Gold hits record price on debt uncertainty

In the Lead: “You Go Your Way, I'll Go Mine...”

While gold continued firm after the opening bell, retaining the uncertainty premium, silver narrowed its opening gains to only about 25 cents as oil sold off some more and as the platinum-group metals also gave up their initial gains. Standard Bank (SA) noted in its weekly review of the gold market’s speculative positioning that the fall-off last week in speculative short positions was “encouraging” but since it is still more than 30% higher than last year’s average, the gold price remains “vulnerable to shifts in investor sentiment.”

The Standard Bank team has now taken a ‘neutral’ tactical view on the yellow metal, based at least in part on the “weakening physical demand at current prices.” As for silver, its short positioning – at 924+ tonnes – is closer to last year’s running averages, but the “abrupt increase in short positions” in the latest reporting period “raises a warning flag over silver” and it still highlights the risk of prematurely calling that metal’s bearish tilt as being over, according to the Standard Bank analytical team.

Meanwhile, last week’s Kitco market survey had a majority of those polled tilting towards a lower gold price; probably on account of perceptions that, by now, some kind of deal would have been made in Washington. What happened on the day when a deal is actually made remains an open question, though it is not one that many want to entertain just yet.

Finally, at last check, the platinum spot bid was unchanged at $1,791.00 while palladium’s bid was also unchanged at $803.00 per ounce. Rhodium lost $50 to fall to the round $1900.00 mark per ounce. US equity futures fell ahead of the markets’ opening on account of the same Washington impasse that is keeping other markets virtually hostage at the moment. Meanwhile, the financial newsletter scaremongering also continues unchecked.

A plethora of direr-than-dire scenarios are on offer practically every evening, if you just care to look at your e-mail inbox. Gory titles such as “America on the Brink!” and “The Dollar’s Days are Numbered” compete for your gut reaction incessantly. “The debt is an immediate threat to our prosperity!” Oh, wait, that one is a no-go. Or, so says Marketwatch’s Rex Nutting, who would like to call your attention to the basic fact that the American government can “currently borrow at very low rates” and that “if government borrowing were crowding out private investment, you’d see it in the bond yields.”

Thus, Mr. Nutting concludes, “[America] can afford to repay our debts, easily. We have time to fix this.” Aside from that, the other little presently ignored factoid is that a mere 1% (!) growth in the US economy would totally fix the ‘issue.’ But, hey, who wants to listen to Arianna Huffington’s solutions when their attention is being diverted to the ‘heroic’ efforts of the Tea Party “freshmen” in Congress by none other than George F. Will? As noted before, a Sunday talk show bonanza, indeed.

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