Gold continues to churn in increased volatility

In the Lead: “A Gross error? Time tells”

On Monday, Greek stocks staged a 15% rally in the wake of a merger that created the country’s largest bank (a process that the Greek government has been very supportive of). This morning the going got a bit rougher in the eurozone equity markets however. As the euro lost ground, the greenback benefited; it was able to recapture the 74-mark on the trade-weighted index with a rise of nearly 0.50%.

The eurozone’s debt debacle also presented a fuzzy picture to traders this morning. Stories related to once again rising jitters about the situation made the rounds, but so did the news that Italy cobbled together a fresh austerity plan and that it was able to move a decent ($11 billion) chunk of debt instruments at auction (at lower rates, to boot), albeit observers characterized the reception the offering got as “disappointing.”

No word on what such market observers expected out of this Italian sale. “Crisis? What Crisis?” – Supertramp once crooned. Recent news out of the Old World have seen a decline in the frequency of the usage of the “C” word. Plus, Moody’s and S&P have been relatively “quiet” after all the noise they both made this summer; something that has also been helping investor psychology. On the US side, currency watchers are watching for the release of the FOMC minutes to ascertain how the buck will react to the reading of those particular tea leaves.

Not far from the Fed’s marble halls, US President Obama is likely putting the finishing touches on his upcoming “jobs speech” amid calls from his supporters to go “bold” with this one. Given what has been perceived as weakness on the President’s part when he recently compromised with tantrum-throwing Tea Party and/or GOP troop leaders, Mr. Obama might just have to “stop nibbling around the edge” and show a clear-cut strategy.

For now, Mr. Obama has nominated Harvard Ph.D. (and current Princeton Professor) economist Alan Krueger to head the White House Council of Economic Advisers; a choice seen by many as a possible precursor to a more aggressive participation by the government in the process of revitalizing the US jobs scene.

Next week’s address might indeed be his last/best chance to recapture whatever it is that has been lost in the process that brought him a recent 38% approval rating; a laborious task for a post Labor Day address. Given this morning’s sagging US consumer confidence numbers, the President’s job will more closely resemble a session with Dr. Phil when counseling a depressed patient on the sofa. Anyway, this might be a kind of speech you don’t quite hear…every day.

Here is something else you do not see/hear very often: PIMCO’s Bill Gross saying that betting against US sovereign debt was a mistake large enough to cry in one’s beer about. In fact, it is safe to say one never expected to hear this kind of admission, given the level of confidence on display in the early part of this year.

Mr. Gross’ wagers fired up the gold partisan community like few other official trading positions and/or opinions had in recent years. The fact that PIMCO showed total lack of confidence in the US, its debt, its currency, etc. was validation that was worth its weight in…you-know-what. After all, someone running an $8 billion shop must always be making only the best of bets. But, you know, fund performance (or the lack thereof) has a way of stubbornly coming up into official tables after some time elapses and it can be compared to…other funds’ performance. So, sometimes, the best laid plans/wagers/assumptions can turn out to be in error. Where is the surprise in that? Keep looking…

Until tomorrow.

Jon Nadler is Senior Metals Analyst with Kitco Metals Inc. in Montreal

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About the Author
Jon Nadler Jon Nadler is a Senior Analyst at Kitco Metals Inc. North America
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