Gold bubble continues to deflate

Posted August 12, 2008

The gold bubble is continuing to deflate, right alongside the oil and euro bubble. Just how far? Jon Nadler provides perspective.

by Jon Nadler, Kitco.com

Baltimore — (TFN): Showing no signs that it has found a near-term bottom, gold continued to lose ground in overnight trading and erased its year-to-date gains, plunging to $801.90 per ounce and turning into bear territory. The metal was the subject of long liquidation by funds and did not fully meet the anticipated bargain hunting demand from India. Although buying interest has picked up nicely in advance of wedding season, some local buyers are now betting that they might be able to pick up even cheaper gold if they wait some more.

Gold futures fell by their daily limit in Tokyo and Shanghai, while platinum fell limit on the TOCOM as well. The recent volatility in these markets appears to indicate a shift in the long-term trends of the dollar, the euro, and the precious metals. The US dollar was trading at 1.487 against the euro this morning, and at 76.30 on the index. The US currency solidified its gains as the UK pound came under pressure this morning. Oil prices fell more than $1.25 to $113.20 after Russia announced an end to its Georgian operation, and despite (unconfirmed) reports of a bombing of the Baku-Suspa pipeline.

Gold prices started Tuesday’s New York session still on the back foot, but looking a little better than overnight, down only $2.60 per ounce at $820.50 while participants ponder the metal’s next steps, but remain apprehensive that the upper $700’s might still be the first value zone for which it is headed. Bullion would need to return to above $875 to change the current situation in any meaningful way. Little in the way of data is on the economic calendar today, but a speech by Fed Chairman Bernanke is likely to draw the crowd’s attention this morning. Silver fell another 7 cents to open at $14.57 while platinum added to its losses in Japan by starting the day $36 lower, at $1477 per ounce. Palladium dropped $10 to $309 and appeared to be aiming for a test of support at $300 per ounce.

Finish this excellent article here…

****Make sure you sign up for our FREE TFN News Feed for breaking news, special reports and new financial videos. Sign up through your favorite reader here. Or, if you prefer, have the feed delivered to your email.