Gold and euro share sentiment over debt levels

In the Lead: “Maybe We Should Pay Greece With Bitcoin?”

Spare cash with which to buy baubles is fairly scarce this year as India’s buyers are struggling with inflation in fuel and food costs. Current gold buying patterns are being labeled as “sporadic and indifferent’ and they follow an estimated 540 tonnes of bullion having been bought in the first half of the year. Since then, many a local has turned not only price-sensitive (and who wouldn’t be in the wake of $1,900+ bullion not that long ago?) but somewhat skeptical as well and is perhaps awaiting further corrections in the price of the yellow metal. One jeweller in Hyderabad estimates demand to be down 50% from what he witnessed in 2010.

Meanwhile, CFTC data indicates that gold speculators (you know, the so-called “paper gold” aficionados) are exhibiting some caution about bullion’s short-term prospects. The same applies to silver specs; their net speculative length in the white metal now stands at a fresh low for the current year as bearishness rules. Shorts in copper appear to be a looming threat to prices despite the notable gains the orange metals has achieved over the past couple of trading sessions.

One niche where the speculative positioning appears to indicate a bit more positive sentiment in the making is in the platinum-group metals’ space. Palladium appears to be drawing net speculative length and there has been some addition to ETF balances over the past week. The dip to under the $600 mark in the noble metal appears to have had a short half-life, thus far.

The US dollar was very slow to move this morning; it lost 0.04 then gained 0.04, and it traded at 76.45 to 76.52 on the index while crude oil was also showing some signs of apathy; it advanced half a dollar to $87.90 per barrel. US stock futures showed only that investors were preparing for another day of digesting news out of Europe and acting based on such developments rather than taking the lead. Investors remain uncertain about growth in Europe as well as in the US. Hardly anyone can blame them for being less than enthusiastic about such matters; not at a time when Mr. Dudley (he of the NY Fed) comes out (this morning) and opines that the US is facing sluggish growth and persistent “headwinds,” and that Fed monetary policy is not “all powerful.”

Perhaps the Fed has done all it can, and perhaps not. Officials seem to indicate that there are still arrows left in the Fed’s quiver to use if the need arises. However, the US central bank will first try…talking before acting. At the upcoming November (1st and 2nd) FOMC meeting the Fed’s team will “give greater guidance” to the markets about its interest rate policy and will refrain from injecting any QE3 type of liquid into the US economy unless the latter shows signs of crumbling away in a speedy fashion. Further assets purchases (mortgage-backed securities, etc.) have been mentioned as possibilities and some Fed officials have expressed alarm at what are visibly tightening credit conditions in the US.

Some “newspeak” was also used in connection with describing current US economic conditions: We do not have a “recession” in the US economy – we have a “growth recession.” Hmmm…How we reconcile that label with the latest indications on third-quarter US economic performance remains a bit of a mystery, for now. If the forecasts turn out to be correct, Q3 US growth might come in at the 2.8% level; more than double that of Q2. Yes, that is some distance away from the 4% growth pace that is needed in order to call the “all clear” but it does not seem like a “growth recession.”

Don’t look now but there is a major currency crash already under way. No, we have not suddenly turned into alarmist newsletter scribes here. The fiat currency Armageddon we are referring to is taking place in the same space that others have tried their hand in and failed previously; the creation of alternative money. Remember Beenz? Remember Flooz? Neither do we. Remember Bitcoin? You won’t, soon.

The recently invented “encrypted monetary unit” that is more complex than the design of the Mayan calendar was supposed to take the world by storm. Forget the greenback when you can swear by Bitcoin. Aha. Whereas the latest in alternative cash once traded as high as $33 (hey, near gold standard status!) it is now changing hands at under $3 and it might soon vanish altogether. Some have called it nothing short of a “screwball scheme to bypass the system.” You know; the “IRS and taxes” kind of system. So, do not be shocked if you get “called in” by Uncle Sam for a friendly audit, or to soon read that “Bitcoin…bit the dust.”

In the meantime, we do take “regular” greenbacks and loonies here.

Until tomorrow,

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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