist at FAF Advisors Inc. in Minneapolis, which oversees more than $107 billion in assets. ``You have to stand back and say, for the time being, it looks to be a pretty successful combination of moves that have worked.''
Gold had its biggest weekly loss since August 1990 after reaching a record $1,033.90 an ounce on March 17. Oil plunged almost $10 over three days, after rallying to $111.80 a barrel, the highest ever. Corn dropped more than 9 percent for the week, the most since July.
Oil, soybeans, platinum and wheat had all jumped to records this year. The weighted UBS Bloomberg Constant Maturity Commodity Index of 26 futures has gained more than 20 percent every year since 2001. The index is up 10 percent this year. Gold had rallied as much as 43 percent since Sept. 18, when the policy makers began lowering the federal-funds rate for the first time in four years.
Marketwatch's Mark Hulbert also chimes in on the issue, and reports that:
The significant and growing threat posed by inflation, and the even bigger worry that the Fed could soon find itself so behind the curve in responding to financial crises that it becomes 180 degrees out of phase with what's really going on in the economy.
Dan Seiver, [editor of the PAD Systems Report and a professor of economics] is confident that Fed chairman Ben Bernanke is well aware of the risks involved with the Fed falling too behind the curve. That is why, Seiver believes, Bernanke is likely, once he starts to raise rates to counter the inflationary threat, he will raise rates just as aggressively as he has recently cut them. When it becomes clear that the economy is going to recover from its current period of weakness; the Fed will take back [the rate cuts], and will take them back fast.
Stay tuned for the next chapters in the markets' saga. We will return on Monday with a briefing on the fresh events and news that matter to our readers.
Have a pleasant weekend.