Morning Market Update: Feb 13

February 13th, 2013 by

Short covering in early morning trading in New York has helped gold regain its footing, after a shallow slide in overnight trading. China markets remain on holiday all week, so the level of physical buying is Asia is much lower than normal right now. Gold has been trading in a very narrow range in U.S. trading all week, since the drop seen early Monday morning.

There is no real guidance on gold prices right now, and many investors are sitting on the sidelines, waiting for developments in the G-20 meeting in Moscow on Friday and Saturday. The main topic for discussion is expected to be the competitive devaluation of currencies by the various nations.  The Group of Seven nations (Canada, France, Germany, Japan, U.K. and U.S.) collectively issued a statement yesterday asking Japan to not follow through with its proposed action of buying foreign bonds with yen. This tactic would be purely to devalue the yen, instead of ostensibly being one to improve domestic conditions.

European equities were slightly up in choppy trading as the euro rose, but corporate earnings reports disappointed. With the Chinese markets closed, eyes in Asia were on the Nikkei, which dropped 1% on export profit taking as the yen rose, and lackluster corporate earnings. Wall St. is set to open slightly higher, as the bulls still have the advantage as funds chase returns in riskier avenues than bonds.

The dollar is slightly lower, and oil is slightly higher, near a 5-month high. These factors are lending support to gold. Palladium hit a 17-month high yesterday, and platinum stands to gain as well due to destabilizing developments in Zimbabwe, where the government has seized 69,000 acres of land from platinum miner Zimplats. (Check our story yesterday for details.) PGMs are positioned to benefit most if the global economy improves, due to projected shortages, and the many industrial uses the metals have.

by David Peterson