Precious Metals

Gold was flat to slightly higher in the far East and most of London trading, but went vertical in the second hour of the COMEX and never looked back, rocketing higher to finish barely off its intraday high at $862.90, up $85.20 (more than 10.5%). Overnight, gold has pushed higher.

Even battered platinum got some love yesterday, climbing from its low around noon to end at its intraday high of $1117/oz., up $78. Overnight, platinum has been flat.

Silver had already been trending higher in London when it hit the same New York launch point as gold, and then when it took off found an even steeper trajectory as it turned in the performance of the day, closing at its intraday high of $12.06/oz., up $1.62 (better than 15.5%). Overnight, silver is sharply higher. (Click here for charts)

Such a day. Was Wednesday, September 17th, the day the markets finally turned for the precious metals? While it’s a bit too early to tell as yet, the signs were extremely positive as buyers streamed into the metals in huge numbers.

Gold notched a record dollar increase for a most-active contract, at least since 1980, the first year historical data are available, and its biggest percentage gain since September of 1999. Silver soared the most since 1979.

No doubt the reaction was to the spreading credit crisis, which yesterday saw the government having to, essentially, nationalize the nation’s largest insurer, AIG, in order to prevent it from failing.

“When you're perhaps facing a catastrophe in the U.S. financial market, investors are thinking: ‘Screw it. I'm jumping back into the old faithful’,” said Joel Crane, a metals strategist at Deutsche Bank in New York. And, “Gold's relative value is cheap compared with the dollar,” he added.

About $2.8 trillion of market value was erased from global stocks this week.

No wonder Amaury Conti, of investment adviser Austin Calvert-Flavin, was moved to say: “Gold is acting like it is supposed to on a flight-to-safety move … We have a global financial crisis and nobody has a clear answer. Therefore stocks, currencies and debt are being questioned and nobody wants to own a 'paper' asset.”

Brien Lundin, editor of Gold Newsletter, summed it up well, to our way of thinking: “Physical demand is breaking records, mining supply continues to fall, and the economic environment is, of course, promoting safe-haven demand … The shorts are covering, the funds are buying back in, and everyone wants the safety of gold.”