Gold finds gains following ‘missed’ ADP

Silver prices picked up in value on Wednesday and were last seen trading near $37.48 per ounce (up 35 cents) on the back of more speculative interest on the part of hedge funds. A Bloomberg webinar in which this author participated this morning had panelists in unanimity agree that the speculation in silver is red-hot and that potential outsized pullbacks could manifest themselves when least expected. Silver retains the crown in the volatility and/or riskiness race when compared to gold, other precious metals, and a host of other assets of the conventional type (think paper).

Platinum and palladium gained nicely on Wednesday despite the recent fall in the share price of its miners – a decline precipitated by the ultimatum that was issued by the government of Zimbabwe late last week, giving mining firms 45 days in which they need to come up with a plan on how to transfer a majority ownership stake to local black investors. The ownership transfer issue could be regarded as a positive for platinum prices if in fact the process suffers from glitches, results in work stoppages, or is perceived in any way to impede the output of the underlying (and still vital to the world) metal.

Meanwhile, in Japan, the production of more than 230 automobile parts is said to be unable to resume for up to one full month, while Honda has cancelled all dealer orders for May delivery for the autos it builds in Japan. No details were available as to the parts rationing by Toyota, Subaru, and others and whether or not they include platinum-group metals-containing catalytic converters or not.

Well, one could almost see this one coming. Following several days of hawkish Fed talkers taking to the microphones, we have now also heard from the almost-extinct doves who work for the central bank. Could there be only two such birds left? Here goes today’s (ample) harvest of Fed-talk:

Boston Fed President Rosengren and his Chicago counterpart Mr. Evans both affirmed that QE2 ought to remain in place and that perhaps it should not be truncated in size or in terms of expiration date. Such talk was quickly counteracted by Kansas City Fed President Thomas Hoenig (a non-voting FOMC member) who urged that the Fed should being the exit procedures from its current monetary policy, like…yesterday. Mr. Hoenig would like to see the Fed shrink its balance sheet and lift the fed funds rate to 1% -and soon.

Mr. Hoenig went one step further and made a direct linkage between what we see on various commodity price boards at this very moment and the Fed’s monetary policy (up to this point). He argued that “the longer policy remains as it is, the greater the likelihood these [inflationary] pressures will build and ultimately undermine world growth. He also alluded to resources (read: easy money) being misallocated (read: used to play in various markets) and creating problems (read: bubbles).

For his part, Atlanta Fed President Dennis Lockhart said today that rising commodity prices –while eliciting “understandable” fears- are not here to stay, and that he (for one) would be ready to hit the “tighten” button if overall price stability were at risk of falling over. While the statement does lift a page from his boss’ Mr. Bernanke’s oft-used script, it is a de facto new one for Mr. Lockhart, and it reinforces the perception that almost everyone out there on a mission from the Fed is preparing the markets for the inevitable.

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