Gold still gaining as debt nervousness grows

In the Lead: “Circus Maximus”

Standard Bank (SA) analysts note support in gold at $1,608 and at $1,599 while first-line resistance is seen very near the aforementioned $1,629 area. Increasing price volatility is a given at this juncture, and it could spark serious consequences for those on the wrong side of the betting tracks as we get closer to next Tuesday. Silver’s support is estimated to reside around $39.75 as a first step, while resistance might emerge at or above the $41.09 level

Said nervousness also applied to the other metals; silver in particular. The white metal has been riding along on the wavelengths of the interminable DC standoff and managed contact with the $41 level but then opened at $40.35 (with an 11 cent gain) and subsequently slipped into the red by about an equal amount of pennies, while the bulls and the bears played their own version of the Mexican standoff playing out in Washington. Platinum dropped $1 to $1,791.00 and palladium advanced $4 to $828.00 the ounce. Sizeable profit-taking liquidations buffeted the PGMs yesterday and overnight and the focus remains on the resumption of wage talks between mineworkers and management over at Anglo Platinum.

Rhodium retained the $25 gain it has made and remained quoted at $1,925.00 per ounce. Carmaker Saab is thought to be heading towards defunct status in as little as two weeks, while the VW group’s profits tripled in Q2 and the firm envisions record 2011 car sales. In the background, the US dollar advanced 0.20 on the trade-weighted index and was trading at 74.26 at last check. Crude oil fell about 14 cents to trade at $97.26 per barrel. Also falling a tad was the euro; it changed hands on currency markets at $1.426 earlier this morning. Dow futures traded higher however, bolstered by hopes that jobless claim might show progress on the US labor front and that something –anything- concrete might be on tap from Washington today.

Jobless claims filings did indeed show amelioration in the labor picture in the US this morning. The most recent level of applications for unemployment benefits fell by 24,000 and eased to under the 400,000 mark as against market expectations that had pegged the tally to roughly 413,000 claims. The four-week average of new claims also fell; the reading was 413,750 – the lowest since April. Economists continue to pine for a string of monthly jobless claims that would consistently remain at under the 400,000 mark. The current political impasse in DC is not very conducive to employers confidently posting “wanted” signs for workers, to say the least. Equally skittish, US consumers are still wondering what exactly to do given the prospects being implied by the boxing matches in Washington.

More and more noises are being made about the inevitability of an eventual US ‘credit event’ of some kind, even if that which President Obama has asserted will not happen on August 2 does indeed not happen. About $5 billion have been earmarked by investors thus far to be parked in various instruments that could offer protection in the event of ‘the big problem’ materializing. These vehicles are also known as credit default swaps. For the moment, however, the ‘biggest’ credit event that is being factored in is the likelihood of a mild downgrade coming the US’ way – even if the debt limit is expanded on August 2.

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