As the Federal Reserve prepares more stimulus injections into the financial system, investors continue to flip back and forth from favoring safe haven assets one week to growth stories another. This week markets swung back toward growth, perhaps in hopes of progress on U.S.-China trade talks.

Global equity markets got a bounce mid-week. Industrial commodities including copper and platinum group metals also made gains. Bonds, meanwhile, sold off, and gold and silver struggled to hold significant near-term technical levels.

Gold prices dipped on Thursday to test $1,500 per ounce support. As of this Friday recording, gold is struggling to close the week here and comes in at $1,480 and shows a weekly loss of 1.8% now.

Turning to silver, the white metal is down 0.7% this week to trade at $17.51 an ounce. Platinum is up 0.9% for the week, now checking in at $891. And finally, palladium recorded another new record high. The catalytic metal currently trades at $1,696 per ounce on the heels of a 2.0% weekly advance.

Metals traders are processing the latest price inflation data as well as the prospects for more monetary inflation courtesy of the Federal Reserve. Thursday’s Consumer Price Index report showed the CPI rising by a minuscule 0.1% in the month of September and 1.7% year over year.

With government statistics showing annual costs of living running below the Fed’s 2% target, Fed chairman Jerome Powell may be inclined to cut rates again later this month. The minutes from the last FOMC meeting show policymakers divided over the issue, with some reluctant to cut at all and at least one ultra-dove favoring a 50 basis point cut.

Odds favor a 25 basis point cut by the end of October, and perhaps another by the end of the year.

Perhaps just as importantly, the Fed is also expected to continue expanding its balance sheet as an outgrowth of its recent rescue operation in the repo market. The Fed will continue to provide daily liquidity injections into the first week of November at least while making some of its “temporary” open market operations permanent.

Chairman Powell insisted this week at a Q and A with economists that the Fed isn’t pursuing QE – Quantitative Easing. Critics aren’t buying Powell’s denials.



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