Good Morning,

Precious metals markets were essentially stalled near previous levels and they were seen quietly tracking investor sentiment following various economic data releases across the globe. The US dollar managed a gain of 0.21 on the trade-weighted index, rising to 78.33 ahead of this morning's start in the markets. Crude oil climbed ever so slightly, and was idling at one or two pennies under the $70 per barrel mark.

Gold bullion opened its firs September trading session showing a $0.90  gain at $951.80 per ounce. Direction is still lacking and moves have thus far been tentative and largely determined by developments in other markets. Internal dynamics still show poor offtake from India (it probably only imported 12 tonnes last month as against last year's 98) while the largest gold ETF remains in hibernation mode. Where the news to move this market out of its doldrums might come from, is anyone's guess at this time. Speaking of guesses,...

...Analysts at Standard Bank group have offered up a technicals-based price scenario by which gold might break out of its current pattern and -if it manages to successfully close above $981 per ounce - shoot up to $1325. Of course, the breakout could also turn out to be a breakdown. In that case, the bank feels that once support at $935 give way, the door could be opened for a decline to anywhere between $800 and $850. Take your pick. We already know what the newsletter community and gold forums believe. You don't have to guess too hard.

Silver started with an 11-cent loss at $14.79 per ounce, while platinum opened $2 lower at $1236.00 per ounce. Palladium dropped $1 to ring in at $288 an once. Meetings between labour and management are on tap at South Africa platinum producers today. Other -unverified- news indicate that Russia may have exhausted its palladium stockpiles and is supplying the market from current production at this time.

The first day of September dawned to mixed global economic news and sent investors off into different directions depending on what they concluded on the basis of such stories. Tuesday marks the harvesting of manufacturing data from across various regions of the global economy. To say that the news reveals a tenuous recovery process, is to understate matters.  Here is the roundup, as of early this morning:

China's first half lending spree resulted in the country's fastest expansion in manufacturing in nearly a year and a half. However, questions about the government's continued willingness to pump up the economy with liberal lending that will unquestionably result in more lethal bubbles continue to make the rounds among Chinese speculators. In any case, yesterday's victim of such apprehensions - copper- picked up steam following the news. August's Indian manufacturing activity showed the slowest pace in over five months, but remained above the 53-mark anyway.

Over in Euroland, the common currency fell following reports that the region's manufacturing activity was doing the exact opposite of that in China. Investors may have cheered the decline in German unemployment and rise in retail sales, but the shrinkage in manufacturing, coupled with the highest regional unemployment rate in a decade put a significant damper on things and caused a 1.1% decline in Europe's Stoxx 600 index. Across the English Channel, a somewhat more scary report: the UK's manufacturing index fell back into contraction mode and local consumer lending shrank for the first time in 16 years.

Stateside, a number of fund managers are basically betting against Goldman's recent call for the official start of an economic recovery. US markets have enjoyed a six-month long rally that brought the S&P 500 to levels not seen since 2004. The overall theme remains the same, no matter where one cares to look: namely, that speculative expectations have gotten somewhat -and in some cases, way - ahead of the realities on the ground.

Hard to blame participants for wanting to put the last two years' worth of misery behind them and get on with making money once again. There is, however, a balancing trick involved here and we can also forgive the doubters for not jumping on this bandwagon with the same wild abandon as some have.

Thus, US stock index futures were pointing to a feeble September debut, even as anticipation grew that American manufacturing activity might show a departure from the rest of the world and look more like China's. The expectation is that the ISM figures will show a rise above the key 50% level (even if only 0.50% above it) and tilt into expansion mode for the first month since January of 2008.

Well, we won't keep you hanging until 10:00 am but will return with a post-ISM post-mortem after the lunch hour.

In case anyone get bored this morning, they might want to read a pure entertainment piece on gold, as supplied by Bloomberg this morning.

http://www.bloomberg.com/apps/news?pid=20601109&sid=an7Pm3hkmauw

Next time someone calls and offers up 20,000 metric tonnes of gold bullion for sale, you'll be prepared. Unless, of course, you live in Utah. In which case, you might wish to call us or any other bullion dealer first, and obtain a quick education on matters. It could save you....$50 million ?!!!

Have a nice Tuesday!

Jon Nadler
Senior Analyst
 
Kitco Metals Inc.
North America