All was fairly steady and relatively quiet on the Western gold market front on this Thursday. Gold prices turned their overnight Asian market losses of nearly $6 into only marginal declines this morning. The pattern continued into the trading day, with the yellow metal remaining in the mid $930s and showing only quarter-to-half percent losses.
This, while the US dollar continued to slip somewhat more, amid whopper earnings reports - such as those offered up by JPMorgan this morning. The firm's profit was up 36% for Q2 and it trounced analyst estimates. Tim Geithner trounced some estimates as well - those that still call for economic Armageddon - by stating that he sees some 'very encouraging' signs of amelioration in the global financial system, and in related confidence towards it.
Gold prices opened with hardly visible (50-cent) losses this morning, quoted at an even $939.00 per ounce, against a 0.20 point drop in the greenback's value on the trade-weighted index. By the afternoon hour, bullion was trading within narrow price channels, apparently stuck near $937 per ounce. Whilst oil prices initially gave back more than half a dollar and slipped to $61 per barrel, the decline was halted and turned into a net half-dollar gain on the day, and a recapture of the $62 level took place.
Either way, black gold's daily gyrations are not seen as materially impacting the precious metal at this moment. Caveat, however: A US government energy adviser bluntly predicted a major collapse in crude oil for later this year - down to $20 per barrel, based on a huge surplus and once again vanishing, recession-impacted, demand. There is hardly a way that a two-thirds cave-in in oil would not affect gold values. Whenever such an implosion were to take place.
Profit-taking in gold following yesterday's surge to just above $940 was seen as potentially more meaningful for the next two sessions, and some of these sales have begun to emerge even before yesterday's settlement came in. Some of what the trade does today and tomorrow will obviously be jobs numbers and book-squaring-driven, but the overall move we have had this week is not yet seen as the start of some new chapter for the yellow metal. Bullion's three-day run to the upside was seen as a 'me-too' event by equity market watchers.
Some European traders expressed surprise at the metal's current price, given no increases in ETF holdings for the sixth week (in fact a sizeable liquidation was seen early in the week) and quite poor fabrication demand from jewelry. There is still much lacking on the fabrication demand front, despite the latest weather news from India - indicating perhaps only a 20% rain deficit for the monsoon season as of now.
Jobless claims hit the wires this morning, and they revealed the lowest initial claims figures since January - at 522,000 in the week ended July 11. Initial reaction in the precious metals complex was mildly to the downside. The numbers are seen as subject to adjustment and are not seen as remaining on track after further layoffs will hit the labor market after not having taken place at this time.
Stock futures gained on the jobs news. The Dow later managed a 106-point climb. Something else seen on a climb was the homebuilder's confidence level in the US. Perhaps Bob the Builder has been taking note of the 40 to 60 percent drop in South Florida's number of homes entering foreclosure. Now, there is a sign of possible better times ahead, if ever there was any. Recall that this global mess was intensely real-estate flavoured. And then some. Also note that Team Obama is letting CIT fend for itself and live or die. Now there is something refreshing. No bailout for a big RE lender. What is this crisis coming to? Looks like a resolution. Read on.
However, the whopper confidence-booster-bombshell of the day came from none other than Dr. Doom - famed economist Nouriel Roubini. He predicted an end to the US recession this very year, and declared the worst of the financial crisis as 'over.' Bloomberg supplies the details for us:
The U.S. economy may pull out of a recession by the end of the year and a second stimulus package would help broaden the recovery, said Nouriel Roubini, the New York University professor who predicted the financial crisis.
The free fall of the economy has stopped, Roubini said at a Chilean investors' conference in New York. The economy is still contracting but slowly. To help shore up growth, a second spending package may be needed by late 2009 or early 2010 totaling between $200 billion and $250 billion, Roubini said.
We should continue with fiscal stimulus and we might need a second one, Roubini said. While the worst of the crisis is over, there's still a meaningful amount of weakness in labor markets, industrial production and housing, he said. China, India and Brazil are among economies that may recover faster once the global economy picks up, Roubini said. He also mentioned Chile, Uruguay, Colombia and Peru as countries better-positioned to grow, in an interview at the conference. Countries in emerging Europe such as Hungary, Bulgaria and Ukraine face the biggest challenges, he said.
Not very good news for Armageddon-flogging newsletters, that. What possibly will they pick to fret over next??? No worries. There is plenty to scare people with, like stories on the Zimbabwe-comes-to-the-US front, and on the world will repudiate the dollar' front. Always good for a frisson. And, sales, too.
Silver opened at $13.22 and was off by 3 cents at the starting time of today's session. The white metal did not manage to make much headway towards the afternoon, either. It was ahead by 2 pennies at last check, quoted at $13.27 per ounce. Platinum gained $4 to open and finish at $1161.00 per ounce, and palladium rose $1 to $246.00 per ounce. A bullish-platinum forecast was offered up by Goldman Sachs, citing improved auto production heading into the home stretch of 2009 and renewed (although unnamed) production problems out of South Africa. We can sign on to the car scenario, with only a little hesitation. Not so sure about the S. African problems however.
No specific price target was included for the January 2010 platinum contract by JPM, as far as we know. Point is, if one has an appetite for risk, and is cognizant of platinum's recent peak near $2300 per ounce, well, the current math might just become compelling - even if the metal tops out halfway between here and there. Or, put another way, who sees another $600 being added to the price of gold between today and early next year? We do not. Not as of today.
Also helping investors' rising appetite for risk were news from China that the country's economy grew at a 7.9% pace during Q2. Remaining doubts about the effectiveness of various stimuli are facing a tough time in lingering around. On the not-so-hot news front, US foreclosures rose by a significant 20% from one year ago levels. Basically, 1 in 84 US housing units of all kind were foreclosed upon in the first half of the current year.
Continued focus on the global economy, risk appetite and/or aversion, and keeping an eye on equity markets appear to be on the menu for precious metals players as we head into the final sessions of this week. Nice rally thus far - question is, how sustainable? The tea leaves are in the green shoots. Be that green tea, or black tea.
Dr. Doom is serving green tea, this mid-July/lazy/summer doldrums/day. Any takers?