Gold buoyed by currency and equity outlooks

In the Lead: “Yes, We Cain? Ummm…No”

Silver traded 60 to 70 cents higher and was quoted at near the $32.50 level for most of the morning hours ahead of Friday’s ritualistic book-squaring. Platinum and palladium both advanced by double-digits; the former gained $23 to trade at $1,559 on the offered side of spot and the latter climbed $21 to the $618 level per ounce. Standard Bank (SA) market analysts opine that based on “ a cost of production basis [view] both metals are too low and they are expected to move towards $1,600 and $700 respectively, towards the end of the year.”

A portion of Friday morning’s speculative-flavored optimism was attributed to news from China that inflation slowed somewhat during September. Chinese CPI figures came in at the 6.1% year-on-year level, slowing from their recently alarming peak of 6.5%. PPI also showed some signs of slowing and was reported at 6.5%, down from its own unwelcome pinnacle of 7.5% in July. Specs feel that the numbers might result in a “pause” phase as regards further tightening by the PBOC.

Slowdown in inflation figures aside, there remains a stubborn level of food price pressures in the system and the country’s central bank will need to keep a firm grip on the policy handle in coming months. One month may not a trend make, and inflationary expectations –frequently the bigger fly in the economic ointment- continue to show a lack of easing.

Policies and guidance coming from the PBOC are expected to undergo a fine-tuning in December; that’s when the Communist Party holds its agenda-defining conference. While rate hikes may undergo a temporary phase of “hold” there are hardly any expectations of rate cuts present among analysts at this time. Thus, the Chinese business community is also ‘pausing’ for the moment and will try to ascertain what size and scope lending activity might take in coming weeks.

The US business community, on the other hand, appears less than pleased with candidate Herman Cain’s “9-9-9” tax plan. Some (including a growing number of GOP opponents to it) have called the triple-niner a “job killer” and “empty sloganeering.” Entities such as the National Retail Federation, the National Association of Homebuilders have come out and warned that Mr. Cain plans would aggravate retail sales (this comes on a day when US retail sales gave a shot in the arm to the Dow and many other assets) and that it would deepen the already more-fragile-than-porcelain US housing market (ironically most of all, Florida’s –Mr. Cain’s own).

As for Mr. Cain’s last “nine” – the national GST– it is thought to result not only in screaming retailers, but it might also yield transference of the tax burden onto the middle and lower class in America. That is something that – at this particular point in time, and given the country’s mood – could have some…interesting outcomes. Think “Occupy America.” At the forefront of such “occupation” might be America’s truckers who are probably shuddering at the idea of a further surcharge on fuel and on heavy-duty vehicles.

One USC-based economist has projected that the tax burden on an American family of four that earns $50K per annum would balloon from $5,100 to $13,500. While most everyone is in favor of solving deficits and of simplifying the labyrinthine and/or Byzantine US tax system, this kind of ‘overhaul’ is not what they apparently have in mind.

Until Monday, do have a splendid weekend, please; even if you choose to spend it camping out all night in front of your nearest Apple store waiting for the iPhone you can talk to.

It is rumored that you can ask Siri the question: “What will gold do next week?” Your likeliest reply will be: “More data needed.”

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

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

About the Author
Jon Nadler

Jon Nadler is senior metals analyst with Kitco Metals Inc. in Montreal.

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