Precious metals values remained under pressure as the midweek sessions got underway in various parts of the world. Gold fell to lows near $917 during the hours it spent in overnight trading, and this time the metal dropped despite an easing the US dollar (to near 80.65 on the index). Crude oil continued to slip to under the mid-$62 area, dragging other commodities lower as well. Asian stocks fell for a sixth straight session, pushed down by rising concerns over global economic growth prospects.
New York spot bullion prices opened with losses of varying magnitude in precious metals. Gold was off by $5.80 quoted at $918.30 per ounce, and was seen aiming for first-level support near $912. The yellow metal is currently trading at a 60-day low and continues to show signs of summer 'doldrumitis' as ETFs appear apathetic and investors manifest generalized confusion as regards the state of the markets, opportunities in same, and the overall direction of the global economy.
If only the G-8 summit could shed some light or point a finger into a more clear cardinal direction... Should that first support number not hold, the $880 to $900 area might come into the focus of players next. If not this week, anytime soon. Such a dip is to possibly be followed by fresh highs for gold during what remains of 2009. At least, such is the opinion of London-based GMFS, whose Chairman spoke at a presentation in China. Platts reports that:
Gold prices could decline below $900/oz during this summer before rebounding later in the year, with supply increasing and demand declining sharply, according to Philip Klapwijk, chairman of GFMS, the London-based metals consultancy. The price may have pulled back a fair bit from the February highs but that was largely just the market's reaction to jewelry demand crumbling and scrap booming, said Klapwijk at the launch of GFMS's 13th Chinese-language edition of its annual Gold Survey in Beijing Wednesday.
We believe that it's far from game over for investors. The gold price in the coming months could easily reattain the $1,000 mark and is likely to push up towards a fresh record high before the end of the year. The consultancy forecasts that the gold price will reach a new record high in the second half of 2009, as the threat of inflation will drive a new wave of investment.
However, the upswing in gold prices will come only after inflationary pressures start to build following the summer lull, that could take the metal's price below $900/oz. In his presentation, Klapwijk noted that GFMS expected an increase in overall supply in 2009. This is because an expected further drop in net official sector sales could be offset by a modest increase in mine production and, especially, a record high in the recycling of fabricated products.
On the demand side, GFMS is forecasting that gold used in jewelry and other fabricated applications will fall considerably in 2009, due to high and volatile gold prices coupled with the slowdown in the global economy. As a result, the market will move into substantial surplus this year but much of the gap is expected to be filled by investors. The consultancy believes that sustained concerns over the global economy, and the health of the financial system, will continue to fuel safe haven interest in the yellow metal.
Silver opened with a 17-cent loss, quoted at $12.93 per ounce. Our projections calling for $1100 platinum in a Bloomberg market note a few days ago, now appear to have come to within but a few dollars of that number. The noble metal dropped $27 this morning, and was quoted at $1106.00 per ounce. Palladium sustained $4 worth of damage at the open, being quoted at $236.00 per ounce. Bloomberg fills us in on the details in this morning's commodity roundup:
Platinum fell to a seven-week low in London, heading for the longest losing streak since October, on concern a slower economic recovery will hurt demand. Gold was little changed after dropping to a two-week low. The MSCI World Index of shares retreated for a fifth day on speculation that second-quarter earnings reports will show the first global recession since World War II is far from over. Crude oil slid for a sixth day, while the dollar traded near a two-week high against a basket of major currencies.
A slower economic recovery is ''bad for the car industry, because there's less demand for platinum-group metals,'' Bernard Sin, head of currency and metals trading at Swiss refiner MKS Finance SA, said by phone from Geneva. ''There was also some stop-loss selling'' from Asia today, he said. Some investors sell commodities when prices fall below certain thresholds. Platinum for immediate delivery dropped as much as 2.5 percent to $1,106 an ounce, the lowest since May 18.
The moves in the noble metals complex were aggravated by apprehension on the reglatory front as well. A few days back we reported on the clear and present danger that commodity speculation a la last-year's oil price spec fund Roman orgy was being targeted by the powers. Now, our own Gobe and Mail reports that today's swing to lower values in the platinum and palladium pits was (aside from the US dollar's strength) very likely also being driven by:
News the U.S. futures market regulator, the Commodity Futures Trading Commission, was considering a clampdown on excessive speculation in commodities by restricting holdings of big players also put some downward pressure on prices, dealers said. The CFTC announcement is definitely putting some pressure on metals, as well as on energy, said one European precious metals trader.
The news prompted speculation that the approval of proposed U.S. platinum and palladium ETFs could be delayed until the CFTC had finished its deliberations.We do wonder whether the proposed U.S. listing of platinum and palladium ETFs - under consideration by the SEC at present - can possibly be approved until the CFTC's investigations are concluded, UBS strategist John Reade said in a note.
Quick: for the bonus round, name the last hard-money dispatch or conference presenter who used the words substantial surplus in connection with the gold market's current balance status. Of course, you cannot name one, as there has not been one. Why, just overnight we received another warning missive emanating from a sales shop tried to steer one towards the perception that 'tight conditions' putatively exist in the gold market, and that dwindling supply is being pressured by exploding demand.
Something is indeed 'exploding' there. The ego of the writer in question. And, likely, the sales book at that particular shop as well. Nobody questions gurus. It is their divine right not to be questioned. Even by honest facts and figures supplied by firms such as GFMS who hold the market's pulse hand very close in their lap, quarter after quarter. Just hand the money over.
Speaking of handing money over, California could obviously use some major wads of that item. The state has been battlingfor its fiscal and the flood of ideas designed to help it from falling off into the Pacific has been pouring into Sacramento for sme time now. At least one advocacy group believes it has somewhat of a...solution for what ails the Golden State. The AP reports (and this is serious, folks):
A pro-marijuana group is launching another television bid to legalize pot in California - this time with the pitch that legalizing and taxing the drug could help solve the state's massive budget deficit. The 30-second spot, airing Wednesday and paid for by the Marijuana Policy Project, features a retired 58-year-old state worker who says state leaders are ignoring millions of Californians who want to pay taxes.
We're marijuana consumers, says Nadene Herndon of Fair Oaks, who says she began using marijuana after suffering multiple strokes three years ago. Instead of being treated like criminals for using a substance safer than alcohol, we want to pay our fair share.State lawmakers are bitterly debating how to close a $26.3 billion budget deficit that likely means cuts to state services. In February, Assemblyman Tom Ammiano, D-San Francisco, introduced a bill to tax and regulate marijuana like alcohol. Bill supporters estimate the state's pot industry could bring in more than $1 billion in taxes.
More than a billion dollars in taxes? Nah. It could be multiples of that, very likely. The remaining question is, where might the other couple of dozen billion come from? The Guv might have to also entertain some 'dough-for-gold' scheme with his subjects. You never know how much that could raise eventually. Especially if owners are paid along the lines of what gold party participants are being paid these days; 75% of what their bullion is worth. While someone else pockets the remaining 20 to 25 percent...But, hey, the need for cash is stronger than many another need...
Back into the 110-degree desert heat, out in the Old West. Headin' for Freedom Fest. Where the ones who congregate, are truly and only the best.
We will report on the fun and brain stimulation (of the very sober variety) in coming days. Until then,