Gold hovering as data is digested

Good Morning,

Gold prices held fairly steady near the $1,290.00 level overnight and within the $1,285-$1,295 mini-range as dollar watchers noted an attempt by the US currency to recapture the 80-mark on the trade-weighted index. More official jawboning was on display overnight and the jaws most tightly clenched appeared to be those of Premier Wen of China.

In effect, the Chinese leader said “Meyiou Banfa” to the clamored-for 20% or 40% appreciation of his country’s currency, saying it would come attached with certain ‘strings’ (like upheaval in the domestic social order, for starters) that he is unwilling to accept.

Over in the Old World, the Eurozone Flash Services Purchasing Managers Index flashed a less-than-comforting figure of 53.6 (down from the 55.9 level recorded in August) as the European version of the US economic recovery slowdown appears to be taking hold on the continent. However, the region climbed out of the trough of recession just a few months after the US did so last June, as reported earlier via the NBER analysis.

For the moment however, given the continuing fragility of said recoveries, the two central banks in question remain ‘on hold’ with the enactment of their exit programs. The Greek (and, to a certain extent, other PIIGS members) credit ‘incidents’ of May have temporarily delayed the ECB’s plan to mop up excess liquidity, while August’s string of economic data prompted the Fed to do likewise and now offer bond purchases in the event that the recovery morphs into contraction.

This morning’s 12,000 filings jump in jobless claims for the latest reporting period certainly would appear to play into the hands of those bettors who see the latter (yet, curiously, continue to load up on silver and noble metals?). As is the (latest) norm, the drop in continuing jobless claims was ignored, as was the fact that –on a historical basis-such claims reliably rise following the Labour Day holiday.

Leading indicators for August were on tap but US stock index futures were already showing a dip following the not-so-hot European data. As well, traders were anticipating that reports regarding existing home sales levels for August –albeit likely to show a gain- will probably end up at their second-lowest level on record. Later this morning, the awaited numbers turned out as follows: August LEI rose 0.3% - a better showing that that recorded in July, but still sluggish enough to maintain anxiety levels more elevated than normal. Home sales gained 7.6% last month but the ‘all-clear’ signal has not been sounded on the real estate front, either.

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