End-of-the-week top gold news

Friday, 22-May-2015

Julie Verhage (Bloomberg) Bank of America: Markets Are in a ‘Twilight Zone’ and It’s Time to Hold More Cash and Gold “…the investment backdrop will likely continue to be cursed by mediocre returns, volatile trading rotation, correlation breakdowns and flash crashes. For this reason we continue to advocate higher than normal levels of cash, adding gold and owning volatility in mid 2015.”

Note: We have indeed seen quite a few clients booking profits in equities and moving that capital into gold.

Marcy Nicholson & Jan Harvey (Reuters) Gold hits 3-month high after run of downbeat U.S. data “Gold hit three-month highs on Monday, rising for a fifth session, as a run of soft U.S. data supported expectations that the Federal Reserve will hold off raising interest rates for the time being.”

Note: The bad news is mounting, and Q1 GDP will likely be revised to a negative number. And yet, there are still many investors that seem to believe a rate hike is still in the cards for this year.

Tommy Stubbington (Wall Street Journal) ECB Jolts Markets With Fresh Comments on QE “Just when it seemed the market impact of its stimulus was fading, the European Central Bank has reminded investors about the power of its bond-buying program. Comments by two ECB officials have jolted markets early on Tuesday. Benoît Coeuré said the central bank will moderately frontload its debt purchases to avoid too much buying in the quiet summer holiday period. And Christian Noyer added that the ECB is ready to go beyond its already announced stimulus in order to hit its inflation target, if necessary.”

Note: This is nothing more than the latest salvo in the currency war.

David Levenstein (Gold-Eagle) Demand For Physical Gold Remains Strong And Global Debt Explodes “McKinsey concluded that total global debt was $199 trillion and the little covered report was released in February – 3 months ago – meaning that the figure is likely over $200 trillion. With a global population of 7.3 billion this works out at over $27,200 of debt for every man, woman and child alive in the world today. Almost 29% of that debt – $57 trillion – has been accumulated in the relative short period since the financial crisis erupted in 2007 – just 8 years.”

Note: If you want to get out of a hole, the first thing you do is stop digging. This simple advise has been broadly ignored the world-over, which leaves the global economy even more vulnerable than it was ahead of the financial crisis.

Kira Brecht (KitcoNews) Remember, There Are Many Reasons To Own Gold “”Physical gold provides important non-correlated diversification within a well balanced portfolio. In fact, gold is unique in that it is the only primary asset that is not simultaneously someone else’s liability. An allocation to gold has been shown to protect and enhance returns, while reducing volatility,” added Peter A. Grant, chief market analyst at USAGOLD.”

Note: Words of wisdom from a smart guy!

Posted in Gold News, Gold Views |

Yes, the U.S. Economy Probably Contracted in the First Quarter. But How Much?

22-May (Wall Street Journal) — The U.S. economy’s performance in the first quarter of the year is looking worse and worse.

Last month, the Commerce Department reported gross domestic product, the broadest measure of economic output, grew at a 0.2% seasonally adjusted annual rate in the opening months of the year.

That estimate was based on incomplete data. Since, figures on trade and inventories have come in lower than expected, suggesting the economy actually contracted. (Higher-than-expected imports and lower-than-expected inventories are the big drags.)

On Friday, after Commerce released wholesale inventory data for March, J.P. Morgan Chase cut its tracking estimate of first-quarter GDP growth to minus 0.8% from minus 0.5%. Barclays lowered its estimate by three-tenths of a percentage point to minus 0.6%. Forecasting firm Macroeconomic Advisers knocked two-tenths of a percentage point off of its first-quarter estimate, taking it to minus 0.6%.

[source]

PG View: Well, as long as the economy continues to improve (see Yellen comments today), the Fed is on track for a rate hike this year. . . Not.

Posted in Economy |

The Daily Market Report: Gold Dips Within Range as Inflation Remains Tepid


22-May (USAGOLD) — Gold remains generally consolidate above the $1200 level. The yellow metal retreated from overseas gains, leaving the three-month high set on Monday at 1232.41 protected for the time being.

