Overseas gold prices fell overnight, as the metal's four-day winning streak was interrupted by profit-takers cashing in some very attractive chips at the redemption windows. Perceptions that bullion had once again gotten ahead of the equilibrium curve of the market's current background conditions brought gold back near $950 an ounce and participants have to now keep rooting for further declines in the US dollar in order to make a push beyond $965 not only materialize, but also hold intact.
As a reminder, the greenback fell to its lowest point since the Lehman collapse last fall, but failed to bring about a corresponding peak in the price of gold. Traders we polled indicate that players are aware of the risk of scrap gold flooding markets once gain, and Indian buyers becoming an endangered species, in the wake of higher than $935 an ounce gold. Thus, a decisive break towards $975 may have to wait until other factors play a positive role and translate into confident buying near seven-week highs. Double dare for now.
Equity markets were trading in lockstep with bullion overnight, as did other commodities. The four-day rally was truncated for now, but it is also worth noting that stocks had risen globally for 14 out of 16 sessions. Mass euphoria linked to second quarter earnings reports is still being seen as...euphoria, rather than a solid confidence level based on real macroeconomic conditions.
That the global economy is climbing out of the subprime cave is one thing; that it remains extremely fragile given what has transpired, is another story altogether. At the same time, concern that China will turn the off the easy money spigots, and that its commodity stockpiles are beyond adequate, made their way back into the markets - as seen by a1.3% fall in copper, and by crude oil speculators denting black gold by nearly 2% this morning, on perceptions that -perhaps- a 13% gain over three trading sessions was a bit...rich. No, really?
As the dollar and the yen regained some lost footing, the scene was set for this morning's opening in precious metals, energy, and base metals. Gold started the NY session with a $4 loss at $952.50 per ounce, but the profit-takinghad not yet appeared toturn into anything of significant size as participants watched narrowing losses in the oil pits and a dollar that made fairly small progress to the upside.
Bullion turned slightly positive within the first 20 minutes of trading, and, depending on the dollar/oil tango, could yet make another attempt at clearing the $960+ hurdle. Keyword: depending . This, because there is very little else to point towards in the gold price equation of the moment. It certainly is not core inflation figures rising 0.2% in the latest tally. Stalled ETFs, India in suspended animation, lurking scrap flows, add up to range-trading. Even if that range is wide enough to excite many a fund: from $905 to $965, with an inside channel of $930 to $960.
Two 'declarations' from officialdom failed to lift the US currency in a meaningful way this morning. The first, from Mr. Geithner, who sees no more funds needed for bank bailouts and sees no chance of a financial collapse. The second statement comes from Larry Summers - he sees an American economy that is no longer in a free-fall. Nice opinions, both. Let's see how much value the markets place upon them. US stock futures looked set to follow the easing in values seen in Asia and in Europe overnight.
Silver started off unchanged, quoted at $14.21 per ounce, while platinum lost $6 on the open and was trading at $1229 an ounce. No change was reported in palladium, at $270 per ounce. Today's automotive sector news reveals Toyota and BMW as having beaten analyst estimates - by reporting a narrower Q2 loss than expected (Toyota) and by showing a 76% decline in Q2 profits (BMW). Some positive surprises, eh?
Cash4 Clunkers, now the topic du jour in the US (replacing health-care) and has now de-evolved into a Congressional circus of sorts, with some lawmakers calling for all sorts of 'cash for XXXX' programs to be offered.Good. How about a Cash 4 Replacing Lawmakers WhoDo Not Know What They Are Talking About program? How about these fellas focus on other little items such as the 1.8% drop in real USdisposable income and the 1.3% drop in personal income (the biggest such fall in four years)?