Despite Chinese Permier Wen's remarks intended to keep the idea of lending cuts on the back burner, the Shanghai market lost nearly 5% and then settled for a 2.6% loss overnight, as worried investors opted to get ahead of such an eventual clampdown on hitherto...liberal funding. Their choice to sell was made easier by comments from...China Construction Bank's own chairman, who explained to those who still did not realize it, that vast sums of excess cash have made for the advent of asset bubbles. It's elementary, Mr. Guo.
Crude oil backed away from a 10-month high in the wake of the Chinese run for the exit doors, while the yen netted 1.2% gain as some investors chose to park under its relative safe-haven shade. The US dollar did not fare too well ahead of the NY session's opening this morning, losing 0.17 on the trade-weighted index, to touch 78.06 while oil sank only a tiny fraction, to $74.14 per barrel. Precious metals advanced amid these conditions showing various-sized gains whilst still defined by thin participation.
New York spot dealings started their Tuesday run with a 0.84% rise in gold (quoted at $950.10 bid), a 14-cent gain in silver (opening at $14.28), and a $4 advance in platinum (to $1241.00 per ounce). Palladium was unchanged at $282.00 an ounce. Gold appeared set to repair Monday's selling damage albeit traders remained wary of its ability to make a break-through run beyond the $960s just yet. In any case, our call for higher values this week appears back on track. Phew.
Analysts over at Barclays Capital beg to differ on the matter, although they allow for such a run to only take place sometime next month - mostly on the back of stronger seasonal patterns. In any case, they envision a fall of the $1032.70 record set last March. This view appears to be dovetailing with contrarian analysis as tracked by Marketwatch's Mark Hulbert. His flock of tracked gold timers appears so distraught by gold's apparent price prospects that he has no choice but to shade the market as looking 'bullish' - at least for the short-term. Time will tell.
News that Swiss platinum stockpiles have risen to their highest level in a decade failed to affect the noble metal thus far. However, the nearly half-million ounces added to the pile in the land of chocolate is making 2008's 375,000 ounce shortfall in supply look like it could tilt into not only balance, but a possible surplus. Platinum has gained more than twice as much as gold this year, rising 33% against a loss of 39% in 2008.
If last week's Jackson Hole presentation by Mr. Bernanke can be seen as a summary report on his job performance during what is shaping up to be the biggest economic debacle since the 30's, well, he has no worries that could erase more of his hairline. President Obama plans to reappoint the Fed Chairman and credit him with something that the appointee himself has already asserted: that his and his team's efforts have pulled the US economy back from the edge of the depressionary abyss. How's that for a hands-on lab on the very things Mr. B focused upon in his college years? Evidently, he passes the class - and then some. Not that it will stop detractors from continued name-calling.
While such megaphone-toting Town Hall screamers keep pointing to putative 'nekkid' money printing by the Fed, the fact is that -according to Marketwatch's Irwin Kellner- the US central bank has been doing quite the opposite thing, of late. Quote of the day: After growing at unprecedented rates for well over a year, the aggregate measures of monetary policy have stopped rising several months ago and have since declined. Not only that, but Ms and MZM have begun to contract. So, although nobody expects an Israeli-like rate hike announcement in coming days or weeks, the trend change marks the beginning of what could be an aggressive tightening of monetary policy period.
Just to keep things in perspective. The poop deck is in serious need of being mopped, and the Fed appears to be bringing out some stealthy devices for the job, at the moment. Someone ought to take note. Even if John Lipsky, the IMF's first deputy managing director, wrote yesterday that: With inflation threats distant, there is little doubt that central bankers intend to keep policy interest rates very low for some time to come.
Little doubts rarely become big doubts but rather, they have a tendency to turn into expressions of surprise, post facto. In any case, the veiled words and not-so-veiled numbers coming from China and the US should serve as fair warning.