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.
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.
Spot gold dealings commenced the new trading week with a loss of $6 per ounce and the yellow metal was quoted at $1,767 on the bid-side. Silver prices fell by about a dime per ounce and initial indications came in at $35.32 the ounce in the white metal.
Gold prices remained near three-month highs around $1,780 overnight and early this morning as a similarly-sounding achievement was also noted in its most recent tandem trading partner-the euro. The common currency hovered near ten-week highs above $1.34 despite an EU projection of a recession.
Gold and silver prices headed lower this morning while platinum and palladium extended their Tuesday rally with fairly hefty additional gains. Gold retreated towards the $1,750 area while silver fell back to near the $34 level as profit-takers moved in following yesterday’s Sino-Euro-news-induced euphoria.
Most commodities gained this morning as lingering optimism related to future demand was still manifest in the wake of China’s easing of bank reserve requirements and following perceptions that the European deal with Greece will be good for the sector in the near-term.
Last year’s ETF gold demand stands at the lowest annual level since these vehicles were launched late in 2004. Many ETF speculators still hold large positions, but recent price drops and rising volatility have eroded a portion of the belief that gold is always a “safe haven” investment.
The latest news from Europe points to a further potential delay in the granting of aid to Greece (possibly to beyond that country’s April elections), a delay that could see the March 20 deadline for euro bond repayments come and go.