By Jon Nadler
continued to orbit around the $900 mark,
however, they were seen spending the bulk of the
midweek session above that level. Highs near
$914 were achieved on the back of a somewhat
weaker dollar, an indecisive stock market, and
were ultimately hampered by swooning crude oil
values. Gold's most recent rally exhibits the
unmistakable footprints of speculative hedge
funds (and, according to MF Global analysts, a
small pack of them, at that) as the buying
stopped suddenly, and ETF holdings grew no
further - this, despite no material change in
global macro conditions. Hard to believe that a
wide range of individual gold buyers suddenly
smacked themselves on the head, and realized
that India was (still) not buying, or that the
gold ETF had grown to scary proportions (yes, we
have now seen reports that allude to the fact
that some buyers are shying away from that gold
proxy vehicle, as they deem it to be 'too big').
Spot gold was up $5.50 an ounce, in the late
afternoon, and with only 90 minutes left in
electronic trade, the metal was quoted at
$902.80 (bid) per ounce. Some of what may happen
in the next couple of sessions could hinge on
the closing level this evening. For the moment,
the book-ends of the price range are seen at
$875 to $950 with the inside channel extending
from $890 to $920. Silver gained a 18 cents, and
was last 'spotted' at $12.75 per ounce, while
platinum moved only $2 higher to $1043 and
palladium went nowhere again, remaining
unchanged at $196 per ounce.
The action in noble metals continues to be
agonizingly slow. There is very little to get
excited about, as baseline demand remains
lackluster in Japan (jewelry, autos) and shows
no signs of returning to former levels in the
US. Labor concessions from the UAW and other
savings might help Ford avoid the possible fate
of GM and Chrysler, but are doing nothing in
terms of adding to net platinum demand in North
America at this time. Thus, the markets in
platinum and palladium remain at the beck and
call of spec funds at this time, and even they
are showing signs of being sated for the time
Adding to the aforementioned 200 tonne hedge
fund gold buying spree in the early part of
2009, a hitherto unlikely bunch: central banks.
No, not China, or some other Asian central bank.
More like nephew Rafael, uncle Hugo (now, his
dollar distrust, we can understand) and cousin
Vlad (Putin) who felt the collective need to
scoop up 34 tonnes of bullion for various
reasons. Platt's reports on the findings over at
CPM Group NY (whose annual gold overview is set
to launch on the 24th):
"Central banks, which have been net sellers of
gold in recent years, were net buyers of an
estimated 1.1 million oz in January, according
to the latest Market Alert by the CPM Group, the
New York-based metals consultancy. The world's
central banks were both buyers and sellers, but
the quantity bought outstripped what was sold.
Ecuador is estimated to have purchased 920,000
oz of gold in January, Venezuela bought 240,000
oz and Russia purchased 130,000 oz, after having
bought 310,000 oz in December. "Ecuador's
government has run into severe political and
economic problems, and has a dollarized economy,
using the US dollar as its currency and thus not
having many monetary tools, such as being able
to issue money that other central banks
possess," CPM noted.
France was the largest seller of gold in January
by 40,000 oz and 10,000 oz, respectively. "It
seems highly unlikely that such large net
purchases of gold by central banks will
continue," said CPM. "However, those central
banks that have been selling gold for much of
the past two decades have sold most of what they
wanted to sell. Others are buying small volumes,
and considering larger purchases, in the face of
the financial crises and currency market
volatility they have faced over the past year."
Loading up on gold, or unloading some of what's
in the basement. A question not yet preoccupying
the G-20 too much. They are more intensely
focused on the issue and effectiveness of the
stimuli packages which many of them launched.
Tim Geithner for one, is fretting about the
half-life of the injections and appears at odds
with Mr. Bernanke's opinion that we
(collectively) will have climbed out of the cave
by the start of next year.
Spending plans that major countries around the
globe have put in place to combat the worldwide
recession may not have the strength to make it
to the late rounds of the crisis, Treasury
Secretary Timothy Geithner said Wednesday.
Fiscal outlays intended to revive economies must
be sustained into 2010, Geithner said. At the
moment, statistics from the International
Monetary Fund show fiscal stimulus plans are
expected to drop off next year, he said. The
global crisis shows no signs of weakening yet.
Rather, the recession has been "deepening,"
according to the most complete data available,
"What we're seeing happen really around the
world now is really without recent precedent,"
he said. The Treasury secretary's comments came
during a press conference ahead of his trip to
London to meet top finance officials from 20
major economies. Geithner will be preparing the
way for President Obama and fellow heads of
state and government to meet in early April.
Geithner threw his support behind an IMF
recommendation that major economies enact
spending plans equal or greater to 2% of annual
gross domestic product. Geithner sidestepped
questions on whether the big countries of Europe
were meeting the spending target. "That's really
a question for the IMF," he said.
There is some debate over which spending to
count. And some important countries such as
Germany and Japan have not been enthusiastic
about increasing spending.
To amplify the effect, the fiscal actions should
come at the same time, Geithner said.
Also on the table for discussion at this
weekend's G20 meeting will be reform of the
oversight of the financial institutions. But
this discussion may not be as fruitful because
the U.S. position on many of the issues won't be
known for a few weeks.
For instance, many continental European
countries are calling for strict oversight of
hedge funds. The idea is not popular in London.
Geithner has been silent on the issue.
Geithner did say that the U.S. would push for
new global regulatory standards that are shared
evenly among countries. He suggested that the
Financial Stability Forum would be sort of like
a referee of these reform efforts in order to
maintain standards. "The United States will
promote a race to the top, not to the bottom,"
Geithner said. But this pledge will surely be
tested in the coming months. For years in
Washington, banks and other financial firms were
successful in loosening U.S. regulation by
arguing that, if the rules were not relaxed,
lucrative business would disappear overseas.
Many countries have been benefited by loose
standards, in the same way that Delaware has
been advantaged by its relatively less strict
There seems to be broad agreement among G20
members that the IMF needs a quick infusion of
money so that it can assist countries in Eastern
Europe and other regions that have been hammered
by the global financial crisis. These countries
have seen credit disappear from their economies
as banks and investors instead hoard capital.
Geithner proposed a $500 billion increase of the
IMF's emergency reserve fund. He also signaled
support for initiatives already in the pipeline
to have the IMF sell some of its gold to help
the poorest countries of the world.
The U.S. share of the new fund would be roughly
$100 billion, he said."
100 big ones. These days, seems more like an
'opening bid' amount. Why Bernie has allegedly "Madeoff"
with half that much.
Anyone still counting?