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 A confluence of supportive factors gave gold prices a continuing support as the trading week drew to a close. Chief among the market`s assisting drivers was the news that power shortages in S.Africa have disrupted and/or shut down several mining operations. While this kind of trouble helped platinum jump to very near $1700 per ounce, it certainly helped gold as well, which was primed for a test of the previous highs, following the return of money to equities and the new/improved economic rescue package being talked about in the US. The next plausible resistance level and price objective has now been achieved (near $927) but we got very few answers from various trading desks as to what may be next. For the time being, and daily gain aside, the price settled under the previous $915 record and some $15 away from the overnight peaks.
New York spot gold finished the session still in the positive column, but just barely (by current standards) - gaining $3.50 to $910.50 per ounce. The market appeared to be taking cues from a retreat in the Dow as it shows continuing lack of confidence in the countermeasures being thrown at the credit and recession monsters. Silver was showing a 16 cent gain, at $16.41 while platinum, which had looked all set to add triple digits today, rose $66 to $1672.00 per ounce. Participants were seen closely monitoring the US dollar (rising .34 to 75.99 on the index) and crude oil (gaining 94 cents to $90.35) but were rather displeased with the near 130 point drop in the US index, when they had expected the Dow to turn in a commendable performance today. Fear of everything (financials, insurers, recession, inflation, etc.) remains loose on Wall Street and one of its not-to-be-ignored aspects is the fact that there is some risk that the Fed may not be so aggressive in lowering rates next week, and may "disappoint investors who are betting against the dollar", analysts told Reuters today.
It appears that all markets -even those that are traditional enemies to each other - are hoping to benefit from the apparent resolve among global monetary officials to address the developing vortex triggered by the US credit squeeze. Nobody wants to face the prospect of deflationary asset implosions. The scenario brings to mind the situation in Japan several years ago, where the writer heard statements such as "desirable/acceptable levels of inflation" making their way out of the mouths of panicked central bankers.
Now, over to the reality on the ground - or, underground, as the case may be. We continue to live in a totally energy-dependent world, and metals mining (especially in S. Africa) is a highly energy-intensive endeavor. There are indications that the outages and interruptions may persist for some time to come, perhaps as long as f few weeks. South Africa`s IOL News reports that the shortage of power has resulted in:
"Workers from Anglogold, Harmony and Goldfields currently being affected by the power cuts. Trade union Solidarity said on Friday that the largest gold mine in the world, Goldfields` Driefontein Mine near Carletonville, had been forced to stop underground operations.
"16 000 workers were sent for training this morning [Friday] because there was not enough electricity to enable them to work underground." The union said 12 000 workers at Goldfields` Kloof Mine, also near Carletonville, also could not go underground on Friday. Lost production is costing the mines millions."
Indeed, production losses such as the 7,000 ounces per day that GoldFields could show amid this external difficulty, could not come at a better time for the long side of the trade. The question is how much of a premium this situation is adding to prices and how strongly it is heating up the speculative fever. We would not want to be on the wrong side of the trade when the power starts to flow to the mines once again. In the interim, we continue to receive worried calls from the jewelry trade wondering how much smaller, lighter, or lower in fineness their creations might have to become in order to actually have a Valentine`s and Mother`s Day sales event of any significance. These prices do not make for a very happy fabrication crowd.
Trading will take on new dimensions as the market crosses into overbought territory once again, and as we approach next week`s Fed meeting. The surprise to the negative side would be a lukewarm rate adjustment on the part of the central bank, or a resumption of the evaporation of confidence in rescue plans and similar actions, as exhibited by equity market in the US today. A fresh week of ups and downs awaits, thus a good rest is well-advised. Good luck and good weekend.
Best Regards,
Jon Nadler
Senior Analyst
Kitco Bullion Dealers Montreal
http://www.kitco.com/ind/Nadler/jan252008B.html
/``-_-´´
2008-01-28 11:39
(direct link)
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