Gold opens Q4 on an optimistic note

In the Lead: “Go Tell The Spartans: We Don’t Buy in Dubai”

Platinum dropped $7 on the open and later fell harder, losing as much as $26 to trade under the $1,500 bid level per ounce. Palladium also declined; it lost $6 initially and $16 subsequently, trading at $595 the ounce. Robust and better than forecasted GM and Chrysler US car sales (Chrysler reported a 27% gain in September sales) did little to bolster sentiment among traders of the noble metals. CFTC-reported speculative positioning in the platinum and palladium space points to continued short-term bearishness and expectations of price weakness in the near-term; both based on developments such as the one reported in the following paragraph:

Signs that Europe’s economy is contracting rocked the commodities’ sector this morning and such signs translated into apprehensions that led to selling in copper, oil, and certain other metals. The S&P’s GCSI Spot Index tumbled to its lowest levels since last December and the materials’ complex extended its worst drop since 2008 as traders warily eyed the eurozone purchasing managers’ gauge dropping to 48.5 (from 49 in August) and indicating shrinkage in activity.

That kind of signal was not on offer in the September metrics of similar activity in the US however. A surprise rise in the ISM (to 51.6) last month was in large part due to the on-going recovery in auto production and sales and it makes some economists a bit less concerned about the imminence of a full-on stall in the US economy as of this juncture.

Gold and silver received an overdue lift on Monday primarily on the back of perceptions that Greece was headed for budgetary trouble despite austerity measures that would make Spartans envious, were they around to witness them today. Demonstrating once again that the Greek crisis has more layers than a freshly-baked batch of filo dough, the situation took a turn for the worse with the announcement by the country’s government that it most likely will not meet its 2011 deficit target. In order to try to appease its trio of creditors (the EU, ECB, and IMF) the Greek cabinet approved the implementation of another $8.8 billion in belt-tightening.

However, as we recently ascertained, that which this morning compelled global investors to seek safe-haven refuge in gold or silver is also the factor that has of late tended to boost the US dollar and wreak havoc in the equity markets. Such developments have a way of catching up with precious metals and the outcome is familiar to anyone who took a close look at September’s market gyrations in gold and silver. The dollar, for one, advanced to above the 79-mark this morning on the trade-weighted index, while the euro slid to an eight-month low against it on the aforementioned Greek gloom.

Don’t look now, but “dollar days” in September were not just being held at your nearest big-box store at the mall. The “soon-dead-and-gone” greenback beat stocks, commodities and bonds last month, for the first time since May. Its six percent gain on the month stood in stark contrast to the near-or-larger-than double-digit declines that stock and commodity indices suffered.

Rubbing salt into various dollar-morticians’ gaping wounds, the dollar’s climb came shortly on the heels of a much-talked-about (and putatively lethal) downgrade of US ratings by S&P. One currency strategist at Barclays Capital summed the September dollar rally up as follows:“In a time of crisis you want to be holding the most liquid currency out there. It waters down the argument for “the end of the dollar as a reserve currency.” Some, such as Toronto-based First Asset Management’s John Stephenson went one step further and opined that the “dollar is safer than gold at the moment.”

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