Gold fell to, and held near-term support at $914.00 in overnight trading in Asia before turning higher in the morning hours, ahead of the New York opening.
The dollar started out with solid gains following the G-7 summit but such gains turned out to be short-lived as markets took the verbal support offered by the meeting's participants as just that -- verbal.
The focus thus quickly shifted to what could become a fretful week as US earnings reports for Q1 make their way onto the news scene.
Stocks on the Nikkei fell the most in one month as investors exited in the wake of last week's GE earnings estimates and after Wachovia lined up to be the next institution to be the recipient of a much-needed $ 7 billion to bolster capital.
Three airlines went out of business, one into Chapter 11 and two are set to probably merge as the industry is staring into the abyss on sky-high fuel costs and maintenance woes.
New York spot trading opened with gold at $ 926, up $ 1.20 as players watched the dollar dropping under 71.60 on the index, and crude oil rise to just above $ 111 per barrel.
Although the G-7 made a notable shift in posture in the language of the post-meeting communiqué, the trade appears to be taking dollar-supportive words as ineffective until and unless they are supported by actual market action. Which, it may have to come to, but not just yet.
Silver was down 6 cents on the open, quoted at $17.68 but the noble metals took a harder fall. Platinum lost $48 at $1960.00 and palladium dropped $13 to $458.00 per ounce. US retail sales figures came in a bit better than forecast, recording a 0.2% gain in March.
The Dow looked all set to build upon last Friday's losses as the Wachovia news and anticipation of Merrill and Citi earnings later in the week fuel the anxieties, which are still very much part of the scene on Wall Street.
Bloomberg reports that: "Although traders may be wary of selling the dollar as aggressively as they have been, they may 'test' the G-7's appetite to defend it by pushing the currency toward $1.60 per euro, said Goldman Sachs' London chief economist Jim O'Neill, who correctly predicted the G-7 would toughen its language. The dollar closed at $1.5808 per euro on April 11."
In the interim, the 6th Annual Dubai City of Gold Conference wrapped up its proceedings on Monday, as delegates grappled with topics ranging from gold's price to demand prospects. Much has taken place during, and changed in the market over the past twelve months. One of our long-time friends, Jim Steel of HSBC spoke at the event and The Khaleej Times of the UAE sums up his thoughts thus:
"A decline in gold prices will substantially increase demand for the yellow metal, but not until it is about $ 800 per ounce. This is the ideal price for gold to become more accessible to a lot of consumers and investors worldwide, said James Steel, chief commodities analyst at HSBC Bank, who addressed the 6th Dubai City of Gold Conference.
Gold prices, however, could stabilise between $850 and $950 per ounce over a 12-month period as the weak US currency is seen to recover later in the year, according to other panelists at conference.
Steel said the price of gold would come down when global markets will have weathered the impact of a credit crisis in the US. He stressed that the current high prices of commodities have favoured the yellow metal.
Steel also illustrated the stability and growth of exchange-traded funds (ETFs) in gold investment, an opinion shared by Ross Norman, joint managing director of TheBulliondesk.com, a global provider of online information on precious metals.
Norman said that ETFs, which represent a basket of assets and traded on stock exchanges, have been growing by as much as 30 per cent per annum. "With more pension funds and industrial funds moving into the gold market, ETFs will grow significantly," he added.
Steel warned, however, against relying mainly on ETFs as regards investment projections in gold. "The phenomenal success with gold has spawned ETFs in other sectors," he said, adding that agricultural products would also have their own ETFs soon.
Finally, a brief report on platinum for today, from Bloomberg: "Citigroup Inc. raised its 2008 forecast for platinum by 18 percent to $2,005 and for palladium by 17 percent to $443. Both metals are used in jewelry and autocatalysts to cut emissions."
"Key contributors to these prices are not only the current tight market conditions, but also the continued weakness in the U.S. dollar,'' Citigroup said in a report e-mailed on Tuesday. "Demand is set to continue on its growth path as new emission standards are set in Europe in 2009. Demand for Chinese jewelry also appears unaffected."
The markets are looking a bit indecisive at this point in the day, but stay tuned for changes - and not necessarily small ones - ahead.
The closing of the Cambridge House Calgary Conference had a number of analysts assuring us that volatility and surprise shifts in values will very much stay with us before the summer doldrums roll around.
On a final note, if you are interested in silver (and who isn't these days?) and want to get the real picture of what is going on in that market, do yourself a favour and make a small investment into the CPM Group's 2008 Silver Yearbook, set to be released on the 29th of the month.
Jon Nadler is Senior Analyst with Kitco Bullion Dealers Montreal