Gold retreated intraday after a bigger than expected uptick in core inflation. Inflation, excluding food and energy, rose 0.3% in April. That was just above expectations of 0.2% and was largely driven by housing and healthcare costs. While the year-on-year pace of core inflation held at 1.8%, gains since the beginning of the year suggest inflation may finally be heating up.

But wait you say! Inflation tends to have a positive influence on gold. That is very true, but the initial reaction to U.S. economic data these days always centers on how the Fed will react: Higher inflation may prompt the Fed to hike rates sooner rather than later.

As we noted in yesterday’s DMR, there is some rising concern that the 2% inflation objective is not high enough. After all, the Fed has exploded their balance sheet by more than $4 trillion dollars and inflation remains below target.

PCE inflation (Fed’s preferred measure) as of March was a mere +0.3% y/y. The April data come out June 01 and consensus is running around unchanged. I therefore continue to believe there is little incentive in the growth, employment or inflation data to warrant a rate hike any time soon. That should continue to underpin the gold market.

In a speech today, Fed chair Yellen reiterated that she believes the Q1 weakness was “transitory.” She went on to acknowledge that the more recent data have been “disappointing,” but apparently still believes a rate hike this year would be “appropriate”

    if

the economy continues to improve.

Continues to improve? From what benchmark?

Yellen is a smart woman, so I don’t think she’s delusional. I think she is following the lead of her predecessors at the Fed and being purposefully opaque; feeding the policy hawks and keeping investors from making big bets one way or the other in these precariously overpriced stock and bond markets.

Posted in Daily Market Report, Gold News, Gold Views |

Kronen Zeitung: Austria Repatriates 110 Tonnes From UK

22-May (BullionStar) — Austria is repatriating gold from the vaults at the Bank Of England (BOE) at this very moment, according to Kronen Zeitung. The OeNB (central bank of the Republic of Austria) stored 82 % of its 280 tonnes at the depository in England. It will start by bringing back 110 tonnes to Austria, to eventually have 50 % on own soil.

This was to be expected as Austria has steadily working to move more of its official gold reserves from unallocated to allocated accounts in recent years, and additionally reduced its gold leased out by a staggering 60 %.

[source]

Posted in Gold News, Gold Views |

Remember, There Are Many Reasons To Own Gold


22-May (KitcoNews) — While the gold market languishes quietly around the $1,200 per ounce level, the chart pattern has improved in recent weeks. Higher daily highs are seen on the chart as Asian buying interest supports the yellow metal on price declines.

For western investors, however, it is useful to take a look at the many different factors that can support the gold market. Traditionally, of course, gold is a safe-haven investment and a vehicle to preserve wealth and retain purchasing power. It is an inflation hedge, an insurance play against geopolitical risks, including severe economic dislocations or even war. It is a quasi-currency and is used to hedge against declines in the value of paper currencies.

…”Physical gold provides important non-correlated diversification within a well balanced portfolio. In fact, gold is unique in that it is the only primary asset that is not simultaneously someone else’s liability. An allocation to gold has been shown to protect and enhance returns, while reducing volatility,” added Peter A. Grant, chief market analyst at USAGOLD.

Gold has also performed well across differing macroeconomic environments. “Gold is indeed the classic inflation hedge, but it has performed well in periods of deflation —1930s, disinflation —2000s, and stagflation—1970s as well,” said Grant.

Gold also has properties to retain purchasing power, especially during times of rising inflation. Gold tends to rise as consumer prices increase, which means as cost of living jumps so does the value of one’s gold holdings. “Inflation is often the result of currency debasement, and gold generally maintains an inverse correlated to the dollar. As the greenback devalues, the dollar price of gold rises,” Grant noted.

[source]

Posted in Gold News, Gold Views |

Gold gives back earlier gains, but remains above $1200, as rise in core inflation clouds rate hike outlook.

