The Federal Reserve held another meeting this week, and while all look to the Fed to gain any inkling of policy changes that might affect the markets, this Thursday offered very little in the way of actionable news.  The most productive highlight came in the question and answer session when Bernanke was asked point blank if the prospect of QE3 was closer than it was after the last meeting.  He responded by saying the Fed is ready and willing to step in if economic conditions should worsen and policy be required to assist the economy.  Both gold and stocks jumped after this answer, suggesting that most people do believe that at some point the economy has to worsen, prompting Fed action.  It seems that by holding QE in his pocket, Bernanke is not only supporting the stock market, he's putting a floor underneath the gold price.  Europe is in deterioration mode again, as citizens of countries under forced austerity are beginning to seek political change.  In France, for example, Sarkozy was defeated in the preliminary election by the socialist leaning candidate Hollande.  Similar political changeovers are taking place in Spain, the Netherlands, and the Czech Republic.  This all sheds an interesting light on our own political sphere as we are now in the thick of an election year.  All the while, gold remains range bound, making this the longest consolidation period since the last significant gold consolidation from Feb, 2009 to Aug 2009.  As we all remember, after breaking out of the range set in 2009 gold went on to its greatest run yet, doubling in two years, while increasing almost $1000.  Did the Fed give gold the bump to make it out of this range?  Time will tell, but if gold explodes from this range like it did in 2009, the price levels it achieves over the next few years could be impressive. 

(March 30, 2012 discussion). Recently, the bullish sentiment reading on gold fell to 10%, which, put another way, means that 90% of investors believe gold is headed lower. By comparison, when gold topped out at $1920, the bullish sentiment was above 90%. Many analysts look to extremes in sentiment as indicators for changes in market direction, and have been calling for such a drop in sentiment as a cue to a turning point in the gold price. It is interesting that this indicator coincides with a resurgent stock market. Recent stock market performance is not all its cracked up to be, however. If Apple is removed from the S&P 500, the index would be unchanged on the year. So if you are a stock owner, but did not own Apple stock, all the talk of a well-performing stock market would be lost on your portfolio. Fears of a slowdown in China have increased in the last week, as the Chinese stock market has turned lower. Discussed is what China might do in terms of monetary stimulus should this slowdown gain momentum. If China were to stimulate its economy, it would join the United States, the EU, Japan, and the UK, creating an international environment where all five of the largest economies of the world would simultaneously be operating with easy monetary policies. Talk of inflation here at home has also ramped up of late as gas prices are creeping toward all-time highs. If the Fed wants inflation, inflation it will have. Such an environment of international easy money, combined with domestic inflation, is a potentially explosive one for gold. 25 minutes, with George Cooper, Peter Grant, and Jonathan Kosares

Gold posted its best January since 1980 as the Federal Reserve announced an extension to its accommodative interest rate policy to the end of 2014.  The end of 2014 will mark our sixth year of zero interest rate policy, placing us smack dab in the middle of our own 'lost decade'.  The Fed is also now targeting core inflation rates of 2%.  Targeting core rates of inflation is simply another way of saying 'formal currency devaluation', and carries with it substantial risk.  If the Fed is unable to reign back in the mechanisms used to achieve its targets, it runs the risk of creating runaway inflation, especially in food and energy.  Meanwhile, it was announced Thursday that Greece reached a new deal to secure another round of bailouts.  Deeper austerity measures were agreed to, renewing protests and demonstrations throughout the country.  (Post-production note:  It appears even this latest deal for Greece is running into trouble, as even greater cuts were asked for after Greece agreed.  So again, talk has returned to a increased risk of default). 

Its been another year of positive performance for the gold market, trading roughly 20% higher than where it began the year.  Stocks, on the other hand, have been largely flat.  Another year, another debt milestone, with the U.S. national debt crossing $15 trillion for the first time in history.  Europe remains in flux, with yet another agreement coming forward, yet no true signs of action to give the market any reliable sense of direction.  The result has been increased volatility within the range, both for gold and equities.  The failure of MF Global is being largely downplayed in the media.  Co-mingling investor funds with the firm's risky plays on credit default swaps has destroyed huge sums of private capital.  Jon Corzine, in his testimony before the House Agricultural Committee, stated very simply when asked where client's funds went, "I don't know."  As a major clearinghouse for commodity futures, MF Global's failure has put a significant dent in the perceived reliability of the futures market as a whole.  The erosion of confidence in this arena suggests large swaths of investment capital may seek physical ownership to gain safer (absent of counter-party risk) exposure to the gold market.  If this is indeed the trend, it won't take long for the broader market to realize just how little physical gold is actually available.  30 minutes, with George Cooper, Peter Grant, and Jonathan Kosares

To all of our clients and patrons, Happy Holidays and Happy New Year!

(August 23, discussion) Gold's ascent over the past few weeks has been remarkable. Following the downgrade of US debt by S&P, gold covered the distance between $1600 and $1900 in less than three weeks. Talk of gold being in a bubble quickly resurfaced as gold surged, though very little, if anything, in the bubble claims hold water. Net global investment in gold remains less than 1% of total assets, compared to levels as high as 5% in the 1960's. Perceived safe haven currencies such as the Yen and the Swiss Franc and being forcibly suppressed, while all other major currencies continue to decline. As Alan Greenspan said earlier this week, "Gold, unlike all other commodities, is a currency. And the major thrust in the demand for gold is not for jewelry. It's not for anything other than an escape from what is perceived to be a fiat money system, paper money, that seems to be deteriorating." Also discussed is Hugo Chavez' effort to repatriate Venezuela's gold from the Bank of England, setting the stage for other countries to attempt the same, raising questions about just how much gold is really out there to fill this kind of demand. Last week was also the 40th anniversary of Nixon closing the gold window.-- With Peter Grant, George Cooper, and Jonathan Kosares. 23min.

4.11.2011 Round Table

(April 11, 2011) -- An assessment of today's closing metals report and current news.

USAGOLD RoundTable (January 26, 2011) -- Has Anything Really Changed? Trends to Follow in 2011