Gold market manufactures another surge

Good Morning,

With manufacturing activity results on the radar, the precious metals markets’ players manufactured yet another morning full of price surges in the complex. Within a speculative feedback loop that still sees any, even remote sign of US economic weakness as the catalyst for a fresh round of Fed ‘gimme’ dollar sellers invaded the currency market as so many predatory insects overnight. Such currency market raids, in turn, pushed metals higher, obviating any traces of yesterday’s attempt at a correction and making it look in retrospect like just a slight misstep in the march to (question mark).

Spot gold sported a $5.20 gain out of the session’s starting gate this morning. The bid-side quote was $1,314.50 per ounce, while the overnight new high water mark was but 90 cents short of the $1,320.00 level. The financial media appears to have lost count of the number of records that have been set in recent sessions but they are fairly certain that one Mark Spitz would be green with envy when it comes to the subject of them.

Silver players mounted a fresh assault on the $22.00 mark once again this morning, pushing the white metal 20 cents higher despite what would be an obvious disconnect between a weak US manufacturing index reading (who needs more silver if they are not producing ‘stuff?’) and the need to pile into the metal.

Ditto for platinum, whose market participants’ buying added $29 (!) to its opening quote, raising it to $1,680.00 on the aforementioned speculation that all will be well if the Fed just gets with the ‘program’ and buys something as well. Like some bonds, or something. Palladium gained $9 an ounce, climbing to the $572.00 mark while rhodium showed no gains/no losses at $2,250.00 the ounce.

The string of US economic data that came due this morning actually offered very little in the way of additional and urgent motivating factors for the Fed to launch that certain vessel from the central bank’s docks. Personal spending in August was up by 0.4% (more than the expected 0.3%) while personal income gained 0.5%.

Granted, the numbers show a US consumer predisposed to save (who wouldn’t under uncertain conditions?) but the fact is they are earning and spending. All of this, against a background of tame (a euphemism for barely visible) inflation running at the very edge of the lower end of the Fed’s target zone of 1.5%-2%.

Despite the fact that most of the Congressional record (at least on the Democratic side) shows a US legislature that is apparently loathe to let the Fed throw some more money at the problem of a less-than-Chinese-fast rate of economic progress (something the administration’s critics have no patience for, at all) the positioning ahead of the pivotal November Fed meeting is as obvious as a poppy seed between one’s teeth.

And, how could it not, when once again, despite several key Fed members coming out against such action this week- one, Mr. Dudley, (he of the NY Fed) argued this morning that half a trillion in government bond buys would equate a ¾ point cut in the fed funds rate and somehow be the panacea for what ails the US economy? Divisions on what to do about all of this within the Fed are growing perhaps even faster than the vast chasms which have already formed between GOP and Democratic factions in the US body politic.

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