Posted in Gold News |

Schaeuble Said to Cite Option of Greek Parallel Currency

22-May (Bloomberg) — German Finance Minister Wolfgang Schaeuble raised the possibility that Greece may need a parallel currency alongside the euro if the country’s talks with creditors fail, people familiar with his views said.

Schaeuble mentioned the idea of parallel currencies at a recent meeting without endorsing it, according to two people who attended and asked not to be identified because the gathering was private. He also cited the example of Montenegro, which uses the euro but isn’t a member of the currency union, one person said.

The comments suggest that some in Germany are preparing for the worst amid a standoff with Greece that has dragged on since February. While Chancellor Angela Merkel and her finance minister say the goal is to keep Greece in the euro, Schaeuble has also said he wouldn’t rule out a Greek exit from the 19-nation currency.

[source]

Posted in European Debt Crisis |

US CPI +0.1% in Apr, in line with expectations, vs +0.2% in Mar; -0.2% y/y. Core +0.3%, on expectations of +0.2%.

Posted in Economic Data |

Gold higher at 1212.73 (+6.78). Silver 17.26 (+0.101). Dollar lower. Euro higher. Stocks called higher. US 10yr 2.17% (-2 bps).

Posted in Markets |

The Daily Market Report: Gold Holds Above $1200 After Fed Debates Failed Efforts to Generate Inflation


21-May (USAGOLD) — Gold is consolidating above the $1200 level after yet another rather disappointing round of U.S. economic data. The dollar initially dropped and then recovered, leaving the yellow metal range-bound.

Leading Economic Indicators for April came in better than expected, but initial jobless claims, existing home sales and the Philly Fed index were all worse than expected. This adds further credence to the Fed thinking revealed yesterday in the FOMC minutes that a rate hike in June in off the table. Arguably the latest data make a September tightening less likely as well.

Growing skepticism about a 2015 rate hike should remain generally supportive to gold. As expectations for that first Fed rate hike get pushed further into the future, ultimately we may start to hear increased talk of further easing; perhaps in the form of negative rates, or a return to QE.

The FOMC had a pretty lively debate about inflation expectations last month, with some members wondering whether the 2% inflation objective is in fact too low. This is noteworthy says Wall Street Journal FedWatcher Jon Hilsenrath, because it is happening 4-years after IMF chief economist Oliver Blanchard suggested a 4% inflation target.

I think it’s more noteworthy because the conversation continues six years and more than $4 trillion into the Fed’s QE experiment. They haven’t been able to manufacture 2% inflation, what makes them think they could possibly generate 4% inflation?

I agree with Hilsenrath that an official change to the inflation target is unlikely, but some members of the FOMC have expressed that they wouldn’t be terribly concerned by an “overshoot” of the 2% target. What would that mean exactly? 2.5%, 4%, 10%…?

If they push hard enough to achieve their inflation goals and the barriers eventually give way, they may find that overshoot is more than they bargained for. More importantly perhaps, getting the inflation genie back in the bottle may prove far more difficult than anyone expects.

You’re going to want some gold if the central bank lives up to its long-standing reputation of hubris and fallibility.

Posted in Daily Market Report, Gold News, Gold Views |

Greece should quit euro ‘temporarily': Ifo’s Sinn

21-May (CNBC) — Cash-strapped Greece should be allowed to leave the euro zone temporarily, the president of Germany’s influential Ifo Institute for Economic Research told CNBC on Thursday.

Talk that Greece is on the brink of a debt default that could trigger its exit from the euro zone has grown this week. A senior ruling party official said on Wednesday that Greece would be unable to make a payment to the International Monetary Fund on June 5 unless it received more aid from its creditors.

“Greece is insolvent… and we are delaying the process of declaring insolvency which would be illegal if it was a private company,” Ifo’s Hans Werner-Sinn told CNBC Europe’s “Squawk Box.”

“It is time for a big (debt) haircut and more radical measures to help Greece.”

[source]

Posted in European Debt Crisis |

Gold dipped to 1201.10, held above 1200.00 and then bounced back to 1209.10.

Posted in Gold News |

US Philly Fed index sank to 6.7 in May, below expectations of 8.0, vs 7.5 in Apr.

