Spanish Crisis Hurting Commodities (Again)

Precious metal prices have dipped this morning. No prizes for guessing why: eurozone uncertainty, with increasing doubts among traders as to whether or not Spain will make a formal request for a bailout, and media reports of disagreement between France and Germany as to the best means of dealing with bailed out nations. France is unsurprisingly the good cop to Germany’s bad cop, with French Prime Minister Jean-Marc Ayrault arguing that the Greeks should be given more leeway in meeting budget cut commitments.

The euro slipped under the USD 1.29 mark in trading for the first time since the Fed’s QE3 announcement on September 13 – though has since recovered – while the Dollar Index is up 0.27% from Friday’s close and heading back towards 80.00. A rising dollar (and falling US Treasury yields) are generally indicators of “risk off” moves on the part of hedge funds, which coincide with falls in the euro and commodity prices.

Gold has lost around 15 bucks since the start of trading today, with silver down some 60 cents, and once again below $34/oz. Silver should find strong buying support at $33 (if it falls that far). As far as the yellow metal’s concerned, recall James Turk’s interview with Jim Sinclair last summer, and Jim’s highlighting of $1,764 as a key pivot point for gold:

“$1,764 has the same implications as $524.90 had. It's mathematical. But what it would indicate would be that the trend had changed now from arithmetic with certain periods of a geometric rise into a period of time where exponential rises are possible. $1,764 is the loss of confidence. $1,764 is the king has no clothes. $1,764 is the transparency of the depths of our problems and the duration of our problems.”

In other news, the FT reported last week angry comments from Brazil’s finance minister, Guido Mantega, aimed at Ben Bernanke’s Federal Reserve. Mantega accused the Fed of “protectionist” moves aimed at depressing the dollar and boosting US exports, and described the move as part of “a currency war.” For more background on this facet of our current economic landscape, readers would do well to watch Currency Wars author Jim Rickards’ latest interview with Max Keiser.