Gold Ends Weds 1.9% Higher as Banks Prepare for "Level 3" Accounting

From Chris Mullen at GoldSeek.com...

Gold Prices rose steadily in Asia and London on Wednesday, climbing as high as $815.15 by midmorning in New York.

The Gold Market then fell back below $810 by late morning, but it then rallied higher in the last two hours of trade and ended near its session highs with a gain of 1.93%.

Silver followed a similar pattern and made a high of $15.102 before it closed with a gain of 3.02%.

Gold Priced in Euros rose to nearly €555 per ounce, platinum gained $25 to $1440, palladium remained unchanged at $369, and copper rose over 16 cents to about $3.30 on news of an earthquake in Northern Chile that disrupted power to several mines.

Gold and silver mining equities went up over 3% at the open before they cut into their gains for most of the rest of the day. They then fell further in the last hour of trade as the major indices dipped, but they still ended with over 1% gains and closed above yesterday’s highs in a bullish pattern.

Most of today's US economic data came in as expected, with retail sales in Oct. rising by only 0.2% from a month earlier. But the Producer Price Index recorded a surprise slowdown to gain only 0.1% from the Sept. reading vs. the 0.3% increase forecast after oil prices hit new all-time highs above $95 per barrel.

Oil rose again today, up about 3% to end near its high of the session in anticipation of Thursday's delayed US stockpile report, expected to show draw-downs across the board and an increase in refinery utilization. The EIA also noted today that demand appears so far unaffected by the recent high prices.

Treasury bonds traded barely lower for most of trade and ended unchanged ahead of Thursday's dramatic change to US accounting standards when FASB guideline SFAS 157 is implemented, requiring each financial firm to divide its assets into three categories called simply enough, Level 1, Level 2 and Level 3. (Read more about Level 3 in Hell here...)

The Dow, Nasdaq, and S&P traded mostly slightly higher on those tame inflation figures and rising Retail Sales, but Bear Stearns announced it will take a $1.2 billion write down from bad credit-market investments. All three indices then fell back off in the last hour of trade and ended roughly 1% lower on uncertainty about new credit problems that may evidence themselves as SFAS 157 is applied to balance sheets overnight.

Ben Bernanke of the Federal Reserve then spoke today about more transparent and frequent forecasts from the US central bank, but traders pointed out that they will still not be able to predict "event risks" such as the recent and ongoing subprime-induced credit crisis.

The Fed will now give four projections a year, instead of two. It will also look three years ahead in order to "improve accountability".

Thursday at 08:30 EST brings the much-anticipated Consumer Price data for last month, plus Initial Jobless Claims for last week. At noon is the Philadelphia Fed survey for November.

The US Dollar index fell back within 0.5 points of a new record low on its trade-weighted index, but it then rallied back higher in late trade and ended just slightly lower as recent risk aversion abated, resulting in US Dollar gains versus the Japanese Yen.

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