Gold Reclaims $1000, Silver Surges, Stocks Decline Slightly

Precious metals were on fire Wednesday as a weakened US dollar helped gold jump back above $1,000 an ounce. The yellow metal also benefited from a huge rally in crude oil prices. By day’s end, gold and silver recorded their biggest gains in nearly four weeks. US stocks were less fortunate, falling slightly on the day but still ending 15 percent higher for the quarter.

New York precious metals figures follow:

• Silver for December delivery soared 48 cents, or 3.0 percent, to $16.658 an ounce.

• Gold for December delivery advanced $14.90, or 1.5 percent, to $1,009.30 an ounce.

• October platinum climbed $24.70, or 1.9 percent, to $1,295.60 an ounce.

The most notable bullion quotes of the day follow:

"The overall trend of improving economic indicators and inflation concerns look set to push gold higher again and ultimately challenge last year’s all-time high," James Moore, analyst at TheBullionDesk.com, was quoted on MarketWatch.

"The bounce today is all about how the dollar got clobbered," Matt Zeman, a trader at LaSalle Futures Group in Chicago, was quoted on Bloomberg. "Gold would clearly need resumption in dollar weakness in order to go much higher."

"A rise in the euro against the dollar following the ECB’s signals of sharply reduced need for its lending to banks prompted a rebound in bullion prices overnight," wrote Jon Nadler, senior analyst at Kitco Metals, Inc. " [Click to read Nadler’s full commentary.]

In London bullion, the benchmark gold price was fixed earlier in the day to $995.75 an ounce, which was a $6.25 increase. Silver was at $16.45 an ounce for a 38 cent gain. Platinum was set higher by $17.00 to $1,287.00 an ounce.

While gold prices headed higher Wednesday, the United States Mint cut gold coin prices as a result of its London gold reading of below $1,000 an ounce on average between last Thursday and Wednesday. Ultra High Relief Double Eagles and First Spouse Gold Coins prices declined by $50 and $25, respectively.

Gold, considered a hedge during times of high inflation and economic uncertainty, tends to follow oil and move opposite to the U.S. dollar. A rising greenback makes dollar-denominated commodities, like bullion, more expensive for holders of other world currencies.

Oil and gasoline prices

Oil topped $70 and gasoline prices soared after "a U.S. government report showed an unexpected decline in supplies of the motor fuel," wrote Margot Habiby of Bloomberg. The Energy Information Administration (EIA) report said gasoline inventories fell 1.66 million barrels last week, as demand shot up 3.8 percent to 9.13 million barrels a day.

"We did see a slight improvement in demand for gasoline, which should help give a bounce from the recent weakness," Tariq Zahir, managing member at Tyche Capital Advisors, said on MarketWatch. "But we are skeptical that a new trend is being established."

New York crude-oil for November delivery advanced $3.90, or 5.8 percent, to $70.61 a barrel.

The national average for unleaded gasoline fell eight-tenths of cent to $2.479 a gallon, according to AAA fuel data. The price is 6.1 cents lower than last week, 13.10 cents down from a month back, and $1.15 less than a year ago.

U.S. Stocks

U.S. stocks slipped slightly "following weaker-than-expected readings on manufacturing and the labor market, but the declines were minimal at the end of an upbeat month and quarter on Wall Street," writes Alexandra Twin of CNNMoney.com.

"It’s the end of the quarter and, with the data coming out [Thursday], people want to consolidate some of their gains," Thomas Nyheim, portfolio manager at Christiana Bank & Trust Co., was quoted on MarketWatch.

The Dow Jones industrial average lost 29.92 points, or 0.31 percent, to 9,712.28. The S&P 500 Index declined 3.53 points, or 0.33 percent, to 1,057.08. The Nasdaq Composite Index fell 1.62 points, or 0.08 percent, to 2,122.42. The Dow, S&P and Nasdaq all gained just over 15% during the third quarter.

Gold, Silver, and Metals: Prices and Commentary – Sept. 30
by Jon Nadler, Kitco Metals Inc.

Economic News = Chinese Food

Good Day,

A rise in the euro against the dollar following the ECB’s signals of sharply reduced need for its lending to banks prompted a rebound in bullion prices overnight. Further signs that the global banking sector is returning to a more even keel position engendered a rise in risk appetite once again, now that FOMC and G20 news have all but dissipated from the scene.

The IMF issued its own projections for the magnitude of global writedowns for this brutal crisis, and such calculations turned up the optimism more than a notch. The institution feels that 15% less will be tossed out the windows of financial institutions as a result of the meltdown, bringing the estimated tally to $3.4 trillion. Another case of ‘less worser.’ Speculators are already celebrating. They are exhibiting a case of Chinese food syndrome: hungry again, just hours after having eaten the last batch of macroeconomic news. At least, until the next batch of economic news that proves less than ‘appetizing.’

The US dollar lost exactly 0.50 off its Tuesday value on the trade-weighted index in early Wednesday action, sinking to 76.55 and prompting renewed attempts to push bullion back to levels above the $1K mark. Crude oil benefited from the background conditions as well, gaining about $1 to climb to the mid-$67 per barrel area. The New York midweek session started off with a 0.99% gain in gold, which was quoted at $1001 and 50 cents per ounce basis spot bid.

Silver added 28 cents to open at $16.41 an ounce, while platinum managed a $16 gain to $1285 and palladium rose $4 to $290 the troy ounce. For a change, and in the event the daily gyrations in the metal are your cup of tea as a trader, we bring you the technical side of the picture, as relayed by our friends over at GoldEssential.com in Belgium. Take-home numbers: $1005 and $985. Take-home watch-list items – only one: the dollar.

Gold as well as black gold remained at nearly their day’s highs following the ADP private sector jobs survey that revealed 254,000 jobs being shed in the US this month- the smallest such number since July of last year. At the same time, the government announced that US GDP shrank by only 0.7% in a revision of the previously reported 1%. Core inflation rose at only 1.6%- a figure that harks back to 2003 in terms of slowness of pace. Appetite stimulants one and all. Get yours here, and now.

In the fundamentals background, not a whole lot of change, on the other hand. ECB gold holdings fell by 58 million euros in the week that ended Friday, as one member bank sold a bit of metal. Gold imports into India suffered a fifth consecutive decline this month as locals took a long hard look at the metal’s recent price tag and decided to pass for now. August saw imports of under 22 tonnes as compared to nearly 100 tonnes of inflows recorded in the same month of 2008.

Finally, the Dallas Fed’s Richard Fisher said something on Tuesday that perhaps at first blush sounded like many of the other recent pronouncements coming from the US central bank. That is, that as soon as the US economy is ‘convincingly’ back on track, the great mopping up of excess liquidity will commence as well. Okay, that we have heard about. Perma-bulls are betting it won’t even happen.

However, Mr. Fisher not only let it be known that it will (again, predicated upon whatever constitutes ‘convincing’ evidence of the US economic train running on time) but that it will take place with ‘a speed and intensity equal to the emergency rate cuts of 2007 and 2008 – if that is what is needed." In other words, with hardly an FOMC meeting that concludes without an upward rate adjustment.

We will revisit his statements sometime in the second half of 2010. But not if economic news of the type and tenor that have just hit the wires this morning continue to flow uninterrupted. In that case, we will revisit them in but a few months.

Until later,

Check out additional market resources at Live Bullion Spots, the Silver Calculator, U.S. Mint Collector Bullion Price Guide, and the Inflation Calculator.