Gold, silver range-bound ahead of Fed release

In the Lead: “Fedsday Cometh! Plus, More Sci-Fi! ”

The largely sideways action continued to be manifest in the precious metals markets for a third session, ahead of the Fed’s policy statement and Bernanke press conference due later today. While no one expects momentous action words to be contained in today’s Fed language (no imminent rate hikes but also no QE3 are already baked into current anticipations), the parsing of the content will still offer a sufficient amount of material upon which to make a trade or three, as well as related excuses to come later. Greece and the apparently successful vote of confidence in PM Papandreou’s government by that country’s Parliament were placed on the “simmer” burner for the moment while all eyes and ears turned to the Fed for the day.

Naturally, as has been the case for several previous Fed meetings now, some will interpret the lack of certain QE3-flavored promises as bearish, while others will see the lack of rate hike signals as bullish. Of course, both sides will claim they are correct in their interpretations. Little wonder then that CNBC previewed the day’s events by noting that “Federal Reserve Chairman Ben Bernanke is unlikely to announce a major change in monetary policy at his second-ever news conference later Wednesday, but investors will hang on his every word for clues on whether the Fed will scale back its presence in financial markets.”

The midweek trading session in metals in New York opened with a firm…lack of conviction. Spot gold fell $2.20 to open at $1,545.00 the ounce, while silver lost 28 cents to start at $36.12 per ounce. Overnight lows were recorded at $1,540 and at $35.83 respectively. Still, the trading range in the yellow and the white metal was confined to less than $10 and to less than 75 cents ahead of “Fedsday.” In the background, the US dollar was also just marking time at 74.74 on the trade-weighted index (up a tiny 0.05%) while crude oil eased by a further half a dollar to trade at $93.61 per barrel.

Platinum and palladium opened mixed-to-unchanged as players in that niche appeared to have headed out the door for an early summer hiatus. The former fell $3 to open at $1,744.00 while the latter gained $1 to start at $766.00 the ounce. No changes were seen in rhodium at $1.950.00 bid this morning. Automaker Daimler posted a robust comeback in 2010 and its executives are optimistic about the firm’s prospects for the current year.

The automotive crisis of 2009 (itself an outcome of the ‘other’ crisis) appears to be fading into history for Daimler at least, if Mercedes sales in China for example, are anything to go by. Potential obstacles to sales growth remain on the scene, in the form of the European debt situation, the soft-patch in the US economic picture and the effects of the Japanese quake in March. As well, the fact that China’s epoch of white-hot economic expansion may just possibly be coming to an end, ought to be weighed in making future projections – and not just by the automotive executives of the world.

Economist and author Richard Duncan notes that China has managed to avoid the recession felt elsewhere in the world only by rapidly boosting available credit. Meanwhile, Mr. Duncan projects that China will be singled out by the U.S. and forced to stop growing its trade surplus ... and that will be the death blow to China’s era of rapid economic growth. Mr. Duncan sees a Chinese banking sector that is only starting to deal with the aftermath of the easy credit orgy of recent years.

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