By Jon Nadler
We cannot address rumors and would rather wait for confirmation, but the trigger for today's move may have been the talk on the street that UBS was looking for 'help' from the Swiss National Bank.
Take that kind of potential headline, couple it with a money-market fund halting redemptions, add the Russian markets crashing, and top it off with the Dow losing 350 points the day after AIG's demise is averted. Proposed stiffer rules on 'naked' short-selling may have had quite a bit to do with equity position unwinds as well. Market such as gold's only need a relatively small injection of buyers' money to make the type of move which we are witnessing today.
As we wrote the other day, the surprise was that it took so long to see a move of this magnitude. We are waiting to see if today represents the oft-predicted de-coupling of Gold from its primary reliable price-moving (oil, dollar) agents.
We are quite pleased to finally see a positive reaction from gold, given the global market and economic circumstances. Whether or not the rally is broad-based retail buying or just another profit-oriented fund play, remains to be seen. we would like to believe it is more of the former, but certainly, on the basis of the tiny decline in the dollar and a mild rise in crude oil, the $50-plus move appears to be more of the latter than people lining up in front of their coin shop after having lined up to make a run on their respective banks.
Floor talk is that pros are selling quite a bit into this rally. Some of the move is an overdue correction of the two week-long fall the metal had previously experienced. Research by specialist firm GFMS indicates that miners may be cutting supply and that central banks are not keen to sell at a time when seasonal demand is set to start. Coming at this juncture of the credit debacle, this could be a supportive factor for Gold in the year's final quarter.
The respite one was hoping for after the last two weeks and two days is obviously not in the cards for today. Gold needed this shot in the arm and it is a relief to see it. Let us hope the move has some longevity to it.
