By Jon Nadler
One quarter of a million US
private sector jobs (the most in seven years)
were lost in November as the economic downturn
accelerated. Add the ISM's November
non-manufacturing sector record shrinkage
figures to that bit of news, and you get the
general background picture for the markets as
today's sessions got underway. Think Edvard
Munch's "The Scream" for starters. And now the
focus turns to pricing in more news of the same
kind for the weeks ahead in December. Beginning
with Friday's jobs numbers - expected to reveal
some 320,000 lost nonfarm jobs.
The markets are certainly looking for a hefty
half-point Fed rate cut in less than two weeks.
However, generous moves of a similar nature are
also expected from the BoE and the ECB and are
seen as likely sterilizing the potential
short-term impact of the accommodation on the US
dollar. The greenback was maintaining above the
87 level on the index, while crude oil remained
near $47 per barrel. One hundred bucks cheaper
than the same barrel's price tag in early July.
The de facto tax cut being enjoyed by consumers
suddenly able to borrow mortgage money for under
5% and fill up their cars with $1.65 per gallon
gas is providing some comfort, but the debate is
already raging on as to whether this is a
potentially new paradigm, or just a fleeting
New York gold prices started out under renewed
selling pressure but recovered later in the
morning along with a turnaround in the Dow. Lows
came near $762.00 and the bounce off that level
brought values back to near $777 before noon.
How much progress can be achieved in the next
day or two is still in question, however. India
appears to have once again shifted into neutral
and is apparently awaiting buying windows near
$745 at this point. Silver turned positive on
the day, erasing earlier losses on the same Dow
rally, and were trading near $9.60 per ounce.
Platinum treaded water near $805, while
palladium rose $3 to $173 per ounce. Disastrous
slides in auto sales in recent weeks have put a
damper on the outlook for noble metals (see
below). While US automaker chiefs pulled a nice
PR stunt and drove to DC in hybrid vehicles in
order to appear more credible when extending
their hats, the UAW was seen as making major
concessions on the compensation front in order
for its members to keep receiving...any
compensation at all, going forward...
We mentioned at the end of November that this
(and January) will be the months when various
intense crystal ball-gazing and Magic 8-Ball
shaking sessions will yield some numbers that
their participants distill out of the cloudy
innards and hope that they come to pass.
This is a hazardous occupation (and not just for
one's eyes), at best. But, thus far, the surveys
have certainly been more 'on the ball'
so-to-speak than the astronomical price
assurances readers have been getting from other
quarters. Since at least 1980.
Our old (but quite young) friend Jan Harvey,
over at Thomson Reuters, brings us the results
of the latest precious metals price projection
survey for 2009. Not exactly the rosy picture
that the perma-bulls are churning out day after
day, despite the accelerating deflation signals.
Falls in copper, lead, nickel, aluminum, and
stories of Freeport McMoran dividend suspensions
and output cuts all hit today and underscored
the true picture. As for 2009, here is what the
people who actually work in this industry have
"Prices of precious metals platinum, palladium
and silver, which have significant industrial
uses, are expected to slump next year as demand
sags in line with economic growth, a Reuters
However, gold should fare better than the
industrial precious metals as investors buy
bullion as a haven from risk, especially if the
dollar recovery loses traction. A poll of a
dozen analysts showed 2009 gold forecasts down
just 9 percent.
This fall is dwarfed by cuts in price forecasts
for the other precious metals. Analysts have cut
their median 2009 silver forecast more than 40
percent since July to $10 an ounce, and slashed
their palladium forecasts by half to $225 an
Platinum forecasts have been cut by nearly 50
percent to $1,050 an ounce from $2,025. The new
view is down over 30 percent from $1,577
forecast for 2008, but above the current spot
platinum <XPT=> price of around $800 an ounce.
"We have had a huge hit on the back of a
deterioration on the demand side for
autocatalysts," said Stephen Briggs, a metals
strategist at RBS Global Banking & Markets.
"But the market is pricing in much of the worst
now and in doing so it has brought prices down
to levels where producers are struggling to make
"The fear must be now that projects in the
future will be postponed, delayed or cancelled,"
Platinum has slumped 65 percent from an all-time
high of $2,290 an ounce hit in March this year
on the back of expected supply problems linked
to a power shortage in South Africa, source of
four out of five ounces of the world's platinum.
Investors have been spooked by a spate of poor
car sales numbers from around the world, most
notably in North America. U.S. car sales fell to
25-year lows in October, while November sales in
Europe and Asia have tumbled.
Major carmakers including GM <GM.N> and Toyota
<7203.T> have said they will cut output in
Platinum prices are particularly exposed to
falling car sales, as around half the global
supply of the metal is consumed by automakers
for use in catalytic converters.
The survey of a dozen analysts also showed gold
price forecasts have been cut by just under 9
percent for 2009 to an average $849 an ounce,
from a previous view of $930 in July. The
year-on-year fall in gold prices will also be
softer than the decline in other metals, with
the median gold forecast of $849 only 3 percent
off the $874 predicted for this year.
Analysts point to falling inflation as a reason
for gold's decline.
"Normally when you have a move from inflation
fears to worries about disinflation and
deflation, gold should suffer," Societe Generale
commodities strategist Jesper Dannesboe said.
The direction of the dollar will also be closely
A recovery in the U.S. currency from the
historic lows it plumbed against the euro
earlier this year helped pressure spot gold <XAU=>
from a high of $1,030.80 in March to around
$775. As gold is often bought as a hedge against
dollar weakness, any move in the currency will
have a significant effect on bullion prices.
However, analysts are divided over whether the
dollar can hold onto its gains, or will weaken
once again -- which would provide significant
support for gold.
"We think the U.S. dollar has gone a bit too
high and we see it falling back again through
2009," said Citi analyst David Thurtell, whose
bank in October forecast gold at $950 an ounce
next year. A number of supportive fundamental
factors remain for bullion, he added. "Mine
supply is also quite constrained, even though
most mines are still quite profitable," he said.
"And investment demand is still quite strong."
We will hopefully be able to bring you some of
the views of participants at the 3rd Annual
China Gold Summit before the weekend. Stay
tuned. Signs point to "Yes."