The precious metals are drifting in COMEX trade this morning, after finishing up for the week on Friday. Gold is treating the 200-day moving average (200 DMA) of $1,298 as support. Silver is barely below Friday’s New York close, while platinum and palladium are modestly lower.
The dollar is weaker, continuing a lethargy that has persisted since the new year. Many banks and currency traders were expecting a strong bull year for the greenback, and have been sorely disappointed. The fact that the dollar was actually weaker than the euro during the Ukraine crisis, seeing no safe haven demand at all, may be signalling a change in the way the rest of the world views our currency.
Tech and biotech stocks are dragging markets down on three continents, with Wall St. opening lower, and European stocks in the red. The Nikkei hit a one-week low as well on flagging tech stocks, with a weaker dollar/stronger yen hurting exports. Hong Kong stocks were also hit by the drop in the tech sector, but Shanghai was in the green, as Beijing’s targeted stimulus focusing on upgrading the nation’s railway system helped soothe investors. Instead of mass bond-buying on the open market like the U.S. and Japan does, China is trying a more focused approach. They want to weed out overcapacity in their industrial sectors, while supporting growth overall.
Asia still has a love affair with physical gold, as recent reports show demand up in several emerging market nations, including India and Turkey, as well as China. At a recent conference in Dubai, the president of the Dubai Multi Commodities Center announced that fully 40% of the world’s gold trade went through Dubai in 2013. Totaling 2,250 metric tons, $75 billion worth of gold was sold through Dubai.
At the same conference, John Hathaway of Toqueville Asset Management warns the audience that their gold may not be safe in banks, even in allocated accounts. He said that even allocated gold could be confiscated if a bank failed, and suggested that vault storage at non-banking institutions would be a better place to store gold.
There’s nothing really on the economic news calendar today, so expect markets to react to technical cues. Short-term traders will probably be hesitant to take a position ahead of Wednesday’s release of the minutes from the March meeting of the FOMC, even though the path ahead is pretty well known. For gold, big movers in the medium term will be what sort of easing on gold imports will we see after the election in India, and how much China’s newly-acquired (and totally proper) fear of non-regulated financial instruments will increase gold demand.
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