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Man On The Hill

By Jon Nadler       Printer Friendly Version Bookmark and Share
Jul 22 2009 4:18PM

www.kitco.com

Good Afternoon,

Yesterday's anemic trading patterns initially appeared to roll over into this morning's markets as price tickers across various assets showed little in the way of change. Despite more dovish-than-expected initial Congressional testimony by Ben Bernanke, the dollar managed an early climb against the euro - a near half-percent one, at that.

Such gains were not long-lasting however, as positive housing data and continued growth in investor risk appetite dented the US currency and rendered its appeal inferior to that of commodity currencies. Thus, a new, seven-week low was recorded in the greenback vis-à-vis the euro, on the heels of which gold returned to the $955 resistance area pretty promptly. However, that sprint did not endure, either. The metal returned to the $950 area after yet another unsuccessful attempt at a breach to higher levels. Bullion was also seen tracking crude oil prices, which managed to turn a near-$1 loss into practically no loss by the start of the afternoon.

New York precious metals dealings started the midweek session in the red this morning, with gold off by $2.80 per ounce, at $946.20, silver at $13.40 (down 0.12), and platinum at $1163.00 (down $7) respectively. Palladium opened at $252 per ounce, losing $2. Chrysler's new parent-to-be, FIAT, swung to a second quarter of losses as slumping truck sales took their toll. Market news from Saudi Arabia was less than encouraging for gold today. The local volume of jewelry sales has fallen by some 30% in the first half of this year. High prices deterred buyers, plain and simple. As did tight pocketbooks in the wake of the global economic contraction.

Following news that US home prices have fallen at the smallest rate in over 10 months, we witnessed a resurgence in risk appetite among investors – as reflected by copper’s losses also turning into gains, and in the gold price making a U-turn from the morning’s lows back towards the aforementioned resistance zone. Bullion was ahead by only about $1.4 at last check this afternoon, quoted at $950.50 per ounce. Silver zoomed 14 cents higher per ounce, to near $13.67 per ounce, while platinum and palladium also perked up as the day wore on. The former gained $1 to $1171 while the latter was $2 higher than the morning’s $252 level.

The trade-weighted index initially showed the US dollar virtually stalled at $78.80 (off by 0.10), while oil was losing nearly $1 per barrel, and dropping to the $64.70 level. The duo was last seen at 78.69 and at $65.28 as of 4 pm NY time. The virtual grinding to a halt in speculative activity over the past couple of days might well result in a larger-than-expected move in (any) one of these sectors. It is becoming apparent that speculative focus has already shifted among market participants. The bulls-eye? Next week’s Treasury auctions and the release of US GDP numbers.

Hopefully, no nasty surprises lie in store. Once again, the gold ETF shed a few tonnes from its sizeable holdings, with yesterday's 68,481 ounce outflow. Gold remains within the range, and will silently follow dollar and oil developments as it lacks internal dynamics that would make it headline material at the moment.

In other precious metals news today, a very somber tally when it comes to the real price of gold and other precious metals – at least as regards certain places they comes from. Africanews.com reports that 95 South African mine workers have lost their lives up to date this year. Industry compliance with mine safety legislation stands at a dismal 66%. We can only call this situation lamentable and express hopes that it will change. Radically. The sooner, the better.

Second quarter tallies of another kind have now been released, and they show some interesting performance dynamics for certain commodities. As well, the year-on-year performance among some of the tracked metals, energy, and index components that were scrutinized yields some noteworthy numbers. Okay, it’s a sea of red for the year-on-year picture, to be very blunt. As for the quarterly returns, zinc, anyone? We hear it makes fine…’copper’ pennies (must be all the money-printing by the Fed). Here is a run-down on the somewhat gory table, as it stands right now:


Commodity

Quarter-on-Quarter %

Year-on-Year %

 

 

 

Gold (London PM Fix)

2.0

    0.5

Silver

6.3

-21.0

Palladium

16.0

-46.0

Platinum

4.4

-43.0

Aluminium

18.3

-47.4

Copper

26.7

-41.8

Lead

36.00

-0.3

Nickel

70.2

-26.2

Tin

43.4

-35.9

Zinc

19.6

-17.0

Brent Crude

46.5

-51.6

S&P GSCI

25.6

-47.8

S&P GS Agriculture Spot Index

3.4

-35.0

S&P GS Livestock Spot Index

-2.4

-15.6

CRB Index

12.5

-24.3

DJ AIG Index

11.6

-47.4

Source: Global Insight, Bloomberg

Gold’s performance Q-on-Q was eclipsed by other commodities, by oil, and by equities. The bright picture for bullion comes when one considers what may have happened to a portfolio that did not happen to contain it during the past year.

For a person who has had more than his fair share of vilification over the past couple of years, Mr. Bernanke is apparently receiving some very high marks - from some of the very sources of the negative noise. About 75% (!) of surveyed global investors approve of his handling of the crisis and have a favorable view of him (with the 25% silent remainder, evidently made up of hard-money newsletter vendors, whose evaluation of the man consists of words we cannot mention here, in print).

One of the take-home lessons from yesterday's Bernanke testimony is that the man charged Congress to go and do its own share of work in ameliorating the current situation, by aggressively cutting budget deficits. Some of this posturing - including the tacit references to how the Fed helped pull the economy from the brink of the abyss- were colored by political overtones, and by the awareness that Mr. B.B.'s term is up for grabs/renewal come January.

Nevertheless, the Fed Head is likely to stand firm on certain issues and will continue to square off on Fed independence issues with the likes of Rep. Ron Paul (R, Texas) as he takes the hot seat again this morning. And, yes, items like consumer protection powers might be lost in the battle. But, not- it seems- much else.

Until Tomorrow,

A Good Evening to All.

Jon Nadler
Senior Analyst
Kitco Bullion Dealers Montreal

 

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