Gold hit a three-week high of $1,283 in early trading, as terrorist army Islamic State of Iraq and the Levant pushes towards Baghdad, and Russia turns off Ukraine's natural gas supply for non-payment.
Platinum is up moderately after the knee-jerk selling that hit the market on news of an agreement in principle to end the five-month mineworkers' strike in South Africa. Global platinum supply was forecast to have a 1.2 million ounce shortfall in 2014 before the strike, which began on January 23rd. The shortage now is likely over 2 million ounces.
FRIDAY'S ACTION: Gold closed modestly up by $2.80 on Friday, at $1,275.90, near the top of its trading range. Silver was up 15 cents to $19.67, ending near mid-range. Platinum and palladium were down $13 and $12 respectively, near the bottom of Friday's trading range.
INDUSTRY NEWS: There may be shenanigans in the labor negotiations in South Africa's platinum sector. News is spreading that AMCU leaders reported to workers that the mining companies were offering lower pay raises than what the deal actually said. If true, this is a dangerous ego-boosting game that could derail negotiations and keep South Africa's economy in decline.
India's central bank is planning on changes to make government bonds more enticing to the public than gold, in order to prevent the trade deficit from ballooning again. A tall order in a society where gold has held a prominent position for centuries. Indian farmers today still use ancestral gold as collateral for farm loans, as reported here.
ECONOMIC NEWS: The Empire State Manufacturing Index, which measure industrial output in the northeastern U.S., surprised to the upside this morning, giving short-term gold speculators an excuse to take some profits. U.S. industrial production increased in May by 0.6%, in line with expectations.
The Federal Reserve Open Market Committee begins its June meeting tomorrow morning, running through Wednesday afternoon. Fed Chairman Janet Yellen will hold a press conference afterward. Signs the U.S. economy is healing will likely mean that the tapering of the quantitative easing "money printing" to the big banks will continue. What analysts will be watching for is any sign that the camp inside the Fed that wants to see tapering accelerate is gaining strength.
The dollar bounced into positive territory in European trading, but dipped back into the red this morning in New York. The yen is seeing a large amount of safe haven demand between Ukraine and Iraq, while the dollar is once again being sold off as international tensions rise. It looks more and more as if the dollar is losing its role as a safe haven among international investors. The dollar today hit a five-YEAR low against the British pound.
Wall St. opened lower on Iraq worries, but the major indices are climbing, assisted by this morning's good economic news. European shares are lower on short selling action. Tokyo stocks are down over Iraq tensions, as Japan has no natural oil reserves, and a disruption of Middle East oil supplies is of great concern. Hong Kong closed flat.
INTERNATIONAL NEWS: The main news is Iraq, as ISIL reports that it has executed more than 1,700 Iraqi Army prisoners (mostly Shiites) as it pushes toward Baghdad. ISIL, which is made mostly of radical Sunnis too barbaric for even Al Qaeda to stomach, is going out of its way to publicize mass executions and beheadings in order to demoralize the Iraqi Army. As ISIL and the Iraqi Army fight outside of Baghdad, the Syrian Army is taking the opportunity to mount an offensive against ISIL-held territory in eastern Syria.
With a large number of ISIL fighters in Iraq, the Syrian government aims to regain cities before more advanced American military equipment and weapons ISIL has looted from Iraqi Army bases makes its way back into Syria. The terrorists are now literally as well armed as the Iraqi Army, including having HUMMVs and Blackhawk helicopters (which some ISIL fighters know how to pilot.)
Iran (a mostly Shiite nation) is sending Revolutionary Guards special forces units into southern Iraq to protect Shiite holy sites, and lend support to the Shiite-led Iraqi national government of al-Maliki, whose persecution of Iraqi Sunnis in retaliation for Sunni persecution of Shiites under Saddam is said to be a major source of support for ISIL in western and northern Iraq. Washington and Tehran are likely to cooperate to some extent in blunting ISIL's stated goal of a trans-national Islamic Caliphate. This is likely to strain Saudi/U.S. relations even further. Saudi support for fundamentalist Sunni rebel groups in Syria is been a sore point between the two nations.
Since the world is watching aghast at the developments in Iraq, Russia has decided to put the screws to Ukraine for non-payment of natural gas. By some accounts, Ukraine is $2 billion behind in paying its power bill. At least it isn't winter...