Gold holds above $1,800, watching Italy and China

In the Lead: “Welcome to Chitaly?”

Platinum and Palladium found the $1,800 and $700 psychological support levels to be fairly solid thus far and remained about $7 and $10 above them, respectively. In the background – no surprise – the US dollar gained additional value ground and traded at 77.24 on the trade-weighted index while crude oil added a bit more than $1 to rise to the $89.34 level in early trade. Black gold gained more on a forecast of falling inventories than on optimism related to economic good times, at this juncture.

The greenback subsequently (briefly) dipped under the 77 mark on the index and that prompted a bit of bargain hunting in bullion. Said bargain hunting ground to a halt by the middle of the morning in New York and gold bullion prices retreated to the red zone (near the $1,812 area) along with a moderation in gains in silver. Platinum also gave up its early gains and fell to $1,801 by the 10:30 AM coffee break period.

The goings-on in Europe have the potential to increase the odds of a US economy that could veer off into some kind of a dip (double, triple, or of or no real significance – the jury is still out on the flavor of it). While American economic growth has been still manifest, it has been characterized by unevenness and by regional divergences that have alarmed some economists. As with other markets these days, the shots are being called by politicians and not really by…the markets.

The trouble with that scenario is that lawmakers have traditionally been behind the curve on resolving problems. While certainly nobody wants the necessary de-levering to take place in the form of “haircuts” in the marketplace (and, believe us, every asset class would be impacted to the downside in that case), leaving matters to legislators has certain…drawbacks. Chief among them, the time it will take them to get their act together. See Europe for a prime example on how to waste one year+ on the Greek problem and still be in the “same place,” effectively.

Thus, we are likely to be stuck with sub-par growth patterns, above-par unemployment levels, and a display of political discourse not seen since…well, just a few weeks ago. While it might be in the best interest of the US Congress to pass Mr. Obama’s recent jobs program (as it might add at least one point to GDP if not more) the chances of it acting properly in lieu of merely “acting” (as in: in front of cameras) are slim at the moment. A plethora of fiscal deadlines are set to come and go between now and the time, in 2013, when a new administration (of whatever flavor) takes over the White House. Odds remain high that the drama we witnessed in connection with the US’ debt ceiling deadline might be on “instant replay” within the aforementioned timeframe. That, is probably, too bad…

As to why that is the case, look no further than the sad factoid that last year some 46 million people found themselves in poverty. The ranks of the poor swelled for the fourth straight year and it has jumped to 15.1% while household income fell 2.3% to the median level of $49,445. So says the Census Bureau. The CB might be well advised to send those numbers on up to Capitol Hill for lawmakers to contemplate while they powder their noses prior to any on-camera appearance. Such statistics have a way of (historically speaking) being translated into certain displays on the social level.

Until tomorrow, it’s…travel day once again. What else is new?

Make sure you tune into the CPM Group Platinum Group Metals Seminar live on the Kitco website, commencing tomorrow at 2:00PM New York time. You will be happy you did.

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

Websites: www.kitco.com and www.kitco.cn

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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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