The countdown to $1,000 gold finally ran out at 10:35 am New York time today as spot bullion reached a historic high of $1,000.25 bid amid the conditions that emerged overnight. The final push to the peak came on the heels of a slump in US retail sales and following a lack of reassuring words or offer of aggressive remedies for the credit black hole by the Mr. Paulson this morning. This was an achievement of a lofty objective
Gold prices were primed to finally achieve the $1K mark as early as last night, when background market conditions shifted from bad to worse overnight. Today's spike will likely become known as the Carlyle/Drake Rally (or cave-in,
depending on your preference). The imminent doom of the Washington-based bond fund and probable demise of the hedge fund sent icy shivers through the financial markets that way overshadowed the (nanosecond-brief) cheer we witnessed following the Fed's term facility plan the other day. Mr. Paulson offered no more than lip service today by concluding his remarks with platitudes such as We will continue to re-assess conditions, monitor progress, put forward new recommendations and take additional steps as necessary. US President Bush himself managed to say about the current predicament of the greenback only that it was not 'good tidings' (?!)
A quick scan of values recorded midday in New York revealed crude oil prices at $110-$111 per barrel, the dollar basically at parity with the Swiss franc, at 1.557 against the euro, and near 100 yen - all records, or near-records. The breach of the 72 mark on the dollar index also raised the gloom among traders,
despite more back-channel chatter about intervention by one (read: Japan) or another central bank. This might also be a day where we see the Dow reversing a good part of the 400+ point rally from two days ago. It has already given up 215 of those points during today's trade. A deeper slump could once again raise the specter of margin-call related sales in other assets. The Nikkei fell by 427 points overnight.
New York spot gold was up $11.60 at last check, showing $994.70 bid per ounce and related metals still surging in concert, with strong gains of their own. Silver was up 44 cents higher at $20.59, platinum was up $37 at 2098 and palladium rose $4 to $506 per ounce. Commodities markets continued in a state of disarray, with huge sums of fund money being thrown at them, while still trying to absorb the pyramid of long positions which has already been piling skyward in previous weeks.
Keep an eye on the Dow and on gold's closing levels. Dollar-denominated commodities have all benefited from the intense fund attention. It has taken an estimated $600 billion credit debacle and six months to lift gold from $730 to $1,000. The same funds will now become increasingly conflicted on whether to push the envelope further based on potential further billions being added to the problem or whether to scale back from the sector as some corners begin to be turned. At such a juncture, we may expect volatility of a much larger order of magnitude in these markets and every single news item to matter much, much more. Keep very alert and take nothing for granted. Even on a day of such celebration. We already know how we got here. The bigger/better question is: What next?