Gold built on Friday’s large gains overnight to continue a four-week rally, and is trading this morning at six-week highs. Gold ETFs added 7.4 tonnes of the shiny on Friday, the largest one-day increase in over 11 months. The SPDR Gold ETF (GLD) added the largest one-day amount since November 2012, when gold was near $1,700 an ounce. Hedge funds increased their long bets on gold for the fourth week in a row. Bullish bets on gold are standing at eight-week highs.
Silver is also holding on to its huge gains it booked on Friday, when it rose over 30 cents an ounce. Platinum, which closed Friday at over a two-month high, built big gains on that level overnight, as the largest platinum mineworkers union in South Africa announced it would strike on Thursday. This strike will shut down over 50% of global platinum production. Platinum was already facing substantial shortages this year that may exhaust above-ground reserves.
Precious metals triumphed Friday in the face of a dollar that hit eight-week highs. A flat dollar on Friday would have seen massive gains in the metals. Today, the dollar is moderately weaker, against a stronger yen that is seeing safe haven demand in Asia. The yields on the 1-year Treasury note is down slightly to 2.82%.
Stock markets are closed today in the U.S., in observance of the Martin Luther King Jr. holiday.
Physical gold demand in Asia is growing ahead of the Chinese New Year, which arrives on January 31st. The Peoples Bank of China eased market liquidity overnight, to stabilize interbank loans in the face of a looming default in an “investment product” that conducted shadow loans. The market consensus was that the government would bail out speculative operations, the way the U.S. government did Wall St., but Beijing looks like it will do nothing of the sort.
Also in China, factory production was reported to have risen “only” 9.7%. While such numbers in the West would be cause for partying in the streets, for China, this is the lowest number in five months. Chinese GDP expanded 7.7% in the fourth quarter of 2013. Again, these numbers would be cause for euphoria in the West, but are disappointing numbers for export powerhouse China. Stocks in China and Hong Kong dropped, led by the tumble of Industrial & Commercial Bank of China, which peddled the above-mentioned “investment product.”
In Japan, the Nikkei was also down, as Nintendo posted a surprise annual loss due to the failure of its Wii U game console.
In Europe, Deutsches Bank, which is under investigation for currency, gold, and silver manipulation on top of its conviction for interest rate rigging, posted a fourth quarter loss of €1.15 billion due to litigation and restructuring costs. Deutsches is looking to sell its seats on the London Gold and Silver fixing consortium, and is divesting itself from base commodity trading. The bank announced that it would still conduct precious metals operations, despite giving up its seats on the price-setting committee. The euro hit a six-week low against both the dollar and yen before recovering a bit.