Gold prices underwent a substantial decline on this first trading day of February, more than giving back Thursday and Friday's gains, which had propelled them to six-month highs. Thus far, the $930 zone is proving difficult to overcome, although support is expected to hold close to the $900 level. A breach thereof, could usher in a slightly different mind set among the speculative crowd.
The decline in the precious metal was largely attributed to dollar strength against the pound, slumping physical demand in another key market (Abu Dhabi), and to profit-taking among participants returning from the Chinese New Year celebration period. We noted a few sources on Friday as opining that the conditions were indicating overbought towards the end of last week. The US dollar slipped against the euro however, showing a breach of the 86 mark on the trade weighted index, but this did little to stem the selling in the gold pits today. A $1.63 decline in crude oil -which is now threatening to break under $40 - contributed to the selloff in metals as well.
Gold bullion skidded to a low of $901.20 per ounce overnight, and was still seen trading with unease in the afternoon session in NY, quoted at $905, off by $22.10 per ounce. Silver was off by 26 cents on the day at last check, quoted at $12.41 per ounce, while platinum declined $14 to $973.00 and palladium showed a small gain of $3, at $195.00 an ounce.
On the bullion demand side, we learn that sales figures for gold jewellery (another luxury purchase for most) indicate a 70% cratering for this month, in one of the more important venues being tracked: Abu Dhabi. Fairly logical, given the high prices seen recently, and the fact that the region also serves as a gateway for bullion flows into India. gold demand there, as we learned recently, fell by 90% or more in the month of December.
On the statistical breakfast plate this morning, were the ISM figures for US manufacturing. Numbers were expected to show a US economy that is contracting at the fastest rate in nearly three decades. Contract they did, but not quite at the rate they were seen at in the preceding two months. This slowdown in the decline gave rise to glimmers of hope that, perhaps, the USS Economy's sonar is returning at least some echoes showing a bottom in the vicinity.
Meanwhile, something else that still has not found a bottom, real US consumer spending. It declined for the sixth time in seven months, as consumers failed to consume. Belt sales must be going through the roof as Jane Shopper clutches her purse ever tighter. Any tighter, and Joe Six-pack will be down to a single can of Bud to go with the game. Unfortunately, US banks are also as tight as can be (not structurally, mind you) - with their credit, that is. To the point that the Fed says they likely hurting the economy, it appears. The Dow was off more than 100 points this afternoon, as worries about the recession and the banking sector continued to keep the index under the 8K level.
No need to wonder about Phil the groundhog, however, at least as far as carmakers are concerned - car sales are heavily snowed-in, and the Formerly Big Three will be lucky to move one million pieces of iron per month in 2009. Toymaker Mattel was hit with a 46% decline in Q4 profits, underscoring the disaster that the holiday season buying turned into. Barbie was rumoured to have auctioned her pink Corvette, while Ken was waiting for his pink slip. Also waiting for pink slips, are some 7,000 Macy's employees. Make that 7,000 people who will not be inclined, or able to spend on much more than the essentials. This is how the vortex builds...
Davos participants Gordon Brown and Angela Merkel called for unity and coordination among nations as they tackle the regulatory environment in the financial industry and restructure the damaged global economy. The idea of a UN Economic Council was floated at the meeting, and some strong apprehensions were voiced about the apparent rise in protectionism in various nations and some of their economic sectors (banking, autos) in the wake of taxpayer money infusions. More such infusions took place in Borat's homeland today, as two Kazakh banks were nationalized, and a third got a $1 billion rescue package. Niiiice.
Other types of problems are having Chinese officials reaching for headache medicine these days. Some 20 million Chinese rural migrant workers have lost their jobs in the economic crunch, raising the spectre of social unrest. Officials are trying to divert all kind of funds towards rural areas, in an attempt to preempt such problems. We are talking here about unemployment figures (in just one niche) larger than Australia's population...
Last week, we brought you a story about an unlikely place to find gold in. The effluent from Japanese loos. Today, we share a news item about a very likely place to find a nice stash of the shiny metal: a sunken ship. Confirming once again, that gold does not 'go away' and that it merely sits around waiting to be recovered, a whole bunch of it was located at the bottom of the sea. The stuff of Discovery Channel documentaries, this. Reuters fills us in:
U.S. salvage teams said on Monday they had found the wreck of a British naval ship which sank in 1744 and may still be laden with a cargo of gold coins now worth over a billion dollars. Florida-based Odyssey Marine Exploration Inc said it had discovered the remains of the HMS Victory, the pride of the British fleet before it was lost in a storm with more than 900 crew aboard somewhere in the Channel between England and France.
The man-of-war, which took its complement of over 110 bronze cannons to a watery grave, was the predecessor to the ship commanded by Admiral Horatio Nelson at the Battle of Trafalgar in 1805.
Finding this shipwreck has solved one of the greatest shipwreck mysteries in history, said Gregg Stemm, Odyssey's chief executive officer.
There is some very strong evidence that there are some valuables on this wreck which may create a bit of a free for all and we just hope we will be able to keep the site hidden, Stemm told a press conference in London. He said Odyssey had kept the find secret for nine months while it negotiated with the British government over salvage rights and how to proceed in examining the site.
Fortunately, this shipwreck is not in waters claimed by any other country, so we do not expect any interference in further exploration of the site, Stemm said. Odyssey discovered the site nearly 100 km (62 miles) from where the ship was believed to have been wrecked on a reef near the Channel Islands. It has not disclosed a more precise location.
Salvors at Odyssey said that historical documents show the Victory was carrying gold coins weighing some four tonnes when she went down, worth some 400,000 pounds at the time. They said the current value of the bullion today alone could be more than $125 million, while the real value for such ancient coins could be more than $1 billion dollars.
In 2007, the same firm announced it had salvaged 17 tonnes of gold and silver coins worth $500 million from the wreck of a ship in the North Atlantic, which prompted the Spanish government to say the hoard belongs to Spain and take legal action to recover the treasure. Working closely with the Britain's Ministry of Defence, the firm has completed an archaeological pre-disturbance survey of the site, and recovered two bronze cannon to confirm the identity of the wreck.
Tallyho! Tally gold!