Gold receives “bubble” label from Wells Fargo

In the Lead: “The ‘Passion’ of the Perry: J'Accuse!”

Precious metals markets opened steady-to-higher for the midweek session in New York this morning.

While gold and silver made only very modest advances that threatened to turn into potential losses, platinum and palladium staged fairly hefty rallies at the start of the trading day. Spot gold opened flat at $1,787.00 the ounce on the bid-side while silver gained a quarter to open at $40.16 the ounce. Overcoming the $40.50 area is still the white metal’s “task” in order to try to draw near an ultimate short-terms potential target around $42.30 per ounce.

Gold, on the other hand, has the mission objective of once again trying to demolish the $1,800 psychological marker before the speculative crowd feels emboldened enough to reattempt the establishment of (or repeat of) the former pinnacle near $1,820.00 the ounce. None of this posturing in the market is stopping the increasing volume of “now you’ve heard it all” type of pronouncements being made about the yellow metal.

One school of (extreme) “thought” tenders some very specific targets: $5,200 by 2018 (!) (but does not give the time of day and day of the week, or the reasons for that price) and other adherents to the same “school” still promise us all $8,000 an ounce bullion. Never mind, they say, that (at least some) of the “big” money formerly in it found it opportune to “lighten up” in the precious metal (Soros, Mindich, etc.).

Another faction, on the other hand, is ringing the warning bells by pointing out that “Speculative demand from investors has pushed the gold market into a “bubble that is poised to burst” after prices surged to a record this year.” No, those words of caution did not come from the desk of George Soros. They were issued this morning by Wells Fargo & Co. The firm sees “substantial” price risk to the yellow metal once the fear that “the world is coming to an end” abates.

Wells did not provide a time-specific target for the world’s skies to “clear” but one must note that it did not refrain from placing the ‘bubble’ label onto the precious metal; and not at some future date, but at present. As well, the nature of gold’s achievement of recent records is specified: speculation. That word is defined as a conclusion based on incomplete facts and as a financial transaction that involves risk but is potentially profitable. Gold has now been profitable for 11 years…

Over in the platinum and palladium trading pits the two noble metals advanced strongly this morning. Perceptions that fundamentals are on the bulls’ side and the “it’s not so bad after all” type of take on the state of the global economy helped fund buyers drop a few ‘large’ into the two metals and such action resulted in double-digit gains for each; the former advanced $25 to $1,838.00 (still, only a $60 premium to gold) and the latter climbed $23 to the $776.00 mark per ounce on the bid-side.

Head-scratcher of the morning: US PPI data indicated that prices have risen at a faster-than-anticipated rate in July and that higher inflation may be on the menu in the US (wouldn’t the Fed be happy…). On that bit of news, gold…sank $5 (?) and did so despite a still-advancing crude oil (up $1.36 at $86.01 pbbl) and a drop of 0.41 in the US dollar on the index (to 73.66). The latter (almost) comes as no surprise, given what has recently been seen in the relationship between the two assets.

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