Gold and silver are basically flat this morning after a slight easing overnight. Platinum is modestly higher, while palladium has seen slight gains. Gold should see major support at the 200 DMA of $1289.
Platinum production: Large platinum company Lonmin announced that its South African operations were only at 30%, after the five month strike by miners was finally ended. It expects to by at 80% production by the end of September, and at full production by the end of the year. That means there are thousands of ounces of platinum that are not going to make it to market this year, after five months of nearly zero production.
In other platinum news, Northam Platinum reported that a mine elevator counterweight broke loose at their largest mine during maintenance, plummeting 6500 feet before crashing into the steel framework. This leaves the mine with only one shaft for the next five or six weeks, reducing output by 50%.
The dollar is down slightly, but holding on to the 81 mark on the DXY. The euro has stopped its recent fall to eight-month lows, but is still under $1.35. The yen is flat against the dollar, under the 102 mark.
Just as Israel and Hamas have eased off beating the hell out of each other, civil war has broken out again in Libya. Rockets fired at the airport in Tripoli hit a fuel storage tank, canceling international flights. The civil war in Ukraine still rages, with heavy fighting at the crash scene of Flight MH17. Both sides are firing artillery as well as fighting with automatic weapons. The fighting has prevented an international team of Australian and Dutch forensics experts from getting to the site, where wreckage has already been moved and luggage looted.
Wall St. is lower for the second day in early trading, as pending sales of existing homes unexpectedly fell in June. The -1.1% reading compares to a +6% reading in May. Analysts expected a rise of 0.5%. The year to year number for June was -4.5%, compared to +6.9% in May. Wage stagnation (and a drop in real wages after inflation), a low labor participation rate, and a shortage of affordable homes were blamed for the decline.
The Federal Reserve Open Market Committee meets tomorrow and Wednesday, and the U.S. GDP is released Wednesday morning. Don’t expect any big positions to be taken in gold or stocks until then. Also, don’t expect the GDP numbers to look like you expect. In order to make things look better, the government is “adjusting” the way GDP is measured, and is going all the way back to 1999 to change the numbers.
This is some of the same sleight of hand the government did when it stopped using the U6 unemployment rate (called the “real” unemployment rate now by some) and started reporting the lower U3 unemployment rate.
European stocks were flat as good earnings reports were counterbalanced by Germany stating that the EU should make peace its “top priority” when discussing sanctions against Russia, and not economic comfort. Germany and Austria are seen as the European nations most under Putin’s thumb, because of their reliance on Russian natural gas, and the number of companies with operations in Russia. This sent Russian stocks lower for a third day, hitting 11-week lows.
Adding to the pressure on Putin, an international court in the Hague ruled in favor of stockholders of Yukos, the huge petrochemical group seized by Putin as a move to destroy a powerful political opponent. The seizure was ruled illegal and politically motivated, and the Russian government ordered to pay $51 billion in restitution to the shareholders. This is less than half of what they sued for, but Russia has nowhere near that amount of loose cash lying around.
The owner of Yukos, Mikhail Khodorkovsky, had transferred his ownership stake in the company to others when it became clear that he was the subject of a government witch hunt, and so gains nothing by yesterday’s ruling. Khodorkovsky spent ten years in Russian prison after being convicted of tax evasion in a show trial. Putin released him as a public relations gesture before the Sochi Olympics.
Asian stocks had a very good day today, as the Nikkei hit a six-month high, Shanghai hit a high for 2014, and the Hang Seng hit a 3-1/2 year high. The reason for this exuberance was the Chinese government’s announcement that private equity (and foreign equity) would be allowed to play a larger part in the Chinese economy.
We’re still in the summer doldrums, where prices in all markets are seeing light volume. This means that trades that might normally not move the markets can have larger than usual effects. We will start seeing more volume and more physical demand as we get into the autumn, and India hits the fall wedding and festival season. Geopolitical risks are still in play, though the markets may be getting “terrorist fatigue” between Ukraine, Gaza, Iraq (remember ISIS? They’re still trying to take over the nation), and now Libya.
Libya in particular may increase oil prices, if their remaining oil terminals have to be shut down due to fighting. This would trigger some safe haven buying in gold, and higher oil prices in an of themselves are supportive of gold.