Gold futures fell by a whopping US$60 overnight, stunning unwary investors into panic overdrive.
Last night, the precious metals, oil and agricultural futures all sold off quite heavily, down between 4% and 7.5% (in the case of wheat).
However, it’s the gold and oil that are getting most of the headlines this morning, having both fallen nearly 6% in New York Trade last night.
In gold’s case, the US$60 sell-off is being attributed to the Fed’s rate cut on Tuesday being ‘only’ 75 basis points.
However, analysts at research house Fat Prophets suggest it can be interpreted as a correction.
“We could rationalise the overnight drop in commodity prices in a number of ways, however, our charting analysts simply suggest that the precious metals and oil have suffered nothing more than a correction in an ongoing bull market,” Fat Prophets said.
They say the strong upward trend is still in place and no critical support levels have been broken.
The charting view supports the strong fundamental backdrop for precious metals and commodities, i.e. the Fed’s number one priority is to avoid deflation and to do this they are actively trying to create inflation. Bernanke’s actions over the past week bear this out.
In a market that has been tanking badly, the precious metals and commodities have exhibited extraordinary strength.
At this stage, a correction is a healthy development.
In a sign that those closest to the action think the bull market is still in force, Indophil Resources (IRN) today made an offer for Lion Selection Group (LST) and Lihir Gold (LGL) and Equigold (EQI) plan to merge.
Indophil Resources unveiled a $340 million scrip bid for diversified miner Lion Selection(LST), which has a 25.7% stake in its takeover aspirant.
Shares in IRN fell 4.5% by midday, continued to fall, closing 7.6% down at 61 cents. Lion Selection on the hand, gained 8.9% to $1.47.
Lihir fell 44 cents to $3.60 and its takeover target Equigold added 7.6% or 33 cents to $4.63.
Avoca Resources added 2.8% to $2.16, while Oxiana lost 7.7% or 25 cents to $2.98 and Newcrest lost $4.7 or 13% to $31.30.