Posted in Economic Data |

US existing home sales -3.3% to 5.040M in Apr, below expectations of 5.222M, vs positive revised 5.210M in Mar.

Posted in Economic Data |

US leading indicators +0.7% in Apr, above expectations of +0.3%, vs positive revised +0.4% in Mar.

Posted in Economic Data |

Is the Fed’s 2% Inflation Target Too Low?

by Jon Hilsenrath
21-May (Wall Street Journal) — Central bankers around the developed world have agreed for much of the past two decades that 2% is a good objective for inflation. They want inflation to be low and stable, but they don’t want it too low. Interest rates move in line with inflation, and they don’t want inflation so low that interest rates are near zero. Then they would have no room to cut rates in a downturn to stimulate economic growth. Thus they have gravitated to 2%, a number born out of pragmatism more than any econometric model or proof.

Now, as with so much economic orthodoxy in this post-crisis era, people are starting to wonder if it’s the right number. Minutes of the Federal Reserve’s April 28-29 policy meeting, released Wednesday, shows officials debated whether the 2% objective is too low. One Fed official, unnamed as per tradition in the minutes, suggested the central bank should discuss raising it. In a higher inflation world, the Fed would have more room to maneuver with short-term interest rates, which have been pinned near zero since December 2008. It would have more room to respond if a new downturn were to emerge. It would allow the Fed to avoid another controversial bond buying program as an alternative to cutting rates.

This isn’t an entirely new idea. International Monetary Fund chief economist Olivier Blanchard floated the idea of a 4% inflation target in 2010.

[source]

PG View: They’ll never “officially” raise the target, but allowing an “overshoot” is another matter entirely.

Posted in Central Banks, inflation, Monetary Policy |

ECB says QE working, but government reforms needed – minutes

21-May (Reuters) — European Central Bank rate setters agreed last month the bank’s asset buying programme was working as intended but its full benefit would only be felt if governments implemented reforms, minutes of April’s monetary policy meeting showed.

ECB Governing Council members concluded risks about the scarcity of bond market supply linked to the quantitative easing scheme had been overstated, and there was no need to consider any change in the bank’s monetary stance.

“(But)… such a scenario was predicated on the full implementation of the policy measures taken by the Governing Council since mid-2014,” rate setters agreed after the first month of the asset purchases.

“Overall, members agreed that emphasis needed to be placed on a steady course of monetary policy.”

[source]

Posted in Central Banks, Monetary Policy, QE |

US initial jobless claims +10k to 274k in the week ended 16-May, above expectations of 271k, vs 264k in the previous week.

Posted in Economic Data |

Gold easier at 1207.04 (-2.98). Silver 17.11 (unch). Dollar lower. Euro higher. Stocks called lower. US 10yr 2.23% (-2 bps).

Posted in Markets |

Many Fed Officials Saw June Rate Rise as Unlikely, Minutes Show

20-May (Bloomberg) — Federal Reserve officials last month didn’t expect to raise rates at their next meeting in June even as they concluded that a first-quarter economic slowdown was unlikely to persist, minutes of the meeting show.

Many of the participants “thought it unlikely that the data available in June would provide sufficient confirmation that the conditions for raising the target range for the federal funds rate had been satisfied,” according to minutes of the April 28-29 Federal Open Market Committee session released Wednesday in Washington.

That sentiment outweighed the opinion of “a few” members, who said they anticipated the economy would be ready for a June liftoff, the minutes showed. At the same time, officials didn’t rule out the option of tightening at that time.

[source]

Posted in Central Banks, Monetary Policy |

The Daily Market Report: Gold Consolidates Ahead of FOMC Minutes


20-May (USAGOLD) — Gold extended modestly lower in overseas trading, but is now consolidating near unchanged on the day ahead of today’s release of the minutes from the April FOMC meeting. With the yellow metal still comfortably above the $1200 level, the short-term upside bias remains intact.

