30-Sep (USAGOLD) — Gold remains consolidative in the recent range, with a softer intraday tone. A firmer dollar is weighing on the yellow metal after the euro was knocked by much weaker than expected retail sales in Germany. Despite the indication of weaker consumption, signs of inflation are mounting. Eurozone HICP jumped to 3.0% in Sep, well above the 2.5% the market was expecting. As we noted earlier in the week, rising inflation will give the ECB pause in lower rates again, even as growth risks mount. Additionally, Swiss KOF leading indicators fell more than expected.

While the expansion of the ESFS bailout fund cleared a major hurdle yesterday in getting the blessing of the German parliament, other EU member states must still approve. While the approval is likely to be forthcoming, the EU will then have to deal with the reality that the fund is probably still not large enough.

The IMF — perhaps recognizing the weakness of the ESFS — is looking to about double its bailout capabilities to $1.3 trillion. According to The Wall Street Journal, they are also “weighing whether to sell bonds in private markets on short notice, a move that could bolster its safety net beyond $1.3 trillion.” So the IMF will look to issue debt as a means to mitigate debt crises… Brilliant.

More paper is just what the world needs: Paper in the form of debt (bonds) and paper in the form of fiat currency. The proliferation of paper is exactly what has perpetuated the 11-year bull market in gold, which largely solidifies in my mind that the recent pullback is nothing more than another correction in that long-term uptrend.

• Chicago ISM jumped to 60.4 in Sep, well above market expectations of 55.9, vs 56.5 in Aug.
• University of Michigan sentiment (final) revised up to 59.4 in Sep, above market expectations, vs 57.8 preliminary reading.
• US personal income fell 0.1% in Aug, below market expectations of +0.1%; First drop in nearly 2-years. PCE +0.2%.
• Canada GDP +0.3% in Jul, in-line with expectations, vs +0.2% in Jun.
• Swiss KOF leading indicator fell to 1.21 in Sep, well below market expectations of 1.35, vs 1.41 in Aug.
• Eurozone HICP jumped to 3.0% y/y in Sep, above market expectations of 2.5%, vs 2.5% y/y in Aug.
• Eurozone unemployment steady at 10.0% in Aug, in-line with expectations.
• German retail sales tumbled 2.9% m/m in Aug, well below market expectations of -0.4%, vs upward revised 0.3% in Jul.
• France PPI unch in Aug; 6.3% y/y.
• Italy PPI unch in Aug; 4.5% y/y.
• Italy CPI – EU Harmonized (preliminary) +1.9% m/m in Sep; 3.5% y/y.
• China PMI (HSBC/Markit) unch at 49.9 in Sep, but better than Sep “flash” print of 49.4.
• Japan PCE -4.1% y/y in Aug, well below market expectations of -2.8%.