Yesterday's test of the $890 support zone appeared successful, and prices broke above the $900 mark once again this morning. The snap to higher levels was aided by a $1.75 jump in crude oil, as speculators loaded up on the goo in anticipation of higher demand coming in the wake of the implementation of the US stimulus package. The latter will be formally unveiled in about three hours. Many a market hit the 'pause' button for the past three or so sessions, awaiting to learn the plan's details. Institutional and private investors alike, were also seen as being on hold while trying to ascertain how the spending program might impact their favorite stock, commodity, or other asset. As we know, optimism has been on the rise among gold speculators. Their net long positions are virtually back to the levels seen last August.
Clearly, as far as those who would like investors to load up on precious metals are concerned, the program has but one outcome: inflation; coming soon, and coming in spades. Never mind that China just tipped over into deflation, or that the stimulus plan could fail to reignite US growth - the sine qua non of global economic health - if in fact the banking system can first turn over and begin idling. Ignore deflation? Be our guest.
The list of known stimulus facts (as of last night, anyway) reads as follows: $838 billion. Virtually everything else is fuzzy, including the ultimate price tag of $1.5 trillion, the value of what is on the books in America's banks, how the lending markets will be unfrozen, and what the share of the burden will be for Tom Taxpayer. The 'good' news is, that investors do not have to wait too long before they once again become confused as to how all of this will play out. Join the club. Oh, and another little factoid to mull over: US banks have chosen not to borrow overnight funds on a no cost basis, and in lieu of lending money, are sitting on a pile of surplus cash at the Fed, that practically equals the size of the stimulus plan. This is all shaping up as a prime game of prisoner's dilemma.
New York spot precious metals prices opened with robust gains. Gold was ahead by nearly $13 per ounce after the open, quoted at $907.70 in active dealings, while players eyed a rising dollar, the oil pits, and the $915 resistance area found above current levels. Silver recaptured its own round figure, that of the $13 mark. The metal rose 32 cents, to trade at $13.15 at last check. The standout leader this morning, was platinum. The noble metal surged $46 to rise to $1036 per ounce, seemingly unfazed by a near 8% drop in Chinese car sales last month, or by the stories that GM will shed 10,000 salaried jobs worldwide. Palladium gained $6 to touch $212 per ounce.
Bloomberg reports that: "Platinum has gained in four of the past five days. Anglo Platinum Ltd., the world's biggest producer of the metal, said yesterday it may add to output cuts because of low prices. Lonmin Plc, the third-largest producer, may slash as many as 6,000 jobs as it halts "uneconomic" mines in South Africa. "People might be getting more optimistic about the impact" a stimulus plan will have on industrial metals, Greg McKinnell, a precious-metals trader at London-based Johnson Matthey Plc, said today by telephone. Possible production cuts at South African mines "are also in the back of people's minds." Automakers account for about half of global platinum and palladium consumption. U.S. auto sales fell 37 percent in January, the worst month since 1981. General Motors Corp. and Chrysler LLC have received government aid in an effort to stave off bankruptcy. The greenback was a hair above 85 on the index at last check.
We are finally hearing from a sector that has had its own share of troubles lately. Whether or not the news is mysteriously linked to February 14th being around the corner, the statistics and possibilities are equally compelling. A store of value, of a different kind - a gem of a story brought to you by Bloomberg:
"De Beers, the world's largest diamond producer, said demand is likely to exceed supply for much of the next decade, helped by a strong rebound in U.S. economic growth.
The U.S. historically "rebounds strongly from recession," said Executive Director Stephen Lussier in a speech at the Mining Indaba conference in Cape Town today. Increased demand is also expected from Brazil, Russia, India and China, he said. Prices of diamonds and other commodities have slumped as economies in the U.S., Europe and Japan slipped into recession. The U.S. accounts for about half of world demand.
De Beers revised mining plans in South Africa and announced jobs cuts at its mines there due to the slowdown in the global economy, while BRC DiamondCore Ltd. last month said it would extend a shutdown at its operations in the country because of "depressed" prices. Gem prices have "virtually halved" since mid-July, and prices of "bigger" stones have been affected "heavily," Petra Diamonds Ltd. Chief Executive Officer Johan Dippenaar said on Jan. 22.
De Beers is 45 percent owned by Anglo American Plc, 40 percent by the Oppenheimer family and 15 percent by Botswana's government."
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