By Jon Nadler
The rebound in global markets ran into some snags overnight, as pessimism about corporate earnings and waning expectations that the world economy might escape a contraction pounded stocks in Asia. Those declines were followed by ones in Europe, and were based on similar apprehensions. Bloomberg's Professional Global Confidence measurement recently reached its lowest level on record. The US dollar dropped to 81.27 on the index and offered enough room for gold prices to climb back to near $845. Further advances were hampered by falling crude oil values (now near 75.75 per barrel!) and by further declines in white metals.
New York gold opened relatively weak, gaining only $3.6 at $838 basis spot, as further nervousness was being exhibited by participants. The threat of declines to levels nearer $800 appears intact as the metal continues to underperform in this ideal (for it) environment of fear and uncertainty. A speech by Ben Bernanke this morning will likely be the first focus item, and will be followed by a large economic data packet that contains retail sales figures, wholesale prices, and NY area manufacturing data along with the Fed's Beige book. For the moment, the weight of the overall funk in the markets is keeping gold on the defensive while would-be buyers take a wait-and-see attitude and find more comfort sitting on the piles of cash they have taken out of teetering banks. Smaller US banks are flat-out refusing the injections of cash (as if they have a choice) but others (like Sovereign) are opening the vaults to the inflows.
Silver fell 43 cents to $10.53 dogged by demand fears from industrial users. Platinum dropped $49 to $983 per ounce and palladium lost $2 to $194 this morning. Emotions continue to rule these markets and thus wide swings are in the cards, pending responses to various news items. Some of those emotions are related to the probability that NYC might lose 165,000 jobs as a result of the credit debacle. Restauranteurs might wish to revise those menus featuring $100 hamburgers. Oh, and don't cash that deposit on the Bimmer just yet, please.
Sensing that gold offtake is on the skids as far as traditional jewelry demand is concerned, the World Gold Council launched a clever new campaign designed to offer small gold coins through India's post offices. As reports of slumping urban gold investment demand have been worrying WGC's sponsors (the mining community), the decision to go for the rural jugular vein of India became a viable one.
"Fear of deepening global financial crisis seems to have affected gold buying spirit in urban India, as urbanites are hesitant to invest in the yellow metal as compared to those in rural areas," the World Gold Council said on Wednesday.
A recent change in the approach taken to promote gold in that country already shifted towards a 'gut' level appeal that draws on historical affinities and cultural ties to bullion on the subcontinent.
India's
Commodity Online reports:
"NEW DELHI : In collaboration with World Gold Council and Reliance Money, The Indian Postal Department on Wednesday announced plans to sell 24 carat gold coins through selected post offices in four states. In the first phase, gold coins in the denomination of half gram, one gram, 5 grams and 8 grams will be sold in over 100 post offices in Delhi, Tamil Nadu, Maharashtra and Gujarat
The gold coins will be packed in a sealed cover with the certification from Valcambi, Switzerland India Post said. In the second phase of the project the gold coins will be sold with the India Post logo. Launching the service here, Union minister for communication and IT, A Raja said the service will be extended to rural areas soon. Minister of State for communication and IT Jyotiraditya Scindia also attended the function."
Just how much of the missing tonnage from buyers of jewelry this scheme might fill, remains to be seen. As an idea however, let's give credit where credit is due. Imagine Uncle Sam offering a one gram Buffalo coin at the local Post Office (hello? Uncle Sam? - Nah, he is busy with another government-owned business line: the banks.)
Happy Decision-Making.
Jon Nadler is Senior Analyst, Kitco Bullion Dealers Montreal
