Gold

The Federal Open Market Committee begins its latest meeting tomorrow. Although some jitters are rippling mildly through markets, there is not much to worry about regarding an immediate rise in U.S. interest rates.

There sits the U.S. dollar versus the euro, only a couple of 100ths or so from 1.10/1.00. Much has happened since yesterday afternoon and much of it can be explained by the People’s Bank of China’s 25-basis-point cut in interest rates.

Head of the European Central Bank, Mario Draghi, made dovish comments about the ECB’s position regarding quantitative easing and rates.

Gold seemed ready to stand its ground overnight but then crude oil, a bearish outside market, tumbled and helped drag gold down.

U.S. dollar strength also helped to weaken gold and indeed the entire precious metals complex. The metals are off their earlier lows, however. Palladium was hit hardest, down more than 2.5% in mid-afternoon trading.

The biggest news today came from the U.S. housing sector. Housing starts jumped sharply in September on surging demand for apartment rentals, the Commerce Department said in a report. Such a surge could be read as being hawkish vis a vis a Federal Reserve interest rate hike.

Gold struggled today, bumping up against a number of factors that combined to keep it from crossing the $1200 threshold, which would have meant fresh buying. Pushing past that level also would have also meant that speculative long buyers would have been crowded out by traders and investors who are true believers in the new bullish posture of the yellow precious metal.

Gold was pushed and pulled in two directions today, but nevertheless ended the week just off 3-1/2 month highs.

Indeed, the yellow precious metal eased on Friday as a recovering dollar tugged on prices and investors 
decided to take their portfolios into the weekend a little lighter in gold.

Reacting to stronger underlying inflation news in the U.S. economy, the dollar moved up today. The nominal notion is that the inflation data feeds the fire of the speculation about an interest rate hike by the Federal Reserve. We still find that scenario unlikely.

The Fed national Beige Book was released today and the data within reinforced what shrewd analysts have been saying all along. The US economy is not going anywhere until it gets some real inflation fires stoked.

A number of factors conspired today to drag most markets down or at least inhibit full-strength upward movement. The simplest to identify is gold, which continued to take losses because of fears that indeed, as we have been saying all along, the Fed will not be raising interest rates any time soon. We should also be mindful that transports lead the way in and out of recession.