Gold prices are trading in a very tight $5 range, right at yesterday's spot close. The dollar is posting slight gains. Talk of a currency intervention by the Bank of Japan led to a modest selloff of the yen, which is helping the US greenback.
In an unheard-of bout of candor (especially for the Japanese,) the Japanese Finance Minister revealed to reporters that not only does the Ministry of Finance and the US Treasury Department have conflicting views of where the yen should be trading, they have actually had arguments over the phone about it.
Look for gold to find support at $1,260, then $1,249. First resistance comes in at $1,268, then $1,284. Hedge funds and other speculators seem to be viewing the price drop yesterday as temporary consolidation, as speculative longs on gold are at their highest point since 2011. The last time hedge funds were this bullish on gold, prices hit an all-time high over $1,900 an ounce.
The dollar's recent decline was halted by the Pied Pipers of the Federal Reserve, which keeps peddling the idea that they will increase interest rates next month. This reversal is weighing on commodity prices, including gold.
Oil futures are almost 2% higher today, as supply disruptions caused by the Fort McMurray wildfires continue. Canadian crude production is down by an estimated 1 million barrels a day. Insurers are predicting that the wildfires will have a greater effect on the Canadian economy than Katrina had on the US economy.
As goes oil, so goes the stock markets. Wall St is higher this morning, on the back of an oil rally. The rally may be short-lived, as Alberta tar sands operators are reporting minimal damage to facilities. The main hurdle to resuming production will be getting workers back on the job. Tens of thousands of workers have either lost their homes entirely to the fires, or are unable to return home due to the loss of electricity and water service.
Oil prices got some bad news today, as Kuwait announced a nearly 50% increase in oil production, to 4 million barrels a day. Plans are to hit this mark in 4 years, and sustain it for at least ten years. In Russia, Rosneft CEO Igor Sechin sounded the death knell for OPEC, saying that the organization has fractured to the point where it will never dictate oil prices again.
Conversely, Eldorado Gold finally got the necessary permits from the socialist government in Greece to resume construction at its oft-delayed Skouries gold mine. While the mine has encountered local opposition, the prospect of 2,000 new, well paying jobs in a region with an unemployment rate of 30% helped swing things in favor of the project.
In the "bad news is good news" for gold department, a senior Bank of America analysts warned of a "vortex of negative headlines this summer" that will send stocks sharply lower. A senior Morgan Stanley analyst is advising that investors employ a variation of the old "Sell in May and go away" adage, saying sell in May and invest in market volatility hedges.
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