Gold lower in advance of Fed announcement

In the Lead

All of the above brings us to…Fedsday. This morning’s ADP private sector payrolls report tallied the addition of 163,000 US jobs in July and the metric could well be the precursor to a Labor Department announcement come Friday that US employers may have added 100,000 positions to payroll rosters last month. While the figure would not be near the desirable job creation level of 200,000 per month, it could certainly constitute an improvement over the June additions of 80,000 positions. The Fed, of course, will have “spoken” by then, so we shall see how the markets will react to that bit of pivotal news.

For now, we can report that gold traded about $20 lower this morning, despite a US dollar that fell by a fraction (-0.10%) on the index, and that spot quotes on the bid-side fell to between $4 and $7 under the psychological round (support) figure at $1,600. Silver lost a hefty 2.7% in early trading and it fell to just a few pennies above the $27.00 per ounce mark. Platinum continued to erode in value, losing about $27 and trading under the $1,400 per ounce level. Palladium was last seen near $580 the ounce showing a loss of $4. Rhodium remained static at the $1,150 per ounce bid quote.

Market background news indicated that China’s manufacturing activity unexpectedly fell to but one-tenth of a percent (okay, two-tenths to be exact) away from a situation in which the “contraction” label could be applied by statisticians. Meanwhile, South Korea’s exports declined by more than twice the level that economists had anticipated. Taiwan did not fare a whole lot better either when it came to the reports on manufacturing activity for July. The US reported its Markit Final Index for manufacturing at 51.4 for last month. The Institute for Supply Management on the other hand reported the US’ manufacturing gauge for July at 49.8 –up a tad (0.10) form June but still lower than analysts’ estimates and still two-tenths (okay, three tenths) under what is considered as “expansion.” With everything out there being as equivocal as all of the above, it would not be very surprising to hear from an equally ambiguous Fed this Fedsday afternoon.

We now hand the mike over to the Fed for what could turn out to be an instant replay of previous policy announcements. Or, not. The FOMC will then pass the electronic baton over to the ECB for tomorrow’s “whatever it takes” spiel by Mr. Draghi. He might act “forcefully” and then again, he might not. Pundits say Super Mario has set the markets up for a letdown with his extremely bold words uttered last week.

Meanwhile, Europe’s August vacation hiatus is just a few hours away. Tick…tick….tick…

Until Friday,

About the Author
Jon Nadler

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

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