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2008-07-18 18:22:21 |
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Why global Metal markets are falling
By Jon Nadler
Metals markets were largely calm during the overnight hours but gold continued to be exhibiting continuing dollar-strength related moderation and was not able to get above the $965 area by much (lows came near $954).
The greenback added a few more ticks in value, rising to 72.30 but then again, so did crude oil, which climbed a bit more than $1.75 to the $131.05 mark. Geopolitics showed signs of significant cooling from last week's heated rhetoric. In the latest developments, Iran welcomed the presence of U.S. officials at tomorrow's talks in Geneva. The Bush administration, taking a page from the playbook of Mr. Obama, decided that hurling warnings towards Iran is probably less wise than trying to open a communications channel and ascertaining if there is room for possible solutions to the nuclear program bugaboo.
New York trading opened the final session of this week on an ominously weakening note, with gold showing an initial loss $7.10 per ounce at $949.90 while players will now have to look at oil, equities, and currencies in the absence of anything to digest from today's blank economic calendar.
A raft of corporate earnings (and lack thereof) hit the street after yesterday's final bell and some of them offered (Merril's) cause for added worry, while others (Citi's) showed that some progress is being achieved in the great unwind. The Dow might have an interesting time trying to deal with the good, the bad, and the ugly as it resumes trading this morning.
Silver dropped 37 more cents, trading at $18.17 while platinum and palladium continued to show further losses as well, with the former declining $32 to $1834 and the latter falling $4 to $417 per ounce. Noble metals values remain under pressure as the apparent postponement of the would-be diesel revival in the USA has been put on the back-burner due to sky-high diesel fuel prices. When additionally considering the latest N. American auto sales trends, platinum and palladium have been thus far unable to capitalize on the continuing supply issues in South Africa and have fallen to near 11 week lows.
Today's focus shifts back to one of the gold market's sine qua non pillars of demand: India. While investment and safe-haven demand have required almost all of gold's recent headlines to be printed in bold, extra-large fonts, the underlying drought in Indian demand should have analysts up at night, wondering who will absorb the metal that the sub-continental buyers are evidently unwilling to consume at current prices.
As we normally come to this discussion table from an almost purely fundamentals-oriented angle, we must once again ring the alarm bell to the complacent bulls who believe that India simply does not matter any more, and that ETFs and such will take every ounce of gold that is now being, and will be dug up from the ground.
Jon Nadler is a Senior Analyst with Kitco Bullion Dealers Montreal |
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