Gold starts week down on Fed uncertainty

Gold prices opened with a $6.60 per ounce loss this morning, and with a quote on the bid-side at $1,362.30 as against a 0.23 rise in the US dollar on the trade-weighted index (last marking a 77.28 print).

The market’s opening level was some $8 away from the lows recorded overnight, but the dollar was not exactly able to pile on sizeable gains just yet, as echoes of the Boston Fed’s Eric Rosengren’s words kept markets hopeful that the Fed will indeed ‘give’ come November. The possibility of a rebound to above the $1,368 level should not be discounted as the ‘force’ is still with the longs – even if they have decreased their positions as reported in the latest CFTC trading data compilation.

Mr. Rosengren said over the weekend that he favors ‘early and aggressive’ Fed action designed to ward off deflation, which in his view, can be every bit (or more) unpleasant than a bout of strong inflation. Meanwhile, another Fed chief, Charles Evans (he of the Chicago ‘branch’) said that he is in favor of raising the central bank’s inflation target for a short while. Anything to deflect deflation. Anything.

Silver started Monday’s session off with a 23-cent drop, and a quote of $24.09 on the bid. The white metal has basically met and exceeded the most optimistic of GFMS and CPM Group projections for the current (and coming) year, rising to not too far from $25 during its recent fund-fueled race upwards. Silver’s mine supply is all set to record another gain for the current year – perhaps as much as a 5% gain. The who’s who and what of the silver niche gather this week in Spokane to debate the metal’s current and future prospects, as the annual Silver Summit gets underway.

Platinum fell $6 at the open, quoted at $1,684.00 per ounce, while palladium lost $11 out of the starting gate this morning and was indicated at $577.00 the ounce. No change was reported in rhodium with the last bid quote notched at $2,250.00 per troy ounce. Auto sales appear on course to reach back to the annualized 12 million level of sales; a figure that could be taken as a pivot-signal of the return towards more ‘normal’ conditions in that market.

Meanwhile, Japan’s National Institute for Materials Science has developed a spherical shell-shaped catalyst that is highly effective and long-lasting. The novelty factor in this invention is the fact that the catalyst could use less expensive metals (such as iron) for the active key cell as a substitute for noble metals. While this is not the start of an imminent switch away from the platinum-group metals, the development bears watching. For the moment, the NIMS use platinum in order to showcase its product. Tried and true.

Today’s market focus will likely be zeroing in on US production figures. Analysts expect to learn that America’s factory, mine, and utilities generated output rose by 0.2% and that such a gain (if it happens) was to be recorded as 14 out of 15 months that have elapsed since the ‘official’ end of the recession last summer. Recovery, yes, but slow enough to prompt dollar-sellers to demand that the Fed weaken the currency even more so that they can enjoy more dollars in their pockets. Such a concept.

Battered as the US dollar might appear to be, foreign investors bought a net of $128.7 billion of long-term US assets in August. That figure was UP from $61.2 billion in July. China, Japan and the UK all ratcheted their US Treasury holdings up in September. ‘Cause, you know, the dollar is “doomed,” and the “country” along with it. Aha. For sale: stone bridge in okay condition, near Brooklyn.

Have a nice week ahead.

Jon Nadler is a Senior Analyst at Kitco Metals Inc. North America

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About the Author
Jon Nadler Jon Nadler is a Senior Analyst at Kitco Metals Inc. North America
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