Latest Headlines

Search

-- Posted Friday, 6 June 2008 | Digg This Article | Source: GoldSeek.com

The Metals:

Gold and silver climbed higher in choppy fashion throughout world trade and ended near their session highs of $899.60 and $17.495 with impressive gains of 2.64% and 1.93%.  A lower dollar, record high oil, and fears over war with Iran were just a few of today’s market movers to add to the ever present fundamental reasons for the metals to go higher.

Euro gold rose to about €569, platinum gained $76 to $2074.50, and copper gained roughly 7 cents to about $3.62.

Gold and silver equities rose throughout most of trade and ended with about 2% gains despite roughly 3% losses in the major indices.

The Economy:

The BLS net birth/death adjustment added 217,000 payrolls to May’s data.  Prior months payrolls were also revised down slightly.  Commentators on CNBC today argued that the huge jump in the Unemployment Rate was due to teenagers and students entering the job market for summer work.  Regardless of whether that is true or not, the same thing happens every year and this year “it was biggest one-month increase in unemployment since January 1975.”

All of this week’s economic reports:

Next week’s economic highlights include Pending Home Sales on Monday, the Trade Balance on Tuesday, the fed’s Beige Book and the Treasury Budget on Wednesday, Export and Import Prices, Initial Jobless Claims, Retail Sales, and Business Inventories on Thursday, and CPI and Michigan Sentiment on Friday.

The Markets:

Charts Courtesy of http://finance.yahoo.com/

Not to be outdone by yesterday’s record price gain of $5.49, oil rose to find over $11 gains to climb past the record intraday high of $135.09 hit on May 22^nd and set a new record intraday high of $139.12.  While a weaker dollar certainly helped, the main reason for today’s record move seemed to be comments from Israel's transport minister that stated an attack on Iranian nuclear sites looked "unavoidable".  Morgan Stanley also came out with a call for $150 oil by July 4^th.

The U.S. dollar index fell as the ECB confirmed plans for a rate hike next month and poor US economic data raised doubt over whether the fed will be able to raise interest rates this year.

Treasuries rose as the Dow, Nasdaq, and S&P fell substantially and more than erased yesterday’s near 2% gains on poor economic data, markedly higher oil, and worries over an attack on Iran.

Among the big names making news in the market Friday were Citigroup, Lehman Brothers, and Apple.

The Commentary:

“Dear CIGAs,

For the shortsighted who feel a recession will depreciate gold please review the Formula, keeping in mind that Gold is a currency.

Jim’s Formula:
September 1, 2006

1.      First interest rates rise affecting the drivers of the US economy, housing, but before that auto production goes from bull to a bear markets.

2.      This impacts many other industries and the jobs report. An economy is either rising at a rising rate or business activity is falling at an increasing rate. That is economic law 101. There is no such thing in any market as a Plateau of Prosperity or Cinderella - Goldilocks situations.

3.      We have witnessed the Dow rise on economic news indicating deceleration of activity. This continues until major corporations announced poor earnings, making the Dow fall faster than it rose, moving it deeply into the red.

4.      The formula economically is inherent in #2 which is lower economic activity equals lower profits.

5.      Lower profits leads to lower Federal Tax revenues.

6.      Lower Federal tax revenues in the face of increased Federal spending causes geometric, not arithmetic, rises in the US Federal Budget deficit. This is also true for cities & States as it is for the Federal government.

7.      The increased US Federal Budget deficit in the face of a US Trade Deficit increases the US Current Account Deficit.

8.      The US Current Account Balance is the speedometer of the money exiting the US into world markets (deficit).

9.      It is this deficit that must be met by incoming investment in the US in any form. It could be anything from businesses, equities to Treasury instruments. We are already seeing a fall off in the situation of developing nations carrying the spending habits of industrial nations; a contradiction in terms.

10.  If the investment by non US entities fails to meet the exiting dollars by all means, then the US must turn within to finance the shortfall.

11.  Assuming the US turns inside to finance all maturities, interest rates will rise with the long term rates moving fastest regardless of prevailing business conditions.

12.  This will further contract business activity and start a downward spiral of unparalleled dimension because the size of US debt already issued is of unparalleled dimension.

Therefore as you get to #12 you are automatically right back at #1. This is an economic downward spiral.

I heard all this "slow business" as negative to gold talk in the 70s. It was totally wrong then. It will be exactly the same now.”- Jim Sinclair, JSMineset.com

“August Gold finished up 23.5 at 899, 3 off the high and 11.5 up from the low.

July Silver closed up 0.26 at 17.43. This was 0.21 up from the low and 0.08 off the high.

The gold market showed a very impressive recovery bounce despite the fact that the market could have easily fretted over the prospect of further US slowing ahead. However, the gold market was certainly undermined by the combination of increased hawkish dialogue from the ECB and because of the idea that soft US unemployment rate news seemed to dramatically reduce the odds of a US rate hike. In other words, the outlook for the Dollar was clearly undermined by the events at the end of this week and that certainly seemed to shift the attitude in the gold market. Certainly seeing US crude oil prices virtually explode rekindled flight to quality concerns and in turn that probably served to increase the uncertainty of paper assets, which tends to improve the outlook for gold and the precious metals.

While silver relatively underperformed the gold and platinum markets on Friday, it seemed as if the entire metals complex was lifted in the wake of events on Friday. Certainly seeing the US Dollar reverse course dramatically inspired some of the short covering buying in the markets, but it also appeared that rising economic uncertainty was also a force for the bull camp. However, given the pace of the gains in the oil market and the slide in the US equity market, it is possible that some would-be buyers of silver were discouraged off the fear that too much slowing might become a mainstream fear again.”- The Hightower Report, Futures Analysis and Forecasting

GATA Posts:

Mint replies to Silver Institute's complaint about shortage of coins

Amity Shlaes: Contracts as good as gold

The Statistics:

As of close of business: 6/5/2008

Global Gold ETF Holdings

[WGC Sponsored ETF’s]

Note: No change in Total Tonnes from yesterday’s data.

COMEX Gold Trust (IAU)