Gold is stronger in New York after some slight profit-taking overnight that was sparked by it hitting a four-month high of $1,338 on Monday. Silver consolidated moderately overnight, after seeing a bullish “outside day” and hitting its own four-month high yesterday.
These big gains show the recent strength of precious metals, as they occurred against a stock market rally yesterday that saw the S&P 500 touch an intra-day record. Gold is in a seven-week uptrend, while silver is in a four-week uptrend. Platinum is trading near yesterday’s close, while palladium was weaker in European trading.
Gold is still seeing safe haven demand over instability in the Ukraine and continued violence in Thailand. The Ukrainian Parliament has suspended efforts to form a new government while it deals with imminent sovereign default. It is attempting to arrange an emergency bailout from the European Union and International Monetary Fund.
Turkey is back in the news as President Erdogan purges the police and judiciary to suppress corruption probes against himself and allies. Censoring of the Internet in order to block news or accusations of corruption from outside sources is the latest move by his government that has sparked off street protests. Any accusations of wrongdoing are met by charges of treason or described as a “coup attempt” by Erdogan. The breakdown in the rule of law is already negatively affecting Turkey’s economy, and squashing any hope of progress on Turkey’s application for EU membership.
In currency news, the dollar has returned to recent weakness, while the yen is stronger. The yuan saw its largest one-day drop in three months, in a move seen as orchestrated by China’s central bank to flush out leveraged currency speculators. The Chinese government intervenes to only allow the yuan to trade within a certain range each day, capping one-day gains or losses. It is planning to widen that band soon, as part of the campaign to make the yuan a fully-convertible currency and eligible for reserve currency status.
Also on the subject of the Chinese yuan, the central bank (Peoples Bank of China) removed another 100 billion yuan worth of liquidity from the market today, in the latest campaign against the huge “shadow banking” sector that threatens its economy. These non-bank loans to failing companies whose credit rating precludes them from obtaining normal loans are a substantial portion of the economy, and failures of these loans could cascade into a Lehman Brothers/AIG -type situation and bring about another financial collapse.
This led the Shanghai exchange to close down 2%, and drug the Hang Seng down .36%. In Tokyo, the Nikkei rode Wall St’s high yesterday to a four-week high of its own. Profit-taking market European markets, after a three-week rally.
U.S. stocks opened higher, but dropped immediately afterward. U.S. home prices were reported to have risen at a slower pace in December, and the consumer confidence index dropped to 78.1 from 79.4 in January.
The technical outlook for gold still remains positive, with the next near-term goal being a breach of the $1,350 mark. Platinum is also being bid today, as the mining strikes in South Africa drag on. In a bit of a pubic relations ploy, the mining trade group in South Africa has launched a website devoted to the ongoing labor strife, with a real-time counter showing how much revenue the companies have lost since the start of the strike, and how much in wages the miners have lost. It can be found at http://www.platinumwagenegotiations.co.za.