Underscoring once again just how much of a premium Fed QE3-oriented expectations had added to certain market price equations, gold fell out of bed on Tuesday afternoon after the ritual parsing of the Fed’s March 13 meeting minutes left many a smugly hopeful bullish participant with nothing but…hope to hang onto, as their trades/bets (as well as sentiment) soured very fast.
Currency strategists at Brown Brothers Harriman had cautioned as early as yesterday morning that while many market players were expecting at least some kind of QE3 hint in the FOMC’s meeting minutes, there might not be anything in there but a summary mention of the fact that if conditions dictate, then such measures might be put into motion. The firm’s caution was then more than vindicated by a 0.74% rise in the greenback’s value on the trade-weighted index (@79.43) by the end of the trading day. Gold headed sharply lower and touched the $1,640.00 bid level as panicked sellers pulled the “Bail!” triggers en masse.
This morning, the meltdown continued in gold, but this time, unlike during yesterday’s after-hours electronic trading, silver and the noble metals joined gold and fell hard as well. Once again, the only green color to be seen on the trusty new Kitco iPad app was the net change in…the greenback. It surged another 0.47% to reach 79.80 on the trade-weighted index. In the futures market, the active June gold contract was actually off by more than $52 or 3% per troy ounce.
Reuters technical analyst Wang Tao projects that on the technical side of things in gold, the yellow metal has the potential to fall to the $1,392 per ounce level over the next 90 days. That figure represents the 100% Fibonacci projection level while the $1,447 mark represents the 38.3% Fibonacci retracement of the rise from $680 to $1920. The sub-$1,400 gold price target – according to Wang Tao – will be “confirmed when gold falls below the March 22 low of $1,627.68 per ounce."
A negation of this trend might only occur if and when gold is able to breach $1,790.30 on the upside. Wang Tao projects $22.96 per ounce silver for the upcoming three-month period; however, a break of that number could usher in a target of $13.99 per ounce for the white metal. On the other hand, a successful vault to above $37.46 could mark a double-bottom in silver and the path towards at $45.50 per ounce target.
Spot gold opened the midweek session in New York with a loss of more than $25 and a bid-side print very near $1,620.00 per ounce (a near 11-week nadir). This took place at a time when most projections for this week had called for much higher than $1,680 gold and a take-off to be underway in silver as well. Adding insult to injury, the Reserve Bank of India today turned up the heat one more notch on gold imports when it announced a new set of reporting requirements for bullion. Monthly statements from local banks are now required by the RBI as well as the description of payment methods used.
The white metal opened with a 3.4% or a 111-cent loss this morning, and it was bid at $31.55 per ounce. Platinum fell $29 to $1,608.00 and palladium slipped $5 to $647.00 the ounce. Robust car sales results by Chrysler (up 35%) and a quite decent showing by Ford (up 5%) and GM (up 12%) once again should provide support for the PGM complex, but for the moment, the mood is all about the Fed and its reluctance to please. To be fair, the annualized auto sales level shown in March (14.3m units) was below the 15m average that was seen in February and it was also just below analysts’ consensus. Copper declined 2.26% and crude oil lost 1.05% while US equity futures indicated that a grumpy mood was going to be defining the trading day ahead.
Analysts at Standard Bank (SA) report that they are “seeing that the platinum market has tightened up following the recent strikes in South Africa. We also believe that although the palladium market is likely to experience much greater structural deficits than platinum in coming years, at the moment, above-ground stock for platinum is lower than that of palladium (in terms of days consumption). This, at least in the next few months should support platinum, especially if more production is lost in South Africa.
The above is also consistent with our [their] view that we see good value in platinum below $1,600-$1,550 (less than 5% from the current price) and palladium around $600 (about 10% from the current price).” Such fundamentals prompted industry notable Brian Gilbertson to declare that he is “very, very bullish on platinum-group metals” in this Mining Weekly video interview. It is well worth your time to watch it.