Silver surges as fund money pours in

Following Friday’s joblessness number-induced melt-up, the precious metals complex took a small breather early this morning. The rebound in the U.S. dollar (up 0.70 on the index, and back to 79.90) that came despite some “accommodative” remarks made over the weekend by Fed boss Bernanke (see below) was the main catalyst for keeping prices (all but silver, that is) from making further gains in the first hour of Monday trading.

The dollar’s advance, once again, came at the expense of the euro, which, albeit trading a $1.32 – but still down 1.1% against the US currency – is seen as quite vulnerable going into 2011, given the possibility that Spain and/or Italy might get into a sufficient amount of fiscal trouble to give the short-sellers of the common currency a fresh lease on life for the duration of next year, at least. EU finance ministers (and the IMF) will meet today to discuss the “why & how” of boosting the €750 billion safety net facility available to such countries in the event of need, and how such a larger fund might avert the spread of contagion in the eurozone.

Gold spot prices opened at $1,414.30 per ounce in New York, showing a 20-cent loss on the bid-side as some $12 worth of physical buying was mitigated by a corresponding decline in value on account of the rising U.S. dollar (see the Kitco Gold Index). Spot silver on the other hand, surged 37 cents to open at $29.75 as more fund money was in sight, banking on it to outperform; this, after the metal came up four cents short of the round $30 figure overnight.

Platinum fell $4 on the open, showing a quote at $1,721.00 per ounce, while palladium eased as well, dropping $7 to the $760.00 level after quite a run last week. Rhodium remained steady at $2,280.00 per troy ounce. Crude oil rose marginally, adding 62 cents to climb to the $79.77 per barrel level. The Dow opened with minor losses (off 25 points) at the 11,357 level.

Base metals traded a tad lower, caught between the prospects of any potential further Fed easing and the possibility of China hiking interest rates prior to the end of this year. For now, these markets are more likely to draw energy from the implications of last Friday’s jobs situation and the perceived Fed response to same. However, one cannot discount the possible boost the greenback might still enjoy if the news out of Europe reveals further difficulties for the euro.

Although Friday’s increase in the general unemployment level was a probability that had been hinted at repeatedly by U.S. officials since around August, the shock value (markets-wise) it manifested was sufficiently serious to mobilize the Fed’s (and the White House’s) PR machine and take to the public airwaves.

Perhaps this is a consequence of the recent promises that the Fed will commence a more frequent and more detailed public communications campaign on its policies, or maybe just an attempt to put Friday’s numbers into context. Whatever the case, in an appearance (taped three days prior to Friday’s Labor Department release) on CBS Corp.’s “60 Minutes” on Sunday, Fed Chairman Bernanke had some pretty concrete things to say about the U.S. economic situation. Mr. Bernanke painted a picture of an economy that is but one tick away from not being “self-sustaining” and thus not creating the number of jobs that are needed for a gradual reduction in the unemployment level towards the goal of “normal” unemployment levels nearer to six percent.

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