Gold poised for losing week as ETFs sell bullion

In the Lead: “Reading Market News as Good or Bad”

Some of the “questioning” – from here forward anyway – will undoubtedly be of a political flavor. Up to this point, the Fed could generally be seen as acting at arms’ length from the Obama-Romney race. However, whatever (if anything) the US central bank does in August or later this year will immediately draw a penalty whistle from the GOP side of the ring.

Oddly, whatever criticism Mr. Romney might throw at any further Fed stimulus (he went on record on June 1st by saying that the Fed should stand aside: “I don’t think we’re looking for more, a QE3 if you will, I don’t think that will have any more impact than QE2 did.”), the enactment of a full-blown QE3 would actually put him in a position to be able claim “ownership” of the economic progress that it might bring about in America, circa a year from now. Provided, of course, that he is then the VIP occupant at 1600 Pennsylvania Avenue.

There were, in fact, a few smiles to be had by reading various websites (some bullish, some bearish) and getting their take on what this most recent Fed-related news item really meant: “Few Fed Officials Backed More Easing” Some simply added an “A” to that title and called the minutes bullish for gold and other assets, while others took the “Few” to mean precisely what it meant: A minority of FOMC team members willing to ease. This, folks, is what it has come to.

In any case, the head of commodities at French financial giant Natixis, Nic Brown, noted that “the [gold] market can pretend that QE3 isn't important but it is one of the fundamental factors that are supporting gold prices. It is a case that any hints, any clues that are coming out of the Fed over when they might do it, whether they might do it are absolutely central to gold prices.”

In the market’s background, troubles continued for the euro in the wake of once again soaring Spanish and Italian bond yields. The common currency dipped to a two-year low at just under the $1.22 level and it has almost rendered true the previous “outrageous” calls for a dip to $1.20 against the greenback. Trouble is, now there are new schools of foreign exchange thought that are projecting $1.10 and potential parity between the euro and the American currency.

As for the latter, well, the break-out above a further previous resistance point at 83.55 on the trade-weighted index has prompted JP Morgan technical analysts to project a near-term objective at very close to the 85 level. This is turning into a broader US dollar move, and as we alerted readers in Wednesday’s commentary, the possibility of seeing the buck get up to around the 90 value zone on the aforementioned index ought not to be discounted at this juncture. A straight-line, such an ascent would certainly not be, but the target is what is of import.

The other important price-moving metric that we alluded to in last Friday’s “In The Lead” video commentary – US jobs and their ebb and flow – also contributed to the “malaise” in precious metals trends early on Thursday. Despite nine “dislikes” by YouTube viewers, our observation that there is an emergent trend (wavy as it might be) in the American employment/unemployment situation and ignoring it also carries its own risks because a good part of what the Fed might do/ not do is tied to this fundamental economic niche.

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