New York gold staged a powerful post-holiday rally, encouraged by the US dollar's decline and by a resumption of rises in crude oil. Friday's trading closed significantly higher, gaining $23.90 per ounce to $821.60 bid, as the thin trading crowd pondered just where the dollar's support may (eventually) be found. Up to now, its path has been a one-way street towards $1.50 on against the euro, even though other currencies (Canadian dollar for example) have given up much of their previous gains against it. Silver added 30 cents to $14.69 while platinum rose $7 to $1468 per ounce. This first close above $800 was strong enough to perhaps have obviated the need for several $800-$810 settlements. However, if euphoria returns (along with major fund money) to the market, gold may yet be subjected not only to additional volatility but also to sharp turns in mid-course.
A couple of items of interest surfaced over the holiday break. The first, that the US dollar's plunge to current levels is now threatening if not the very the existence of Airbus Industries as yet, at least many of its jobs and certainly its plane sales. The company prices its sales in dollar and now feels a life-threatening situation developing in the wake of recent dollar weakness. Just how long the European Community will tolerate such risks before intervening in the currency markets, remains to be seen. The point is that the greenback's woes are certainly not limited to effects on only the US economy. Stay tuned for more developments on that front.
The other revelation that came to our attention last week was the fact that -as we opined many times before- the gold ETF is shaping up to largely be an institutional trading vehicle rather than the item of choice for gold ownership by the proverbial 'man in the street.' It was reported that Black Rock (a Merrill Lynch money manager unit) holds some three-quarters of a billion dollars of bullion through this product, and that Credit Suisse is not far behind. Whether or not such firms demonstrate a long-term ownership commitment to gold in their portfolios or will treat the metal as short-term play and seek greener pastures quickly in a correction is yet to be determined. The one thing we can likely count on is that the entree of large players and the big sums of money they have at their disposal for a buy or a sell has contributed and will contribute to additional volatility and large tonnage movements in the gold market. Small players beware. Just an opinion.
Finally, a platinum story that may not have the noble metal's fans smiling quite as energetically, even as we near $1500 per ounce. Bloomberg reports that:
[The] Japanese are marrying less and buying fewer rings, cutting demand in the world's second-biggest platinum jewelry market to the lowest in at least 33 years, Johnson Matthey Plc said.
Net consumption of platinum for jewelry will probably drop 15 percent to 305,000 ounces this year, Rainaldo O'Meara, a research manager at the refiner said. The number of wedding-age Japanese is falling, cutting marriages in Japan by more than 26 percent in 2006 from 1970 levels, health ministry figures show.
The drop in appetite for platinum jewelry would more than offset an increase in Japanese demand for the metal in vehicle emission filters, pushing overall consumption down for a fourth year, London-based Johnson Matthey said in a report this month. Total consumption will decline 2.6 percent to 1.1 million ounces.
Still, globally, platinum may be a better investment than gold for a second year in 2008 as rising demand and supply disruptions in South Africa, the largest producer, worsen a shortage. The metal has soared 29 percent this year, outpacing gold's 26 percent gain.
This week promises to be exciting as we start getting additional economic statistics and traders return en masse from their holiday break.
Given the proportions and speed of the surge we have seen since the Wednesday session last week, the possibility of corrective pullbacks in gold remains in place, but the tilt towards aiming for the $850 peak (along with a possible, corresponding $100+ per barrel oil price) also shows all the signs of becoming reality at this point.
Much still depends on oil and the dollar and whether or not some of these markets may have gotten ahead of themselves based on only expectations. Industry observers are looking for a slowdown of physical demand after the middle of next month. Silver added 12 cents to open at $14.81, while platinum shed $16 from earlier peaks near $1483, closing with a net $1 loss at $1467.00 per ounce.
U.S. post-holiday retail sales rose 8.3 percent from a year ago. On Friday, the day after the Thanksgiving, some $10.3 billion were spent on holiday gift purchases, according to Chicago-based ShopperTrak. Black Friday appears to be quite green this year, despite what should be pretty slim wallets out there. Such news should have helped US stock markets today, but worries about the credit mess fallout dampened spirits as well as the speculative drive among players.