Thursday, March 3, 2011

Gold And Silver Pause To Refresh

Gold May Fall From Near-Record Price Following Report of Libya Peace Plan
Gold may decline in London as the Arab League’s announcement that it’s studying ways to end the crisis in Libya prompts some investors to sell the metal following its rally to a record.

Gold reached a record $1,440.32 an ounce yesterday. An Arab League official said the group has consulted with Venezuela on the plan. Libya’s Muammar Qaddafi and Venezuelan President Hugo Chavez have discussed resolving the crisis, the Associated Press reported. Bullion gained the previous four days.

Reports “Venezuelan President Hugo Chavez has offered to broker a peace deal,” pressured gold, James Moore, an analyst at in London, said in a report. “There is scope for further profit taking, particularly if tomorrow’s non- farm payrolls help reinforce the drop in the jobless rate last month. We expect dips to be viewed as buying opportunities.”

Bloomberg...always amusing in their efforts to talk down the price of Gold.  Gold is most likely under pressure this morning because the European Central Bank's Jean Claude Trichet said a "strong vigilance" of the inflation situation was warranted, turning on the language markets had anticipated as laying the groundwork for a near term rate hike in the European Union.  Rate hikes always spook Gold traders.

Trichet has always telegraphed his rate hike intentions via the phrase "strong vigilance" with regards to inflation.  This central banker language sent the Euro soaring upon it's being dropped from Trichet's lips, and inturn it sent the US Dollar tumbling.  Uncharacteristically, Gold and Silver prices dropped along with the Dollar.  This is a bit odd since yesterday Gold and Silver prices rose along with the Euro in anticipation of Trichet's hawkish Inflation comments delivered today as the Dollar was under pressure.

Our charts told us yesterday that the recent run up in Gold and Silver prices was looking a bit tired, and that proved to be the case as both Precious Metals went tepidly higher into the CRIMEX close yesterday afternoon, and then rolled over during the CRIMEX's aftermarket Happy Hours.

This morning Gold, after reaching a new all-time high of $1440, has come all the way down and tested it's breakout near $1416 from Monday morning.  Silver, after missing $35 yesterday by a whisker, has come down and tested it's breakout to new 30 year highs from 34.32 on Monday morning.

Both appear sluggish this morning following the surprise drop in new claims for unemployment:

Unemployment aid requests fall to near 3-year low

WASHINGTON (AP) -- The number of people requesting unemployment benefits last week plunged to a nearly three-year low, bolstering the likelihood that companies will increase the pace of hiring this year.

Applications for unemployment benefits fell by 20,000 to a seasonally adjusted 368,000, the Labor Department reported Thursday. It was the third decline in the last four weeks. Applications are now at their lowest level since May 2008.
The four-week average for applications, a less volatile figure, fell last week to 388,500. That's the lowest level since July 2008, the last time the four-week average was below 400,000.

Plunged!  How dramatic...  what about the "long-term" unemployed?  Oh, you can find reference to that meaningless statistic at the "bottom" of the story:

Thursday's report also showed the number of people receiving unemployment benefits dropped to 3.77 million, the lowest level since mid-October 2008.

That doesn't include millions of people enrolled in emergency unemployment benefit programs funded by the federal government. Another 4.5 million unemployed workers received benefits under the extended programs during the ending Feb. 12, the latest data available. Altogether, 9.2 million people were on the benefit rolls that week.

This is just a preview of the blah-blah we will see when tomorrow's February non-farm payrolls report is released at 8:30AM est.  The CRIMEX goons always find a way to raid the Precious Metals for this most revered monthly financial data point.

It is quite frustrating to watch the Precious Metals being pressured when the US Dollar is getting taken to the woodshed, but comforting to know that it is good for the market to pause occasionally and catch it's breath during a Bull Market.

Here's a good joke I came across yesterday:
By Michael R. Crittenden
WASHINGTON (Dow Jones)--Federal Reserve Chairman Ben Bernanke defended the central bank's effect on the dollar Tuesday, pushing back at the idea that policy makers should consider alternative proposals like the gold standard.

Bernanke, appearing before the Senate Banking Committee, was pressed by Sen. Jim DeMint (R., S.C.) on the viability of a return to a gold-backed economy or the idea of the Treasury Department issuing bonds payable in gold. Bernanke, who has studied the issue, said a return to the gold standard wouldn't work.

"It did deliver price stability over very long periods of time, but over shorter periods of time it caused wide swings in prices related to changes in demand or supply of gold. So I don't think it's a panacea," Bernanke told DeMint.

Additionally, Bernanke said there were a number of practical issues that would prevent the return of gold as the world standard. Namely, there's not enough gold in the world to effectively support the U.S. money supply.

"I don't think that a full-fledged gold standard would be practical at this point," Bernanke said, declining to opine on the gold-backed bond issue because he was not familiar with the idea.

Not enough Gold?  LOL!  Is Bumbling Ben telling us that all the US Treasury Gold is gone?  Ben!  Even a small amount of Gold would be adequate...IF THE PRICE OF GOLD WAS CORRECT.  If Gold were valued at $32,000, there would be plenty of Gold to have a Gold standard Ben.  Keeping Gold marked down to create the illusion of a strong Dollar is the only issue preventing a return to a Gold standard.  Well, it's not the only issue, but it's a big one.

Our next cue in the direction of Precious Metals prices arrives tomorrow morning at 8:30AM est.

Todays MUST read is from the Wall Street Journal:
Why the Dollar's Reign Is Near an End

For decades the dollar has served as the world's main reserve currency, but, argues Barry Eichengreen, it will soon have to share that role. Here's why—and what it will mean for international markets and companies. .

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