The market will be looking for hints as to whether FOMC members still believe that the recent economic weakness is “transitory,” or has become something more serious. Talk that a June rate hike was still on the table faded in the weeks following the April meeting. While focus may have shifted to ‘lift-off’ in September, there seems to be a growing conviction in the market that it may not happen this year at all.

When you consider that the world has accumulated an additional $57 trillion in debt since the financial crisis, we may have borrowed as much prosperity from the future as is possible. That may mean that moribund growth and deflationary pressures are likely to persist for some time to come.

Governments and policymakers are likely to react to this reality by following the same recipe as they have in the past: Borrow and spend. Print more money to paper-over that borrowing and spending.

The ECB has already warned this week that it is prepared to perpetuate their QE program beyond the current deadline of September 2016 if necessary. The euro sank and the dollar firmed in response.

The Fed however does not want a strong currency either. In fact the Q1 weakness in GDP has been largely blamed on the strength of the dollar and the resulting negative impact on exports. Participants in the ongoing currency war remain fully engaged. Will the Fed return fire with hints of renewed dovishness?

It’s too late to alter the content of the FOMC minutes, but I suspect they’ll prove to be pretty non-revealing anyway. I’d be watching the FedSpeak in the weeks ahead, particularly if the rebound in the dollar gains some traction. The last thing the Fed needs right now is a recession after committing trillions to invigorating growth.

The country being more than $18 trillion in debt is troubling enough, but Bloomberg reported today that states continue to struggle mightily 6-years after the recession (allegedly) ended.

State governments have about half the reserves that they had before the recession, according to the Pew Charitable Trusts. — Bloomberg

Another recession, which is already cyclically past-due, could prove far more devastating than the last. With tools to support growth depleted and not replenished, about the only viable option would be for the Fed to reinstate QE.

Posted in Daily Market Report, Gold News, Gold Views |

HSBC bullish over gold


20-May (Kitco News, via Metal.com) – The U.S. economy hasn’t completely recovered from its last recession – what some have called the biggest since the Great Depression – but another one could be just around the corner, according to one economist.

In an opinion piece in the Financial Times, Monday, HSBC chief economist Stephen King said that historical trends shows that recessions hit every eight or nine years and the last one in the U.S. ended six years ago. If history is any indication, the U.S. could be facing another recession in the next three years. What’s worse, he said, is that policy makers don’t appear to have the ammunition needed to fight another one.

King noted that there could be several triggers for the next recession; a collapse in “overvalued equity markets,” leading to an “implosion of demand;” a sizeable slowdown in the Chinese economy; systemic failures across the pension fund and life-insurance industries; even a premature tightening of interest rates from the Federal Reserve.

“Whatever the likely cause of the next recession, the recovery seen so far has not enabled policymakers to replenish their ammunition; growth has returned but policy has not “normalized,” he said in his op-ed. “The U.S. economy is like a ship sailing across the ocean without lifeboats. Other nations are following in convoy behind. For all their sakes, we must hope to avoid recessionary icebergs.”

[source]

Posted in Gold News, Gold Views |

ECB Ready to Go Further if Inflation Target Not Met—French Central Bank Chief

20-May (Wall Street Journal) — The European Central Bank is ready to take additional steps to boost inflation if its current quantitative easing program proves insufficient, the head of France’s central bank Christian Noyer said Tuesday.

“The Eurosystem is ready to go further if necessary to deliver on its mandate of maintaining inflation close to but below 2%,” Mr. Noyer said at a Euromoney conference speech in Paris.

Mr. Noyer, who sits on the governing council of the ECB, said the central bank’s program to buy €60 billion ($67.05 billion) of assets a month has had a positive impact on inflation expectations. But re-anchoring inflation expectations takes time, he said.

“The purchase program will continue until the end of September 2016 and beyond if we do not see a sustained adjustment in the path of inflation,” Mr. Noyer said.

[source]

Posted in Central Banks, Monetary Policy, QE |

Six Banks Pay $5.8 Billion, Five Plead Guilty to Market Rigging

20-May (Bloomberg) — Six of the world’s biggest banks will pay $5.8 billion and five of them agreed to plead guilty to charges tied to a currency-rigging probe as they seek to wind down almost half a decade of enforcement actions.

