Fundamentals for Gold Unchanged as Economic Uncertainty Rises
With fear and volatility gripping the financial world, many investors find it puzzling that gold—history’s most trusted safe-haven asset—has yet to rebound. Following the Fed’s taper pump-fake and Obama’s appointment of Janet Yellen as the next Federal Reserve Chairman, the ingredients for higher gold prices are in place. What seems to be missing is positive investor sentiment.
Silverfox, The Federal Reserve authorities are trapped in an unhappy predicament but one albeit of their own doing. Most of the money they are printing is being invested in the worst way that being highly flammable stock market speculation. Speculation is absorbing more and more funds of the country. The inflation of credit is becoming more and more dangerous.
The normal course for the reserve banks at such a juncture would have been to raise the interest rate as Volcker once did, thus forcing up the price of money for speculative purposes to render speculation less attractive, and to liquidate speculative loans.
The speculative fever can’t cure itself it can only become more entrenched, there is no egress, the doors are all shut. They are running the risk of bringing about a terrific smash in the market and of appearing to do so deliberately in there attempt to escape the effects of a huge debt. DT
There is no way to deflation except through disaster. DT
DT, we could really use a dose of speculative activity in the metals (all commodities for that matter). It would tell us that the market is beginning to price in inflation for a change and it would also suggest growth. Honestly, I would greet the news with some relief. Velocity of money meantime is so damned low there is barely a heartbeat registering anymore. We have to get something moving or we risk flatlining altogether. Maybe you saw the comments of Fisher from the Dallas Fed. He was pretty blunt that the Fed must remove itself from interfering in the price stting function of markets. He also noted that there was a large amount of fuel already created by the Fed to induce significant inflation in the coming years and that adding more should be resisted. Here is a bit more of his commentary. I think the market just got his message. Whew! Good speech. He sounds serious. Link to Zerohedge below……:
“……we have a surfeit of excess liquidity sloshing about in the system, the idea of ramping up inflation expectations from their current tame levels strikes me as short-sighted and even reckless. We already have enough kindling for potential long-term inflation, which will sorely test our capacity to manage policy going forward. I do not wish to add further wood to that pile. It Is Time to Taper. In my view, we at the Fed should begin tapering back our bond purchases at the earliest opportunity. We need to break away from trying to manipulate term premia and stop prolonging the distortions that accrue from our massive long-term bond purchases and the risks we incur in building an ever-expanding balance sheet that is now approaching $4 trillion. I would feel more comfortable were we to remove ourselves as soon as possible from interfering with the normal price-setting functioning of financial markets”.
Fed’s Fisher Blasts “Flaccid” Monetary Policy, Says More CapEx Needed
http://www.zerohedge.com/news/2013-12-09/feds-fisher-blasts-fiscal-policy-failings-renders-fed-flaccid
Three for three during the last few days, Bird!
Yup. I think they are telling us they really mean it this time. You know, Fisher is bang on about business spending in my opinion. A little more hiring would sure go a long way towards making me feel better about the future rght now.
DT,
Try not to waste to much energy with silverfox on common sense analysis…it doesnt work. Everybody has an opinion – and deservedly so – but, he wont budge – and come to think of it neither will we!! …:). The USA made their bed along time ago, unfortunately for us, that bed is full of bed bugs; all sorts of critters – real and imagined. It is the REAL ones that I am concerned about ; hence physical gold and silver!
These are the times when common sense won’t work and fundamentals are out of the window! Smart investor is who unlearns and learns new tricks of the trade everyday. Enough said.
It all depends on how a person defines fundamentals Silver. In the true sense or in the contrived sense!
Fundamentals are never out the window if you are a long term investor. Conversely, fundamentals are always out the window if you are chasing short term gains. Manipulation or not, any correlation between the fundamental drivers and the short term price action is coincidental.
The only reason to “unlearn” anything is if what you learned in the first place was wrong.
So true Matthew
Just like when they bought tulips Mr Fox, this time it will be different.
Well you just might have gotten a Christmas present, SD. I am still digesting this gold move today because it changed the charts. There was what looked like a ceiling just around the 1250 mark that just got blown through. Hmmm. But what does this mean? We will have to watch and see the rest of the week.
BM,
We will see – like Matthew so often eloquently suggests above, the long-term fundamentals are still VERY, VERY much with us. Now, if I for one second, REALLY thought that wasnt true – I would have gotten out a long time ago – and you, quite beneficially – would quickly have forgotten my ugly mug……a long, long, long time ago!!….:)
Hi Marc, these are indeed DIZZY times but it is interesting to watch ” The Troubles Of The Federal Reserve”, they aren’t supposed to be questioned, remember too many people believe you can’t fight The Fed, so they have been given carte blanche to do whatever they want regardless of the consequences. DT
Don’t you find it interesting, Machine Gun, that three of the Governors are for tapering?
What I find interesting is that they think they can manage their way out of this mess, but what got us here in the first place was their thinking that the market could be managed, it can’t. DT
I again agree with you Machine Gun
Agree SD Marc
Fundamentals for Gold unchanged however, fundamentals for Dollar and US economy bright which puts stress on POG.