Jon Nadler is a Senior Metals Analyst – Kitco Metals
A further decline in crude oil prices conspired to drag most of the commodities’ complex to lower value ground as the new trading week commenced. Thus, precious metals lost chart altitude levels as well, despite the minor, 0.15 loss recorded in the US dollar index this morning.
Part of the early selling pressure was related to investors’ raising cash to cover margin calls incurred in the wake of the sixth consecutive losing session in the equity markets on Friday. However, at the end of the day (or, shall we say, the beginning thereof) reports that China’s economy is slowing (and perhaps more than just a tad) coupled with posturing by Saudi Arabia that it might ratchet supplies of black gold higher in coming weeks were the prime catalysts for the price dips we witnessed this morning.
As regards China, the prospects of a possible “hard landing” by that country’s economy were brought into discussion once again. NYU’s Dr. Nouriel Roubini said that he does not see the combination of China’s reliance on fixed investment (now running at about half of its GDP), its lurking “massive non-performing loan problem” plus its huge amount of overcapacity as resulting in any kind of a rosy outcome. For Dr. Roubini, the period after the year 2013 presents a “meaningful probability” for a Chinese economic “runway disaster” unless the aforementioned issues are tackled and resolved.