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The Kindest Cut of All [Thus Far]
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Good Afternoon,
Gold prices received an early booster shot in the arm on the heels of the Fed's decision to prevent a complete meltdown in the Dow by slashing interest rates more than one week ahead of their expected date. Overnight losses of some $30 (gold probed just under $850 per ounce) turned into a day of gains as the largest US central bank accommodation in over 20 years fueled a return to long oil and gold positions and a logical selling wave in the US dollar. The bounce that we expected in this morning's comment materialized after a few fits and starts and turned into what was a commendable performance, given current conditions.
Whether stability or confidence has now returned to these markets remains anyone's guess. Probably not. We have seen previous instances where an action or an announcement is digested and then investors resume the course they were already on. Last week's proposed economic life raft package and today's rate easing did not prevent the Dow from first caving about 400 points before making a comeback to being down 'only' 125 points. The TSX fared a lot better, gaining back 420 points of yesterday's 605 point swoon.
New York spot bullion closed with a $7.90 gain and was quoted at $889.80 per ounce on the bid side. Participants remain nervous about the possibility of continuing margin call liquidations as well as of the confirmation that the US economy is in in a definite contraction phase. For the time being, the focus shifts to quantifying the effects of this rate cut on stocks and other commodities, and to assessing the mood of individual investors amid this maelstrom of volatility and uncertainty. Silver did not manage to eke out a gain for the day, losing 7 cents to $16.02, while platinum added $4 to finish at $1548.00 per ounce. Questions continue to linger as to who will consume what and at what price as we go forward.
The picture was fairly similar in base metals, where early losses turned into gains following the Fed communique. Make no mistake about the man in the street having taken cover thus far this week; these are fund-driven moves based on little more than best guesses. Hope this Fed move sticks. Naturally, the labels of "PPT" and other similar acronyms will be pulled out of the closet once again, but they are too little, too late, after the horrified, pallid faces that were seen yesterday among the perma-bull crowd. Let's cover it up with some loud(er) cheer, shall we?
Remain on red alert, there are no sure bets anyone can offer you - that much is the least that could have been learned since Christmas time - liquidity remains at the top of many an advisor's list.
Since this is a travel day, we will not be able to bring aftermarket updates to our readers - though there may well be a need for them. See you tomorrow morning.
Best Regards,
Jon Nadler
Senior Analyst
Kitco Bullion Dealers Montreal
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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication. |
