Market Update: Serpentine Movement of Gold

Sales of physical gold are expected to pick up in the coming weeks as China, the world’s second largest consumer of gold, prepares for celebrations in February when it will ring in its new year and mark the arrival of the Black Water Snake during its Spring Festival. Gold’s movement last week certainly looked like a serpent swimming in a pond, and closed the week up %0.6 at $1,657.50. Silver picked up slack and closed a full 4.6% higher, docking at $30.67. Chatter has begun about a possible hard landing for China’s economy. Rough rumors or real talk? As the U.S. fiscal follies come back into view with debate over the debt ceiling, prepare for some jitters in the market. From the outside, the Eurozone seems to be stable (if you consider a slowed slide into collapse as stable), but citizens in each country continue to launch local, alternative currencies. The unrest in the Central Republic of Africa has been halted by a cease fire agreement, but the citizens of the country still clamor for greater redistribution of the wealth generated by the national mining industry. This could be bad news for French mining concerns. Further pressure in Africa: if China does have a hard landing, Angola, Congo, Ghana, Zambia could also see major disruption to their economies. Like the predictions for the Year of the Black Snake, gold will have its ups and downs. Keep your eyes on China these next few weeks.

Precious metals on the move

London Fixed PM price at week’s end, and change over previous Friday:

• Gold: $1,657.50, up 0.576%
• Silver: $30.67, up 4.6%
• Platinum: $1,626, up 4.43%
• Palladium: $693.50, up 0.65%

In the news

Hard times for the Euro and uptick of Chinese consumption gives a boost to gold 
“The market was already trading higher on the Chinese data, and Draghi’s statements gave it a further boost.” — Bill O’Neill, Logic Advisors (link)

Swiss foundries cannot keep up with demand for deliveries of physical gold, spurred by the drop in price at close of 2012 
“The paper sellers are selling what they don’t have, and they can never deliver. And the buyers are buying paper gold that they can never get hold of.  The day the paper buyers realize this, which in my view is not far away, gold will explode. This is why it is so important to hold physical gold and to hold it outside of the banking system.” — Egon von Greyerz, Matterhorn Asset Management (link)

Recent drop in the growth of the Chinese economy has some analysts fearing for gold and other commodities
“A significant drop in Chinese PMIs would send gold prices surging 15 percent in the first quarter after a hard landing to $1,963 per ounce.” — Societe Generale’s head of commodities research, Michael Haigh (link)

Lightening does not strike twice, unless it’s an inside job
“The rare Gold Rush-era box stolen in Monday’s burglary… is an invaluable historical object depicting the pioneer history of our state. The museum’s collection is held in public trust by the city and people of Oakland, and we hope that everyone in our community and those further afield will help us recover this precious object for the people of California.” — Lori Fogarty, Museum Director (link)

Spotlight on Silver

Silver should be a part of your fiscal emergency kit
“Basically, silver is cheap and is priced well below its historical inflation adjusted high. Relatively active price management has resulted in an artificial perception of sufficient physical supply, when it is really paper silver that is being supplied, not the metal itself. Although quite effective in terms of adjusting market sentiment, paper silver price manipulation is ultimately a futile exercise, and the physical metal’s supply will eventually determine the retail price.” — Jeffrey Lewis, SilverSeek (link)

The week ahead

• Greece is all but declared a failed state and UK looks at a triple dip recession
• With eyes on gun reform in the country, will debt ceiling negotiations be easier in the U.S.?
• Cold snap spurs China’s economic slowdown but the rate is a shock nonetheless
• Consumer and producer price indexes to be released