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Gold has traded between $1,342 and $1,358 so far today…as of 9:30 am Pacific, bullion is up $4 an ounce at $1,345…Silver has jumped 36 cents to $20.16…Copper has added 2 pennies to $2.18…Crude Oil has retreated 70 cents to $42.07 while the U.S. Dollar Index has tumbled half a point to 95.67…

Holdings of SPDR Gold Trust, the world’s largest Gold-backed exchange-traded fund, fell for a 2nd straight day yesterday…they slipped 0.12% to 972.62 tonnes from Monday…

In a sign that there is still keen uncertainty and deflationary worries in the world marketplace, German 10-year government bond (bund) yields fell into record-low negative territory today, fetching an average yield of -0.9%, amid good demand…UK and Chinese government 10-year bond yields have also hit record lows but remain in positive territory…

Gold’s “Perfect Storm”

Diego Parrilla, precious metals specialist and co-author of “The Energy World Is Flat“, says a “perfect storm” has formed in Gold as the limits are being tested in global monetary policy, credit markets and the boundaries of fiat currencies…in a commentary Monday in the Financial Times, Parilla stated:  “Quantitative easing and negative interest rates have been game changers and have dramatically distorted the valuation of government bonds, breaking the theoretical ceiling in prices, squeezing shorts and underweight positions, and feeding what, in my view, is one of the largest financial bubbles in history.”

America’s Productivity Problem

Much worse than expected U.S. productivity levels have had a dampening affect on last Friday’s robust jobs number from the Labor Department, and that has contributed to weakness in the dollar and strength in Gold today as investors see even less chance of a Fed rate hike later this year…

Productivity in Q2 unexpectedly fell 0.5%, according to the Labor Department in a report released yesterday…economists surveyed by MarketWatch had forecast a 0.3% gain in productivity during the quarter…productivity is down 0.4% from a year earlier, the first year-over-year decline since the 2nd quarter of 2013…

Why is productivity important?…it measures how much an employee produces in an hour of work…higher productivity is regarded as the key to a rising standard of living over time because it tends to lead to higher pay for workers and larger profits for companies…

Continued low productivity growth likely means that businesses aren’t boosting capital spending to increase output at a time when another input to the production process – labor – is becoming more scarce and more expensive…

Heading into the 2nd quarter of 2016, quarter-on-quarter productivity growth had averaged just 0.7% over the past 4 readings, well shy of its long-run average of 2.2%…

According to Bank of America Merrill Lynch analysts, the manifold headwinds on productivity growth (a mass retirement of the most experienced workers, a prolonged period of rising Oil prices before a sharp retreat, the slow integration of new innovative technologies into the production process, and above all, soft business investment) means policy rates will stay even lower throughout this cycle than the subdued levels monetary policymakers think they’ll eventually reach over the long haul…

Oil Update

Top Oil exporter Saudi Arabia boosted its output to a record high in July, it told OPEC, in a sign that key members remain focused on market share rather than tackling a supply glut by curbing production…the kingdom pumped 10.67 million barrels per day in July, according to figures it provided to OPEC which published them in a monthly report today…total OPEC production was up 46,000 bpd to 33.11 million bpd…

OPEC kept its forecast for world Oil demand growth unchanged at 1.15 million bpd for 2017…the producer group revised its outlook for 2016 global growth, increasing it to 1.22 million bpd…

The U.S. Energy Information Administration added to the market’s unease yesterday when it forecast a smaller decline in U.S. Crude Oil production in 2016 than it projected a month ago as drilling activity picks up…the agency now expects U.S. Oil output to fall by 700,000 barrels per day (bpd) this year to 8.73 million bpd, compared with the 820,000-bpd drop it previously forecast…

RBC:  “Overbearishness” In Oil

Oil markets have been prone to over-bearishness of late with supply fears returning to the market largely “overdone”, according to the latest analysis by RBC Capital Markets…

Helima Croft, RBC’s head of commodity strategy, and commodity strategists Michael Tran and Christopher Louney, stated:  “The Oil market recently has found itself in a sort of bear trap. Even as we march closer to the point where the daily global supply overhang turns to a deficit, a deluge of bearish headlines has kept the market on its heels,” Croft and her colleagues noted, adding that they “believe that the most significant bearish risks are overdone or have already been largely priced in.”

The behavior of the Venture backs up the RBC analysis…

In Today’s Morning Musings…

1. Probe Metals (PRB, TSX-V) starts major drill program at promising Val d’Or East Gold Project…

2. History repeats itself with MX Gold (MXL, TSX-V)…

3. Daniel’s Den – the U.S. earnings “recession”, and some juniors to watch…

Plus more…click here to read the rest of today’s Morning Musings and all BMR exclusive content, through a risk-free Pro, Gold or Basic package, or login with your username and password.