Gold prices dipped once again overnight and this morning after trying to mount an assault on the mid-$1,800s on Tuesday. The yellow metal was not alone in losing value; silver and the noble metals plus a host of other commodities from crude oil to copper also sold off as fears that the still-lingering eurozone crisis and slowing Asian regional growth will end up impacting demand for them.
The entire complex has been buffeted by incessant volatility and indecision rules the day for yet another session. Just yesterday crude oil touched a six-week high after declining stockpiles emboldened traders to push it higher still, despite a recent gain (over the previous two days) of 3%.
The opening of this morning's trading action in New York had gold on the back foot with a loss of $11.50 per ounce and a quote on the bid-side at $1,822.70 the ounce. Silver lost 20 cents and traded just under the $41.00 mark. Platinum bucked the trend and added $6 to rise to the $1,817.00 level while palladium dropped $1 to ease to $721.00 the ounce. European auto executives have warned about a possible slowdown in 2012 in their industry due to the persisting crisis.
As mentioned earlier, copper lost more than 1% and was bid at $3.94 while crude fell half a dollar to the $89.70 per barrel mark. The greenback was trading at just under the 77.00 level on the trade-weighted index. US August retail sales came in flat versus July's levels, and so did wholesale prices. The statistics might make for a tad weaker dollar today, which, in turn, could limit the damage in the precious metals' complex. The $1,780 to $$1,830 channel in gold remains, for the time being, the confining one that speculators need to heed. Speaking of the US dollar, read on:
While the world has been mesmerized with the slow-motion implosion of European debt, a quiet, but notable turn-around has taken place in the US dollar last week. This is an event that you are urged to take note of and keep on the radar as it might very well mark the beginning of a potential battleship turn in the value of many asset classes. It is not often that a particular asset pierces its 50 and 200 day moving averages and does not firmly head into the direction that took it to those pivot points. The greenback made just such a break last week.
This recent breakout by the greenback has several possible implications. Chief among them, is the possibility that its gains in strength might drag the stock and commodity markets to lower value zones. If in fact the decade-long slide in the dollar is possibly reversing, the repositioning of investment allocations might become a top priority for many a money manager in coming weeks and months. Much still depends on where the US economy finds itself as next year begins, but the dollar's turn still bears close watching
Ultimately, with all of its flaws and structural issues, the dollar is breaking out because the euro is breaking down and because and because other currencies offer little more than temporary refuge and investors know this. For additional analysis, you might wish read the Marketwatch article by Wall Street Sector Selector's John Nyaradi on the subject of this shift. He titled it "The Dollar Makes an Epic Breakout."
Over in Athens, the Merkel-Sarkozy-Papandreou trio met today to try to come up with something (anything) that might soothe the on-edge global markets about Greece's imminent prospects. Germany is seen as holding the key to what might eventually happen, but Monsieur Sarkozy also has his job cut out for him as the markets have been punishing certain of his country's banks with a big selling stick in recent days. The US Treasury's Mr. Geithner is heading to Poland this week to attend an ad-hoc meeting of the European finance ministers on the subject of...you-know-whose debt and/or default.
Mr. Geithner told TheStreet.com's Jim Cramer this morning in a live Q&A session in New York that "we need to do whatever it takes to solve economic problems." Starting with the US, Mr. G admitted that the US has seen weaker growth than had been hoped for, while it received "incoming" from the year's events in Europe and Japan.
Ultimately, said Mr. Geithner, we need to "put the economy in front of politics" and do the right thing, whether in the US, or over in the Old World. He defended Mr. Obama's jobs plan (something the American public appears to be as yet not sold on, if recent polls are correct). He will however, only likely be quoted for his unequivocal remark at the session, for the rest of this news day: "No more Lehmans." - referring to what Europe must do at this time, and to what the US is committed to do in the event of a similar development on the domestic front.
He also said that Europe is tackling a monumental problem but that he is convinced that Germany's commitment to resolve the crisis gives him comfort and a good dose of optimism. As noted earlier, Germany does hold the key. Now, if it can just turn it and open the door to daylight...
Finally, on the same topic, we have a bit of clarification on China's intentions when it comes to lending (literally) support to the beleaguered PIIGS of Europe (Italy in particular). Premier Wen said that while China can offer a friendly, helping hand to certain countries in Europe he also made such assistance conditional on the same countries to "first put their houses in order" as opposed to simply relying on his country to be bailed out.
The price of eventual Chinese financial friendship as quoted by Mr. Wen? "Responsible fiscal and monetary policies and the prevention of the spreading of the crisis." Pretty fair price, eh? The quid pro quo expressed by Mr. Wen is the same one that other Chinese officials have previously implied: there is a cost to money, our (obvious) vested interests notwithstanding.
Make sure you tune into the CPM Group Platinum Group Metals Seminar live on the Kitco website, commencing today, at 2:00 p.m. New York time. You will likely be happy that you did.
Jon Nadler is senior metals analyst with Kitco Metals Inc. in Montreal.