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Gold Ends Tues 1.4% Higher on Pointless Fed Chatter, "Outside Day" for Dollar

From Chris Mullen at

Gold and silver fell over 2% in Asia on Tuesday but rebounded near unchanged in London.

Both Gold and then silver rose to find more than 1% gains at $814.90 and $13.33 respectively by noon in New York. Gold rose further to end with a gain of 1.36%, but silver fell back to end unchanged on the day.

Oil fell in early trade as Tropical Storm Fay hit Florida instead of operations in the Gulf of Mexico. Prices turned higher in late trade on geopolitical concerns between NATO and Russia, and a forecast also surfaced for Fay to possibly turn north-west and impact crude oil installations after all.

The US Dollar index had an "outside day" – marking both a higher high and a lower low – which technical analysis says may signal a reversal of its recent bull trend.

The Gold Price in Euros rose to about €549, platinum lost $35.50 to $1352.50, and copper gained over eleven cents to about $3.43. Gold and silver equities rose over 3% by early afternoon before they fell back off slightly into the close, but they still ended with over 2% gains.

The Dow, Nasdaq, and S&P fell on more financial concerns and inflation worries as data showed Building Permits and Housing Starts sinking to fresh multi-year lows.

Producer Price inflation came in higher than expected at a 27-year high, dragging Treasury bonds lower on the day. Comments from Federal Reserve members were also less than soothing.

Richmond Fed president Jeffrey Lacker called for the US central bank to target "core" year-on-year inflation – stripping out fuel and food prices – of just 1.5%, even less than the Fed's current target of 2.0% and way below the core rate of 3.5% reported Tuesday.

His colleague Richard Fisher of the Dallas Fed said the Fed should remain "poised" to hike rates if slowing growth fails to contain inflationary pressures. He also said that he did not regret dissenting from other Fed members at past meetings in calling for higher interest rates.

Both comments seemed hawkish, but there are several analysts who think that raising interest rates will do nothing to help contain inflation and still others who think that listening to Fed members is a fairly useless exercise to begin with. Watch what they do instead – currently holding the returns to cash some 3.6% below the headline rate of inflation in consumer prices, delivering a net loss to bank savings and rewarding debt.

"Do you think the Fed has room to raise rates?" asks Jim Sinclair of "Such an event would drop the Dow like a rock in a matter of days, killing whatever is left of a down trending US economy."

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Chris Mullen is chief content manager of the GoldSeek family of websites, a leading source of gold news, comment and mining-stock data for private and institutional investors.

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