Morning Gold Fix – June 1, 2010

FMX | Connect – www.fmxconnect.com - (Reported 6/01/2010)

The following is a summary of yesterday’s US gold activity and a recap of Asia & European markets overnight. It includes our proprietary options analytics and news stories from industry professionals.

Summary

July gold was up 13.6 to $1225.8 per 100 troy ounces as of 8:00 AM EDT, this morning. The June U.S. dollar index was up .565 to 87.235. July platinum was down 2.4 to $1542.57 per 50 troy ounces. Silver was up 3.3 cents to 18.46.

On Monday, the ECB made a statement that was not shocking to us, but apparently was relevant to the 3 or so people left with long positions in the Euro and the E-zone banks. Reuters reported, "The European Central Bank warned on Monday that euro zone banks faced up to 195 billion Euros in a "second wave" of potential loan losses over the next 18 months due to the financial crisis, and said it had increased purchases of euro zone government bonds." The result of that statement and it implications left the Euro down 1.3 % as of this writing, with equities down across the board, and the barbaric relic Gold up 10 dollars.

We do not see textbook default as something on the horizon for Greece or other E-zone countries. For deflation and deleveraging, that’s another story. The velocity of money is imploding as banks hoard what they need to protect balance sheets from a true valuation of their assets. Economic nationalism is emerging, as evinced by Germany’s ill-communicated decision to ban short selling. Those banks that will lend need to know their client by first name and hug their babies. International trade in Europe, we feel, is dying.

So if there is little chance of default and deflation is the word, why is gold rallying? In short, because its a currency. Just wait until the dollar gets competitively devalued for export purposes and Voila, it will change back to a dollar priced commodity. Gold is in the sweet spot, so to speak. Forget who is buying it. We want to know, Who is selling it? Not banks, not investors, not freaked out E-zone people. The sellers are hedgies with margin calls and tight stops. Pray that we get a 300 drop if you are a buyer, but don't bet on it.

-Elizabeth Thawne

For Market Prices Click Here

Previous Session Options Commentary

With the market unchanged, option volatility was offered heavily primarily in August where the 1250 straddle actively traded. Dealers were squaring up positions for the long holiday. The entire curve was soft through the day until the last hour when volatility firmed up as the market made new lows. Upon rallying with the news from Spain, volatility softened slightly. On the day, options were worth less than they were in the beginning.

Full Options Report Here

Technical Outlook

FMX Morning Newswire

Bloomberg (Reported 6/01/2010)

“Gold rose for a seventh day in London as the threat to growth from Europe’s sovereign debt crisis and declining equity prices spur demand for gold as a haven.

The euro slid against the dollar amid concern that mounting writedowns at Europe’s banks and efforts to reduce budget deficits will hamper the region’s economic recovery. European equities declined as China’s and Europe’s manufacturing growth slowed. Gold reached a record priced in Swiss francs.” Gold Advances a Seventh Day on European Growth Concern, Stocks

NS Futures (Reported 6/01/2010)

“Somewhat surprisingly the gold market this morning is benefiting from revived Euro zone debt contagion fears and that seems to have pulled the marked out of its recent physical commodity market focus. Apparently the markets keyed in on ideas that Euro zone banks were facing another wave of potential loan losses off the financial crisis and that in turn fostered an initial wave of flight to quality buying of gold overnight.

Equity markets in Asia and Europe have moved lower during overnight trading, which in turn put US equities indices under pressure going into the opening. The DOllar is sharply higher against the European currencies, but has lost ground versus the Yen.” Daily Metals Commentary 

Reuters (Reported 6/01/2010)

“Gold rose above $1,220 an ounce in Europe on Tuesday as investors bought the metal as a haven from risk after the European Central Bank warned that euro zone banks could face a fresh wave of losses.

It also benefited from concerns over the strength of the global economic recovery after data showed Chinese and European manufacturing growth slowed in May.” Gold climbs above $1,220 on debt concerns

For More

Energy News

Precious Metals

Softs & Ags