This morning’s opening bids showed a small recovery trying to get underway but gold only added $3.40 to start off the day at $1,678 while silver once again briefly turned negative and fell to $32.92 the ounce.
Proving for the nth time that what happens in China is a pivotal impact factor to the commodities’ space, the most recent developments in that country sent base and precious metals prices, along with most global equity markets, lower overnight.
Friday’s initial tilt in the precious metals markets was to the downside as the US dollar continued to strengthen and it reached 79.30 on the trade-weighted index. Gold spot prices fell by about $11 to the $1,706 area.
Precious metals opened with gains this morning as market participants were hard at work trying to repair at least part of the substantial damage that was incurred on Wednesday. A knee-jerk reaction was to be expected after such a rout, but there is still apprehension in the pits.
A reported 31-tonne sell order on the CME rocked gold which saw prices collapse from a high of $1,790 in London hours to $1,703 during NY trading, followed by a further dip to the low of $1,687 in out of hours electronic trading.
Albeit gold did open about $2.50 higher in New York, yesterday’s enthusiasm levels were nowhere near detectable. We were confronted with abnormal concurrent headlines that observed gold trading at a five-month high and the DJIA closing above 13K for the first time.
Although the markets greeted the news of the passage of the austerity measures with the enthusiasm that one might have expected, the ’celebrations’ were rather half-hearted, as reflected in the gains in various assets.
The near-term in Europe might be darker than many currently anticipate (as reflected in January’s asset-buying euphoria) if we take note of certain underlying trends. An injection of liquidity has not resulted in an injection of loans into the region’s faltering economy, for example.