Gold Stuck In The Mud
Jan 5th, 2009 | By Doug Casey | Category: Financial NewsGold slipped in the overseas markets, bottoming at $868 right at the New York open, moved higher to mid-morning, then went flat for the rest of the day in thin trading, finishing at $874.90/oz., down from the shortened Wednesday session but up $1.30 from Tuesday. For the week, gold added 4.4%.
Platinum was higher through the Comex, falling a bit during the Globex to end at $940/oz., up $29 from Tuesday. For the week, platinum gained a robust 10.5%.
Silver dipped below $11.10 in London trading, but was off to the races as soon as New York opened, rising all through the Comex and tacking on a bit more during the Globex, to close at $11.53/oz., up 61 cents from Tuesday. For the week, silver tacked on 6.6%. (Click here for charts)
The year began with a bang for platinum, and especially silver, as gold was stuck spinning its wheels.
Gold might have taken a lead from two of the usual suspects—oil, which moved higher, and equities, also up—but was effectively capped by a dollar that began 2009 by rallying strongly against the euro.
While gold may be “tracking movement in the dollar,” wrote economists at Action Economics, “expectations of more U.S. economic-data weakness and continued tension in the Middle East should limit the pace of any decline.”
Frank McGhee, of Integrated Brokerage Services in Chicago, concurred, saying that Middle East tensions are starting to trickle “back into the trading psyche.”
Still, many traders remain wary, put off by reports such as the one out of India, the world’s biggest buyer, noting that bullion purchases fell for a second straight month in December. Gold buying dropped to about 3 metric tons, from 16 tons a year earlier, according to the Bombay Bullion Association Ltd.
“Unless gold can bank on investment demand to more than offset the slump in Indian purchase tonnages, we must remain on alert and exercise caution,” said Kitco’s Jon Nadler. “Demand destruction of this type is not beneficial.”
That investor demand may well be there, as gold wrapped up 2008 with a gain of 5.5% on the year. Gold was clearly the place to be, as virtually every other asset declined, with the Case Shiller housing index down 18%, S&P 500 down 38%, 10-year Treasury yields down 42%, crude down 59%, live cattle down 15%. Etc., etc.
Those who sat on bullion did relatively well, compared with everyone else. Will 2009 be the same? We shall have to see what the year brings, but it seems likely that the answer will be more yes than no.
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Doug Casey is a contrarian investor, sought-after public speaker and author of several books. His work "Crisis Investing" held the position of # 1 bestseller on the New York Times list for 26 consecutive weeks. Doug's unusual views on the economy - and just about everything else - have gained a huge following in the investment community, and it certainly helps that his stock recommendations of undervalued junior exploration companies have made his subscribers millions. Now in its 27th year, Doug's monthly newsletter, the International Speculator, is one of the most established and esteemed publications on gold, silver and other natural resource investments. Together with the Casey Energy Speculator, it covers a broad range of carefully selected stocks with the very real potential of double- and triple-digit returns within 12 to 24 months.