Platinum set for bullish high: Goldman Sachs
2009-07-16 18:15:00 Print
All was steady and quiet on the Western front ahead of labor statistics being released this morning. Gold prices turned overnight losses of nearly $6 into only marginal declines this morning, while the US dollar continued to slip amid whopper earnings reports - such as those offered up by JPMorgan this morning. The firm's profit was up 36% for Q2 and it trounced analyst estimates. Tim Geithner trounced some estimates as well - those that still call for economic Armageddon - by stating that he sees some 'very encouraging' signs of amelioration in the global financial system, and in related confidence towards it.
Gold prices opened with hardly visible (50-cent) losses this morning, quoted at an even $939.00 per ounce, against a 0.20 point drop in the greenback's value on the trade-weighted index. Whilst oil prices gave back more than half a dollar and slipped to $61 per barrel, the decline was not seen as materially impacting the precious metal at this moment. A government energy adviser bluntly predicted a major collapse in crude oil for later this year - down to $20 per barrel, based on a huge surplus and once again vanishing, recession-impacted, demand. There is hardly a way that a two-thirds cave-in in oil would not affect gold values. Whenever such an implosion were to take place.
Profit-taking following yesterday's surge to just above $940 was seen as potentially more meaningful for the next two sessions, and some of these sales have begun to emerge even before yesterday's settlement came in. Some of what the trade does today will obviously be jobs numbers-driven, but the overall move we have had this week is not seen as the start of some new chapter for the yellow metal. There is still much lacking on the fabrication demand front, despite the latest weather news from India - indicating perhaps only a 20% rain deficit for the monsoon season as of now.
Jobless claims hit the wires a few moments ago, and they reveal the lowest initial claims figures since January - at 522,000 in the week ended July 11. Initial reaction in the precious metals complex was mildly to the downside. The numbers are seen as subject to adjustment and are not seen as remaining on track after further layoffs will hit the labor market after not having taken place at this time. Stock futures gained on the jobs news.
Silver opened at $13.22 and was off by 3 cents at the starting time of today's session. Platinum gained $4 to open at $1161.00 per ounce, and palladium rose $1 to $246.00 per ounce. A bullish-platinum forecast was offered up by Goldman Sachs, citing improved auto production heading into the home stretch of 2009 and renewed (although unnamed) production problems out of South Africa.
No specific price target was included for the January 2010 contract as far as we know. Point is, if one has an appetite for risk, and is cognizant of platinum's recent peak near $2300 per ounce, well, the current math might just become compelling - even if the metal tops out halfway between here and there. Or, put another way, who sees another $600 being added to the price of gold between today and early next year? We do not. Not as of today.
Also helping investors' rising appetite for risk were news from China that the country's economy grew at a 7.9% pace during Q2. Remaining doubts about the effectiveness of various stimuli are facing a tough time in lingering around. On the not-so-hot news front, US foreclosures rose by a significant 20% from one year ago levels. Basically, 1 in 84 US housing units of all kind were foreclosed upon in the first half of the current year.
Continued focus on the global economy, risk appetite and/or aversion, and keeping an eye on equity markets appear to be on the menu for precious metals players as we head into the final sessions of this week. Nice rally thus far - question is, how sustainable? The tea leaves are in the green shoots. Be that green tea, or black tea.
Jon Nadler is Senior Analyst, Kitco Metals Inc
