Gold rides monetary policy wave to $1,472

The opening gains in precious metals this morning brought the achievement of previously estimated price targets near $1,475.00 into the realm of reality. Spot gold dealings opened with a $13.60 per ounce gain in New York and a bid-side quote at $1,472.00 amid hectic activity. Silver added 63 cents to open at $40.27 the ounce. Massive gains in platinum (up $33 to $1,813.00) and palladium (rising $24 to $798.00) were also manifest and cited “economic optimism” as the principal driver of such value additions.

At least as far as the noble metals’ group is concerned, there was concrete cause for optimism; markets learned today that Japanese automakers plan to resume car production at all domestic factories on Monday – albeit at 50% of their former output levels. At least, there is some certainty as to that situation and the PGM niche directly benefited from the announcement.

However, there is also some uncertainty feeding itself into the platinum-group metals’ market; namely, stories of power supply disruptions courtesy of South Africa’s Eskom utility have surfaced once again and contributed to the metals being bid higher this morning as well. Curiously, little or no mention is being made of the potential impact of $111+ crude oil (or $124 in the case of Brent crude) on the very economies about which the commodities sector speculative crowd appears to be so “optimistic” about.

Also curiously, completely opposite excuses were on offer for the aforementioned gains in gold as one London-based trader noted that “US growth is also being watched, and any signs of weakness should help gold higher.” In so many words, any excuse is equally valid at this time. In fact, it is a time to just cast aside explanations and watch the momentum unfold.

One enigmatic morning market digest message from a New York trading desk we respect described gold’s price as now having perhaps “arrived” to a level that “includes most of the world’s ills.” One can read that finding in many different ways, including the “fully-priced” version of gold to be sure. Others were not so sure what (aside from the dollar) drove metals to this point, but left their explanations concentrated on the influence of the same players who presented the rest of us with crude oil at $111.50 (the Gaddafi “excuse” has outlived its “half-life” by a long shot now), corn at a 33-month high, cotton at more than $2.10 a pound (!), and silver above the $40 mark.

Said players were, in turn, said to be simply “availing” themselves of the opportunity to turn a buck based on the “ample liquidity” present in the system and were thus being afforded the luxury of pushing raw materials higher “irrespective of fundamentals.” Most explanatory fingers still appeared to be pointed at the US dollar. Transitory concerns brought about by yesterday’s tremor in Japan gave way to dollar-focused apprehensions as a government shutdown looms, even though the event is not essentially dollar-negative.

What does appear as dollar-negative for the moment however, is best explained by our good friend Matt Whitaker, over at the Wall Street Journal, when he wrote this morning that “despite the worries about the potential for problematic producer and consumer price increases, monetary policy around the globe remains relatively loose. This accommodative policy has been a boon to gold and silver prices because the low interest rates make it more attractive for participants to move money from other investments into the non-interest-bearing metals.” There’s your “ample liquidity” and there’s your “boon” – or is it: BOOM?

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