MF Global Daily Report: Precious Metals (Sept. 7, 2011)

Sept. 7 (MF Global) -- Price Outlook

The following is the precious metals contribution to the Monthly Market Memo:

Although the gold market held near all-time highs in early-September, the degree of the underlying strength still felt a bit uncertain and could open the market up to weakness in the near-term. The market started August by accelerating the pace of the rally that was already in place in July, with support offered by the prospect of new stimulus measures. The August 8th FOMC meeting indeed clarified the Fed’s language by outlining intentions to leave rates at low levels through mid-2013. The wording created expectations that Fed Chairman Bernanke’s speech at Jackson Hole 18 days later would either contain additional accommodation or become a repeat of 2010’s major quantitative ease initiative. Mr. Bernanke’s speech disappointed doves by leaving out any fresh efforts and created a $212.50/oz selloff in gold, or 11.1% from its late-August peak. The market geared up for a major correction until the non-farm payroll number reported on September 2nd showed zero job growth and put ease back on the table. Prospects for additional accommodation were also bolstered by dovish Fed President Evans and FOMC minutes which showed a split between doves and hawks.