Gold opens up on another weak dollar day

Good Morning,

Precious metals markets recorded small gains as they opened for business in New York this morning. Most of the action to the upside in gold was US dollar related (what else is new these days?) as the latter struggled to maintain the 77 level on the trade-weighted index. The yellow metal opened with a $5.30 per ounce gain, quoted at $1,356.60 bid, showing signs that the pre-Fed “certainty” premium was not about to dissipate; certainly not with a weaker dollar still on the scene.

Silver started Tuesday’s session with a 19 cent per ounce gain, quoted at $24.82 on the bid-side. Meanwhile, platinum added $7 to open at $1,711.00 the ounce and palladium fell a modest $1 to one dollar under the $650.00 mark. Some signs of fatigue have begun to emerge in the noble metals complex following a spectacular recent streak. Rhodium remained flat at $2,230.00 the troy ounce.

All of the metals (and many another commodities) were seen as largely treading water into the latter half of the day when some US election results might start making their way into the news flows. As things stand now, of course, all eyes and ears are fixated on tomorrow’s Fed announcement. Will the Fed give? How much? Over what period of time? Will its program meet/exceed or fall short of market expectations? Have most scenarios already been ‘baked into the cake?’ Will someone sell the news, having bought the rumor? Crystal ball vendors reported shortages across the board and did not blame Sunday’s Halloween for the lack of supplies.

U.S. midterm election day dawned amid indications that the Republicans were likely to at least retake control of the House of Representatives and to also boost their presence in the country’s Senate, without recapturing that majority, however. As Americans go to the voting booth today, there are also 37 state governorships up for grabs. The possible shift in the political landscape should have the US dollar’s ever-growing ranks of morticians up at night, but it does not – just yet. Complacency, complacency.

Perhaps more than any of the above, yet-to-be-played-out dramas, the one thing that appears most important to those who will punch the ballots is the state of the US economy and what can be done about restoring it. Coming out of the most severe downturn in the country’s economy since the Great Depression has engendered a set of conditions that is sure to take its toll on the current leadership as the electorate identifies it (rightly or wrongly) with pretty much everything that has not gone well over the past two years. Blame, blame.

There is at least one school of thought that believes that a GOP victory at the polls means the potential ushering in of a more fiscally (and perhaps monetarily – though the Fed is supposed to be independent) ‘responsible’ era and that such a development would be immensely dollar-supportive. Some credence is being given to the idea that the Fed may have to show restraint on Wednesday if the US election map turns crimson under the effects of the Republican ‘tsunami’ (as some have labeled the currently manifest political trend).

On the eve of the Fed meeting, at least a couple of other central banks went against the trend and hiked interest rates in order to avert inflation from taking root. Australia and India raised rates last night (the former, for the sixth time in a year). The Fed’s decision will see the light of day later tomorrow, while within hours of that announcement, the BoE and the ECB will also chime in with their respective policy statements. Anticipation, anticipation.

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