Morning Gold Market Report 9/12

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Compiled 09/12/12 6:00 AM (CT)

Statistics: London Gold Fix $1,742.75 +6.00 LME Copper Stocks 215,875 tons +1175 tons

GOLD MARKET FUNDAMENTALS: (6:00 AM CST) The gold market got a boost overnight after the German High Court refused to block ratification of the European Stability Mechanism. This lent support to the Euro and sent the Dollar Index to its lowest level since May 4th, which was enough to push December gold to its highest level since February 29th. With that out of the way, the market can now focus on the FOMC meeting today and tomorrow.

The trade is anticipating some sort of action on the part of the Fed, including some sort of quantitative easing, possibly by buying Treasuries and MBS, and an extension of the low-rate policy out to 2015! An announcement is expected around 11:30 AM Central time tomorrow.

Labor unrest in South Africa is spreading beyond the platinum mines, as the second gold mine has been struck in two weeks. The "renegade" ANC leader Julius Malema, who has emerged as a supporter to the strikers, has called for a national strike against the entire mining sector. This lends fundamental support to gold in addition to the "store of value" support it gets from the inflationary threat of quantitative easing.

Comex Gold stocks were 10.844 million ounces up 53,536.

OUTSIDE MARKET DEVELOPMENTS: (6:00 AM CST) Asian equity markets were generally higher during overnight trading, with the Japanese Nikkei up 1.73% and the Shanghai A Share index up 0.28%. European stock indices are posting moderate gains as well, with the German DAX up 1%. The Dollar is sharply lower, while US stock futures are trading moderately higher going into today's session.

The German Constitutional Court gave the go-ahead for that nation to ratify the ESM bailout fund but attached several conditions including a limit on Germany's contribution without further parliamentary approval. Japanese Machinery Orders during July were up 1.7% year-on-year, higher than market forecasts. German CPI during August was up 2.1% year-on-year, in line with expectations.

Today's US economic data will include readings on August Import and Export Prices and July Wholesale Inventories. The Federal Reserve's Open Market Committee will begin a two-day meeting this morning.

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*Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.

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