Gold closed at $971.80, down $2.40 for the first trading day of the week. The opening hour saw gold fall as much as $12.40, as profit-taking continued from last week's rally when prices neared $1,000. Prices rallied later in the day, most likely due to a sharp jump in oil.
Gold has now reached a week-long low. Why? One explanation is investors selling precious metals to cover losses in the equity markets. “There's still a need for cash, and metals are the first things to go,” said Frank McGhee, metals trader at Integrated Brokerage Services in Chicago. “Funds selling assets for margin calls had a cascading effect.”
He wasn’t the only one who thought so. “Gold may have a tougher time moving higher as investors that are forced to meet margin calls may have to liquidate holdings such as gold,'' said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “You're seeing people take some money off the table.”
Should the consolidation be worrisome for investors… or a buying opportunity? “The underlying fundamentals – fears that the US economy may already be in a recession, a weak dollar and firm oil prices – conspire to keep the yellow metal underpinned,” wrote Peter A. Grant in The Morning Gold Report.
From Ed Steer:
Gold was on a bit of a roller coaster ride in Sydney and Hong Kong in early Monday morning trading. Both gold and silver hit their highs for the day at the London open...and then it was lights out from there. For silver, that lasted until the moment the Comex opened. For gold, it was about ninety minutes after that. From these points onward, every rally in either metal got stuffed. The '8 or less' traders in both metals are huffing and puffing against every Comex long out there. I spoke to Ted Butler just before I started to write this, and he didn't feel that there was a lot of liquidation on Monday's take-down...but they sure were trying. Will they succeed or not...that's the question. The 50 day moving averages are a long way down in both metals. We'll see. Right now I'm having a 'Dimitri Speck' flashback. If you want a refresher on the relevant essay that I'm mentally ruminating on, click here.
Gold open interest fell 2,280 contracts on Friday and silver was down another 1,802. Not a lot for either metal. Open interest numbers for yesterday's will be out in a few hours...and they should tell us a lot. I'll have them in my report tomorrow.
In gold news today, I see that South Africa's gold production was down 7.4% in 2007 compared to a year earlier. The average grade of ore mined fell 11.8% to 4.12 grams per tonne. That's pretty slim pickings, considering how deep they have to go to get it.
The stories worth your time today are are all so awful, that it matter not which one I choose. The financial situation is now beyond horrific. I thought Friday was bad....but Monday proved to be at least one order of magnitude worse. I'm afraid I'm out of adjectives to describe the abyss that we now face. I see in a Reuters story that JPMorgan says that Wall Street banks could be looking at a "$325 billion margin call." That's a little low...it's probably ten times that number. Today's story is one that came from the Financial Times in London over the weekend and the headline reads "Credit Derivatives Turmoil Strikes" and is linked here.
It's not the strongest of species that survive, nor the most intelligent, but the one most responsive to change. - Charles Darwin
A week or so ago I stated that the safety catch was off the world's financial system. During the last couple of days, the whole thing has started to implode right before our eyes. Although the Rubicon was crossed last year, everything is now happening so fast, you need a program just to keep up. Along with that seat belt, that crash helmet I suggested you keep handy would be a nifty fashion accessory about now. See you bright and early on Wednesday morning...and I should have lots to talk about.
Casey Research correspondent-at-large Ed Steer is a keen observer of the financial scene and a board member of GATA.org.
Casey's Daily Resource Plus http://www.caseyresearch.com
Ich bin auch schon seit über einem Jahr FVI-Aktionär und warte geduldig ab. Hab heute nochmal zugeschlagen und meinen Anfangsbestand mittlerweile verdreifacht. Das wird ne Cash-Kuh!