Gold near record but waiting on jobs

Good Morning,

Jobs and homes; the pivotal focus items by which many solely continue to gauge the state of the States’ economy, remained at the centre of this morning’s preoccupation among investors as well. Yesterday’s ISM data offered a bright spot and markets responded in kind.

The Dow had its best day in months (254 points were added to its value), and the US dollar sold off as some safe-haven seekers opted for riskier havens. Gold prices backed away from the $1,255.00 area to ease towards the $1,244.00 level, where they ended up closing last night’s session.

Such changes in sentiment however lasted but overnight, as investors greeted markets with another, double serving of doubt and gloom this morning. Jobs and homes. Having a job, buying or keeping a home. These are the metrics by which today’s judgments will be made and which will move markets. However, in essence, the chances of the USA skirting the double-dip event are actually fairly decent. Why, you ask?

Part of the reason, at least according to the tea leaf readers at BofA Merrill Lynch, is that the string of data that has unnerved everyone from the Fed to John Q. Public has already proven to be so dismal that there is largely no more room to the downside (for such numbers to go). Thus, BA/Merrill places the odds for a DD at 25% for the next 12 months, at the moment. In addition, with the markets so emphatically pricing in the inverse of such odds, any surprise to the upside could be pretty nasty for the doomsayers.

At any rate, the odds of a DD were summarily dismissed by ECB head Jean-Claude Trichet this morning, even as he left interest rates unchanged at 1%, just-in-case, until year’s end. Mr. Trichet also opined that he is not distressed with economic reports coming from the US inasmuch as the ECB at least did not expect to learn about “extraordinarily dynamic growth” taking place there at this time.

Another central banker, Mr. Benrnanke, on the other hand, offered a different kind of hindsight today: he said that the single most important lesson he (and presumably the Fed and other authorities) have learned from the crisis is the need to do away with the “too big to fail” mentality.

None of the above stopped gold from opening with a fresh, $5 gain this morning. The spot price was bid at $1,249.40 on account of predominant physical buying by funds (and a small, $0.20 contribution to the price gain, courtesy of a further 0.11 drop on the index in the greenback).

Later in the session, gold drew nearer to yesterday’s $1,255 area but once again retreated to the $1,250.00 level. Judging by both gold and the Dow, the waiting game is all about Friday’s figures on the jobs front at this point. That number, plus pre-long-weekend book-squaring jousts will likely make for a fun Friday for some markets.

Sorties by shoppers to souks in the Middle East were rather scarce in August, as the observation of Ramadan took place. Sales of gold in Dubai and Abu Dhabi fell by 15% for the month. General gold demand in the region during the second quarter was a mixed bag, with Saudi Arabia showing a 5% gain, whilst the UAE’s gold sales dropped by 15%.

The same pre-data-fueled rise was evident in the rest of the metals complex as well. Silver added 14 cents, rallying to but one penny short of $19.50 the ounce. Platinum (go figure) gained $19 the ounce and opened at $1,550.00 following the revelation that US auto sales careened towards a ditch, in their worst August in 27 years.

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