FYI | Nov 10 2006
By Greg Peel
U.S. voters wanted a resolution of Iraq, “but what they got is a new Speaker of the House,” said Ned Schmidt, editor of the Value View Gold Report. “Apparently, the gold market now realizes the potential damage to the U.S. of the new Congress.”
This report from MarketWatch is one that might have been expected yesterday, but it seems that it took the Democrats’ overall victory in both houses – they took the final Senate seat of Virginia – to snap Wall Street out of some strange delirium.
Perhaps a Democrat victory in the House but not the Senate was considered positive, while a totally lame (or as one reporter said, dead) duck president, is another matter altogether. Or perhaps Wall Street just simply refused to believe it yesterday. Either way, markets moved overnight in response to everything that this report covered yesterday (Wall Street Undeterred, Gold Confused, 09/11/06) in directions that might have been otherwise expected.
The Dow finished down 73 points to 12,103, and apart from some relatively benign consumer confidence data, reports suggest it was Virginia that tipped over a market looking for an excuse to pull back.
Gold was up US$17.80 to US$633.40/oz. This market suddenly realised that if the (supposedly) most powerful man in the (supposedly) free world does not have the support of his Congress then it is hardly a comfortable situation.
Gold was helped along, nevertheless, by Chinese comments that it intends to diversify its US$1 trillion reserves into other assets – any other assets – including oil and gold. We have known this for a while now. Why is it a surprise?
Commodity markets thus went to town. Apart from gold being up 3%, oil was up 2% (helped by lower than expected inventory levels), silver was up 4.5%, platinum 4%, palladium 10%, aluminium 4%, copper 3%, lead 1.5% and zinc 2%. Nickel (unchanged) was the only odd one out.
The scene is set for an interesting day on the local bourse. Is the commodity boom back in gear? Or is it just a bit of election adjustment? The SPI was down 6 points overnight.