Gold reaching for $1,800, extends lead over platinum

In the Lead: “London’s Burning, Dial 999. Or, Just Buy the Farm.”

The midweek trading sessions in New York opened with rising commodity prices. Oil gained nearly 3.5% following a dismal month-to-date performance (see below). Copper added 1.2%. In the precious metals’ complex, gold opened with a $21 per ounce gain at $1,765.00 while silver climbed 71 cents to the $38.42 per ounce mark. Volatile conditions will remain the order of the day and outsized moves, the norm. Do not expect market moves to make sense given market-impacting news of a specific type. Oh, and just wait until the day after Labor Day…

There has now (as would be expected after a $300 bungee jump in five weeks) been a virtual epidemic of $2K and $2.5K gold predictions; complete with shrinking timeframes for those achievements to occur. As in: perhaps this very year. Formerly vilified “evil manipulator” entities (JP Morgan) are now being given exalted, near-saintly status as their latest crystal-ball gazing happen to coincide with the crowd that desperately seeks and exhibits positive confirmation biases. Others still, match the $2K gold calls with their own; the 20K Dow calls. Read all about it. Extra, extra!

Platinum advanced $9 to $1,759.00-still under the yellow metal’s valuation- and palladium rose by $10 to the $745.00 level. The US dollar, which had breached the 74 level on the trade-weighted index overnight, was recovering lost ground with a gain of 0.29% as trading got underway. Dow futures indicated a potentially bleak day ahead.

There is one potential contributing factor to the market storms still underway at the moment. However, the topic is still taboo as few dare mention a possible correlation due to the fear of prophecies becoming self-fulfilling. London. A new and ominous dimension has been added to the fear factor that is gripping the world tightly this long hot summer; social chaos. Nihilism appears to have taken over in one of the world’s formerly most stable democracies.

London (and now parts of NW England) is ablaze with the fires of rage; the same London that exhibited nothing but the warm/fuzzies at a recent royal family wedding. Armchair psychologists opine that youth feels most alive when it is rioting. Others point to desperation about a bleak future as the cause. Whatever the paradigm, markets shudder when the streets are on fire. This is one of those times, and we are reminded that there by the Grace…goes France (2007) and Canada (NHL finals) and the USA (when). Dissent is also defined as rebellion in most dictionaries.

Dissent of a different stripe (some call it mutiny) was on the snack menu at yesterday’s Fed meeting. Taking a page from the recent clash we all witnessed in the US legislature, the FOMC’s members displayed active disagreement over what to do about the apparently once again sagging US economy. In just two months’ time the Fed’s perception as to how the American economy is faring has shifted dramatically. The outcome of the gathering – though many have already interpreted this as a full-on promise – was that the Fed has indicated that current conditions are “likely to warrant low levels for the federal funds rate at least through mid-2013.”

CNBC, for one, was not all that happy with the Fed’s “pledge” about rates. The financial channel tendered the opinion that the “Bernanke put” is off the bargaining table and that Mr. Bernanke might have in effect signaled to the markets that they might as well “drop dead.” In other words, the Fed is indicating that the trough of virtually free money remains open for a while longer but that it is now (finally) focusing on the US economy instead of trying to prop up asset values as some have suggested.

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