Metals indecisive despite slew of negative news

In the Lead: “And now, for something completely different; More of the same”

The souring set of US economic statistical data that hit the market this week (and quite literally the Dow on Wednesday) immediately raised the choir of “QE3! QE3!” chants to decibel levels last heard in October of 2010 when the “3” digit was still a “2” appended to the “QE.” Strategist Neil McKinnon at VTB Capital however, feels that “there are sufficient political headwinds to prevent a move to QE3, though I think the Fed has little choice but to proceed cautiously and normalize policy very gradually, in order to avoid unwanted volatility in markets."

On the other hand, MarketWatch’s David Callaway advises investor folk not to “hold their breath” as QE3 has…sailed away already. Mr. Callaway spells it out quite bluntly: “Investors would be wrong to hope Bernanke will ride to the rescue again with a third round of quantitative easing, or QE3, by buying Treasury bonds in bulk. Of course, the Fed will keep buying in some format, but the massive program itself will end this month and we’ll be on our own…The increased volatility will also help arrest declines in the dollar, particularly if Europe plays its usual role this summer of scaring investors about Greece and a possible collapse of the euro. That’s not great for commodities, particularly gold. But it might help prevent the gold brigade from driving prices too high too fast.”

Against this background of mixed, lukewarm-to-not-so-hot global financial news, the metals markets opened with slightly indecisive steps this morning in New York. Spot gold traded virtually unchanged at $1,539.00 the ounce as the dollar narrowed its losses after the Labor Department report and Dow futures showed signs of trending higher. Crude oil remained fairly static but was scraping along just pennies from the century mark, which it still appeared to threaten to breach.

Spot silver fell four cents to open neat the $36.78 bid-side level following yesterday’s late afternoon swoon that was shaping up to remove nearly $2 from its value in what has now become an almost commonplace event; intra-day mega-swings that would have stopped speculative hearts just a year or two ago. It was relatively easy to divine why silver fell out of bed in the wake of the somewhat alarming US manufacturing activity figures.

As we reported in yesterday’s article, slowdowns of variable proportions in the economies of Australia, China, India and in the eurozone appear to be shaping up at this juncture. Platinum gained $2 to open at $1,821.00 while palladium showed an equal rise to reach $771.00 the ounce. As was largely expected, the sales figures for US auto sales for last month were definitely not worth sending postcards home about.

Toyota Motor led the decline in the amount of iron that was moved off dealer lots in the USA. Its sales fell by a whopping 33% on the month. In part, the fact that there wasn’t much out there on those lots to offer for sale, contributed to the dismal statistics. High gas prices (averaging $3.90/gal.) did not help matters either for would-be US auto shoppers.

However, South Korea’s rising auto-star, Kia Motors, bucked the trend and chalked up a 53% spike in US deliveries. Its new Optima sedan apparently fit the bill quite nicely for many a US buyer unable to get a hold of a Prius or a Camry. May’s situation is however seen as the nadir for Japan’s auto sales in the US in the wake of the Sendai quake. Rebounds are almost certain to come as the summer wears on and fall’s new models begin to roll into showrooms.

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