Bullion prices continued to orbit around the $900 mark, however, they were seen spending the bulk of the midweek session above that level. Highs near $914 were achieved on the back of a somewhat weaker dollar, an indecisive stock market, and were ultimately hampered by swooning crude oil values. Gold's most recent rally exhibits the unmistakable footprints of speculative hedge funds (and, according to MF Global analysts, a small pack of them, at that) as the buying stopped suddenly, and ETF holdings grew no further - this, despite no material change in global macro conditions. Hard to believe that a wide range of individual gold buyers suddenly smacked themselves on the head, and realized that India was (still) not buying, or that the gold ETF had grown to scary proportions (yes, we have now seen reports that allude to the fact that some buyers are shying away from that gold proxy vehicle, as they deem it to be 'too big').
Spot gold was up $5.50 an ounce, in the late afternoon, and with only 90 minutes left in electronic trade, the metal was quoted at $902.80 (bid) per ounce. Some of what may happen in the next couple of sessions could hinge on the closing level this evening. For the moment, the book-ends of the price range are seen at $875 to $950 with the inside channel extending from $890 to $920. Silver gained a 18 cents, and was last 'spotted' at $12.75 per ounce, while platinum moved only $2 higher to $1043 and palladium went nowhere again, remaining unchanged at $196 per ounce.
The action in noble metals continues to be agonizingly slow. There is very little to get excited about, as baseline demand remains lackluster in Japan (jewelry, autos) and shows no signs of returning to former levels in the US. Labor concessions from the UAW and other savings might help Ford avoid the possible fate of GM and Chrysler, but are doing nothing in terms of adding to net platinum demand in North America at this time. Thus, the markets in platinum and palladium remain at the beck and call of spec funds at this time, and even they are showing signs of being sated for the time being.
Adding to the aforementioned 200 tonne hedge fund gold buying spree in the early part of 2009, a hitherto unlikely bunch: central banks. No, not China, or some other Asian central bank. More like nephew Rafael, uncle Hugo (now, his dollar distrust, we can understand) and cousin Vlad (Putin) who felt the collective need to scoop up 34 tonnes of bullion for various reasons. Platt's reports on the findings over at CPM Group NY (whose annual gold overview is set to launch on the 24th):
Central banks, which have been net sellers of gold in recent years, were net buyers of an estimated 1.1 million oz in January, according to the latest Market Alert by the CPM Group, the New York-based metals consultancy. The world's central banks were both buyers and sellers, but the quantity bought outstripped what was sold. Ecuador is estimated to have purchased 920,000 oz of gold in January, Venezuela bought 240,000 oz and Russia purchased 130,000 oz, after having bought 310,000 oz in December. Ecuador's government has run into severe political and economic problems, and has a dollarized economy, using the US dollar as its currency and thus not having many monetary tools, such as being able to issue money that other central banks possess, CPM noted.
France was the largest seller of gold in January by 40,000 oz and 10,000 oz, respectively. It seems highly unlikely that such large net purchases of gold by central banks will continue, said CPM. However, those central banks that have been selling gold for much of the past two decades have sold most of what they wanted to sell. Others are buying small volumes, and considering larger purchases, in the face of the financial crises and currency market volatility they have faced over the past year.
Loading up on gold, or unloading some of what's in the basement. A question not yet preoccupying the G-20 too much. They are more intensely focused on the issue and effectiveness of the stimuli packages which many of them launched. Tim Geithner for one, is fretting about the half-life of the injections and appears at odds with Mr. Bernanke's opinion that we (collectively) will have climbed out of the cave by the start of next year.
Spending plans that major countries around the globe have put in place to combat the worldwide recession may not have the strength to make it to the late rounds of the crisis, Treasury Secretary Timothy Geithner said Wednesday. Fiscal outlays intended to revive economies must be sustained into 2010, Geithner said. At the moment, statistics from the International Monetary Fund show fiscal stimulus plans are expected to drop off next year, he said. The global crisis shows no signs of weakening yet. Rather, the recession has been deepening, according to the most complete data available, Geithner said.
What we're seeing happen really around the world now is really without recent precedent, he said. The Treasury secretary's comments came during a press conference ahead of his trip to London to meet top finance officials from 20 major economies. Geithner will be preparing the way for President Obama and fellow heads of state and government to meet in early April. Geithner threw his support behind an IMF recommendation that major economies enact spending plans equal or greater to 2% of annual gross domestic product. Geithner sidestepped questions on whether the big countries of Europe were meeting the spending target. That's really a question for the IMF, he said.
There is some debate over which spending to count. And some important countries such as Germany and Japan have not been enthusiastic about increasing spending.
To amplify the effect, the fiscal actions should come at the same time, Geithner said.
Also on the table for discussion at this weekend's G20 meeting will be reform of the oversight of the financial institutions. But this discussion may not be as fruitful because the U.S. position on many of the issues won't be known for a few weeks.
For instance, many continental European countries are calling for strict oversight of hedge funds. The idea is not popular in London. Geithner has been silent on the issue.
Geithner did say that the U.S. would push for new global regulatory standards that are shared evenly among countries. He suggested that the Financial Stability Forum would be sort of like a referee of these reform efforts in order to maintain standards. The United States will promote a race to the top, not to the bottom, Geithner said. But this pledge will surely be tested in the coming months. For years in Washington, banks and other financial firms were successful in loosening U.S. regulation by arguing that, if the rules were not relaxed, lucrative business would disappear overseas. Many countries have been benefited by loose standards, in the same way that Delaware has been advantaged by its relatively less strict corporate-law environment.
There seems to be broad agreement among G20 members that the IMF needs a quick infusion of money so that it can assist countries in Eastern Europe and other regions that have been hammered by the global financial crisis. These countries have seen credit disappear from their economies as banks and investors instead hoard capital.
Geithner proposed a $500 billion increase of the IMF's emergency reserve fund. He also signaled support for initiatives already in the pipeline to have the IMF sell some of its gold to help the poorest countries of the world.
The U.S. share of the new fund would be roughly $100 billion, he said.
100 big ones. These days, seems more like an 'opening bid' amount. Why Bernie has allegedly Madeoff with half that much.
Anyone still counting?