Gold and silver's sell off has continued this morning. Despite gold's 3.75% and silver's nearly 8.4% fall in January and the continued sell off in futures markets, physical demand remains robust and supply tight. While speculators are taking profits and some shorting, investors and those who see gold as a store of value continue to accumulate physical. This is particularly the case in China, India and Asia but western demand also remains robust as seen in the record demand for US Silver Eagles from the US Mint in January and continuing reports of dealers not being able to secure certain bullion products. Dealers in Hong Kong overnight report that "there doesn't seem to be enough supply in the physical market."
President Vladimir Putin holds a gold bar at a mineral resources exhibition in Madagan in the Russian Far East, Nov. 22, 2005. (Itar-Tass photo).
Asian equities were higher except for the CSI 300 in China which has lagged notably recently. European indices have opened tentatively and US Equity Index Futures are slightly in the red.
President Barack Obama's State of the Union address to Congress later today will be observed but no surprises are expected. Market participants appear to again be over optimistic about Obama's ability to help the US emerge from the economic crisis. Indeed, most continue to underestimate the scale and depth of the crisis in the US where a large minority of the population now survive on food stamps and real unemployment is likely over 20% and not below 10% as reported in the bogus Bureau of Labour Statistics figures.
The bombing in Russia, which is being blamed on terrorists, is another sign that geopolitical risk remains high and markets remain complacent about threats posed by terrorism, state sponsored terrorism and war.
Russian central bank demand for gold is set to remain high and they intend buying 100 tonnes of gold every year in the coming years, according to their central bank. They will acquire the bullion from domestic production according to the bank's first deputy chairman. This contradicts the statement by Vladmir Putin that Russia would buy gold on the international market. It is another underlying bullish fundamental for the market and shows Russia's long term intent of positioning the Russian ruble as a competing global reserve currency to the US dollar.
Gold
Gold is trading at $1,327.35/oz, €976.21/oz and £841.43/oz.
Silver
Silver is trading at $26.65/oz, €19.60/oz and £16.89/oz.
Platinum Group Metals
Platinum is trading at $1,782.50/os, palladium at $782.00/oz and rhodium at $2,400/oz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.