Bank of Japan contemplates more asset purchases

Gold and silver have been performing strongly over the last 24 hours, with the yellow metal now making tentative steps above $1,780. Silver is closing in on $35, while the Dollar Index is down 0.18% since the start of the day, as markets react positively to new budget proposals from the Spanish government, aimed at getting the country’s deficit under control. This has staunched the bleeding in Spanish bonds, and pushed stocks and commodities higher.

Elsewhere, the steady drip-drip of disappointing economic data continues. US durable goods orders for August disappointed, while Q2 GDP growth was revised down. In Japan today, new data shows consumer prices dropped by 0.3% compared with the previous year, while new industrial output data disappointed.

Unsurprisingly given central banks’ deflation phobia and the Japanese authorities’ determination to weaken the yen, the Bank of Japan looks set on further money printing. BoJ board member Takehiro Sato commented in an interview two days ago that "we won't hesitate in taking additional monetary easing steps if we feel that risks have heightened enough and that the economy may undershoot our forecasts even after this month's monetary easing". HSBC Securities expects the BoJ to expand asset purchases by another 5 trillion yen (US$64 billion) before the end of the year.

Japan’s spat with China over the Senkaku Islands is adding a further fission of uncertainty to East Asian events, while Israeli Prime Minister Benjamin Netanyahu’s performance at the UN yesterday is a reminder that an Israel-Iran war is a question of when rather than if. So enjoy the (relatively) cheap crude oil while it lasts.