Following their worst slide since March, gold prices tried for a day of recovery on Tuesday. Coming to their assistance, were a 0.15 drop in the US dollar index (down to 79.04) and a small gain in crude oil (up to $71.02) against a background of recovering Asian equity markets. The greenback exhibited a bit of pre-Fed jitters, but any posturing by Mr. Bernanke vis-a-vis an eventual rise in interest rates could boost the US currency from current levels. Gold appears capped by the $955 and higher areas, whilst (hopefully) being able to draw buying support in the $935 to $945 zone.

Analysts at MF Global see a sea-change afoot in the US dollar however. Their take is that the dollar's ability to rally amid this improving economic environment is a major change and shows that the focus of dollar strength is shifting from risk-aversion to future interest rate hikes. For the moment, the currency markets remain the primary impact factor for bullion, but the change in the commodities vs. dollar game we witnessed last Friday has been favoring the dollar. This, in the opinion of Saxo Bank analysts.

Slight improvements in price were the theme in precious metals as the Tuesday session got underway. Gold opened with a $2.60 per ounce gain, quoted at $ $948.20 as traders watched crude oil climbing a bit. All ears remain on the Fed, but nothing meaningful (aside from the constant second-guessing by speculators) is expected out of the trading day at this point.

Silver rose 7 cents on the open, starting off at $14.41 an ounce. Platinum climbed $4 to $12549 and palladium fell $1 to $272 per ounce. Wanna buy a GM vehicle? If you are so inclined, and you want to strike a deal with a California dealer, look no further than eBay. Complete with the ability to haggle on price. This might just catch on. Imagine not having to look at the salesman's white loafers, or his gold chain from the 1970's. It's all worth it.

Chinese economic news dominated the overnight market scene ahead of the start of the two-day Fed meeting. A mixed bag of statistics was on offer from Beijing overnight, where it was noted that China's industrial output rose at the fastest clip in nearly one year. Conclusions are being drawn that the country is now irreversibly on the path of recovery. China has grown at 'only' a 7.1% rate during the first half of 2009.

However, the (in their officials' words) grave global economic situation made for a sharp fall-off in July exports by the heavily export-oriented Chinese economy. Chinese bank lending was off by 77% last month, following June's lending orgy aimed at the corporate sector. Corporate profits, however, show a wobbly state of affairs. Other areas show that urban fixed asset investment rose significantly, and that deflation is alive and well over there, as well. Consumer prices fell 1.8% in July, making for a sixth month of drops.

China is not alone in the vigil on deflation. The Bank of Japan was seen obsessing about the widening demand/supply gap and expressing worries about the accelerating drops in consumer prices in the country. At the same time, the country is grappling with a 5.4% unemployment rate - the highest in six years, and a near match for its postwar high of 5.5%. Back in the USA, whilst conditions are showing various green shoots still attempting to mature into branches which ought to support the low-hanging fruit of economic progress, there remain various undercurrents of worry as well.

The glowing pool of toxic assets that is still seen leaking dangerous radiation reveals that the TARP plan never really immunized US banks from their soured loans. Problem is, no one appears to be in agreement as to what really constitutes a 'troubled' loan. So-called level III assets (the hardest to value ones) amounted to two-thirds of a trillion dollars among the 19 'stress-tested' financial firms this spring. In so many words, the economy is but one small turn away (in the wrong direction) from having these dark pools of lending spill over and infect the entire scene.

As things stand now, some 1.4 million US consumer bankruptcies are expected to be one of the 'highlights' of 2009. The percentage of US mortgages drowning in this pool may reach 30 this year. Finally, the TARP oversight panel believes that smaller US banks may now need to replenish their capital position. This recession is what really needs a 'death panel.' The sooner, the better. How about a small boost coming from the $473 to $999 expenditure per child among 'back-to-school' households? We'll take anything.