FYI | Dec 01 2006
By Greg Peel
Who am I today, Arthur or Martha? That’s the way traders must be feeling on the Street at the moment as each day brings conflicting economic news. While Wednesday night’s GDP figure was comforting, last night’s Chicago purchasing managers index – a benchmark for economic activity in the US great Midwest – slipped from 53.5 in October to 49.9 in November.
That was not good news. The US dollar, which had staged a fairly limp halt to its slide on the GDP figure, scrambled south once more. It is now at a 20-month low to the (most watched) euro, and a remarkable 14-year low to the sterling.
Gold has been eking up over the last weeks, wanting to push ahead, but somewhat wracked with uncertainty. The US$640/oz resistance level was always going to be a big test. But last night the cavalry arrived, in the form of renewed investor buying. Gold punched through US$640/oz like a rocket sled on rails, ending the New York session on highs of US$648/oz, up US$12.30, or 2%, from the previous mark.
This started a precious romp, as silver jumped US$0.34 (2.5%) to US$13.90/oz, and platinum (3%) and palladium (3.5%) joined in the fun.
Further cementing gold’s bullishness was the oil price. Traders had been basking in unseasonably warm weather over the last month or so, and given the madness of weather across the globe these days, who knew? Maybe a warm winter was on the cards.
Wrong. Traders rushed for their parkas as Arctic winds blew in from Canada and the WTI price on Nymex jumped another 0.8% to US$62.97/bbl. It now looks like it may even be an exceptionally cold winter.
Headless chooks were released on the floor of the NYSE, as the market bounced around all day from poor economic news, to rising energy stocks, to falling Wal-Mart sales data. On the bell, the Dow was down less than 5 points, but it had been quite a ride to get there.
Now that gold has hit US$648/oz, the bulls are all excited once more. The ground from US$640 to US$650/oz was meant to be like a crawl through treacle, but now the bugs are talking at least US$660/oz and maybe even the earlier tip of US$700/oz for Christmas. Deck the halls!
Why US$700/oz? “Because the dollar is going to hell”, said ANZ Investment Bank.