Platinum Catches a Spark

(06/26/2009)
"Gold was dead flat until an hour before New York opened on Thursday, at which point it commenced a daylong rally that pushed it higher, albeit not very dramatically, as it plodded to a finish at $938.90/oz., up $6.80. Overnight, gold is trending higher.

Platinum finally constructed a solid day, adding $20 during the Comex session and ending at $1,185/oz., up $27. Overnight, platinum is pushing higher.

Silver buyers kept appearing after every selling spell, slowly inching the metal higher, and it closed just off its intraday highs at $13.99/oz., up 16 cents. Overnight, silver is sharply.

A strong day for platinum, though hardly a banner one for the other precious metals. Nevertheless, gold and silver both finished comfortably in the green.

The day's disappointment had to be that gold and silver didn't do even better, considering that the usual suspects were leaning in their favor, with the dollar declining against the euro and oil sharply higher.

Analysts also suggested that there was some speculation that record low interest rates—left in place by the Federal Reserve on Wednesday—will spark some demand for the metal as an alternative investment. The Fed said that rates are likely to remain at 'exceptionally low levels' for an 'extended period.'

Kitco's Jon Nadler said of the Fed's decision: 'While the Fed's take on the U.S. economic situation reveals a central bank that is encouraged by the signals being broadcast from various sectors, it also shows that when it comes to hiking interest rates in order to avoid deleterious inflationary effects from recent liquidity injections, the time is. . .well, it is not now.'

How far will inflation be allowed to run, and how far the dollar allowed to fall? These are key questions.

In another comment supporting a higher gold price, Commerzbank analysts wrote that, 'It is likely that China will buy further gold over the coming months and years, as, in contrast to other countries, gold still accounts for only a small proportion of China's entire foreign exchange reserves.'

Many in that country agree. China should buy gold rather than U.S. debt because the Fed’s policies make dollar depreciation inevitable, Li Lianzhong, a senior Communist Party official, told a conference in Beijing yesterday."

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