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Gold Remains Narrowly Confinedby Peter A. Grant
Mar 11, AM 
Gold continues to trade in a narrow range as investors continue to digest Friday's better than expected U.S. employment report for February, and its implications for Fed policy. In the minds of many, every piece of good data brings us a little bit closer to tighter policy.Hopes that the economy is finally showing signs of a real recovery is drawing investors out of their safe havens and back into the stock market. This is reminiscent of the 'green shoots' Spring of 2009 and the widely touted 'recovery Summer' of 2010. However, Fed chairman Bernanke and vice chair Yellen were quite adamant last week in saying that the central bank is prepared to keep their foot on the monetary gas pedal well into any recovery. In fact, as we noted in our most recent newsletter, the monetary base of the U.S. has surged another 8% since the beginning of the year. USAGOLD founder Michael J. Kosares notes that the price of gold "closely tracks, but lags the monetary base." We're still waiting for the yellow metal to react to the latest injections of dollars via QE4. Offering further support is the über-dovish rhetoric of BoJ governor delegate Haruhiko Kuroda. Last year's election of Prime Minister Shinzo Abe resulted in a sharp decline in the yen based on his pledge to inflate away Japan's onerous debt overhang. In Kuroda, Abe would have the perfect ally at the BoJ, committed to doing whatever is necessary to generate at least 2% inflation. Kuroda said today that he would even consider allowing the central bank to buy derivatives. The British pound tested below 1.4900 for the first time since mid-2010 based on rising expectations that the BoE will also have to offer additional accommodations to reinvigorate the economy. The euro is under pressure as well, amid deteriorating economic conditions on the Continent. ECB chief Draghi acknowledged that a rate cut was discussed last week, but they opted to hold steady on policy. As we reported last week, Christine Lagarde of the IMF believes the ECB has room to cut. The dollar index has risen about 3.6% so far this year, but it's not really the result of improving underlying fundamentals. After all, Q4 GDP was a pathetic 0.1%. This is more a function of the dollar being less weak than some of its major counterparts. While the relative firmness in the dollar has weighed on gold, the range is intact and the underlying trend is still bullish. NEWSLETTER SIGN-UP Opinions expressed in commentary on the USAGOLD.com website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. USAGOLD, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD does not warrant or guarantee the accuracy, timeliness or completeness of the information found here. |
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Monday March 11
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