Citicorp, JPMorgan Chase & Co., Barclays Plc and Royal Bank of Scotland Plc agreed to plead guilty to conspiring to manipulate the price of U.S. dollars and euros in settlements with the Justice Department announced in Washington Wednesday. The main banking unit of UBS Group AG agreed to plead guilty to charges related to interest-rate manipulation. The Swiss bank, the first to cooperate with antitrust investigators, was granted immunity in the currency probe.

The four banks that agreed to plead guilty to currency charges are among the world’s biggest foreign-exchange traders. They were accused of colluding to influence benchmark rates by aligning positions and pushing transactions through at the same time. Traders who described themselves as members of “The Cartel” used online chat rooms to discuss their positions in the minutes before the rates were set, the Justice Department said.

[source]

PG View: Just another reason to have some of your wealth held outside of the financial system, in the form of physical gold.

Posted in Markets |

For Many American States, It’s Like the Recession Never Ended

20-May (Bloomberg) — Six years after the recession ended, many U.S. states are hard pressed to balance budgets because of a sluggish recovery and their own policy decisions. The fiscal fragility raises questions about how they will weather the next economic downturn.

A majority of states are making cuts, tapping reserves or facing shortfalls despite an improving national economy and stock markets at record levels, according to Standard & Poors and the Nelson A. Rockefeller Institute of Government. State revenue hasn’t rebounded to a prerecession peak adjusted for inflation, and other factors are putting pressure on budgets.

Alaska, Oklahoma and energy-producing states saw receipts fall with global oil prices. Kansas overestimated revenue after tax cuts, while New Jersey faces a shortfall thanks to unfunded pensions. Even some Republican governors have championed tax increases to avoid further diminishing services curtailed during the 18-month recession, the deepest downturn since the Great Depression.

“The extent of the weakness is really impressive,” said Donald Boyd, who tracks state finances at the Rockefeller Institute in Albany, New York. “There’s a lot of pressure on governors and legislators.”

[source]

Posted in Economy |

Gold prices steady ahead of Fed minutes

20-May (Reuters) – Gold edged higher on Wednesday, recovering some lost ground after the previous session’s slide, but gains were muted as the dollar strengthened ahead of minutes from the Federal Reserve’s latest policy meeting.

The metal slid sharply on Tuesday, posting its biggest one-day loss since April 30, as the dollar rebounded from its weakest run against the euro in four years.

Spot gold was up 0.2 percent at $1,209.58 an ounce at 1141 GMT, while U.S. gold futures for June delivery were $2.60 higher at $1,209.30. Prices fell 1.5 percent on Tuesday after hitting a three-month high of $1,232.20 the previous day.

…The dollar scaled a three-week high against the euro on Wednesday, with the European currency extending losses after a Greek official said the country might not make an upcoming repayment to the International Monetary Fund.

Some analysts said there is a broad feeling the dollar is moving back on the offensive after a month-long pullback. There were mixed views about the likely message from the Fed later in the day.

[source]

Posted in Gold News, Gold Views |

Gold better at 1210.75 (+1.20). Silver 17.15 (+0.031). Dollar higher. Euro lower. Stocks called mixed. US 10yr 2.26% (-3 bps).

Posted in Markets |

U.K. Flirts With Deflation as Prices Fall in April

19-May (Wall Street Journal) — Consumer prices in the U.K. fell on the year for the first time in more than half a century in April, but Bank of England officials say they expect the threat of deflation in Europe’s third-largest economy to soon pass.

Britain’s consumer-prices index, which tracks prices for everything from food and clothing to electrical goods and banking services, fell by 0.1% in the year to April after staying flat in March, the U.K.’s official statistics agency said Tuesday.

The Office for National Statistics said that it estimates that April’s decline was the first time consumer prices have fallen year-over-year since 1960. In the past six months, sluggish global growth and sharp falls in prices for oil and food have dragged down inflation rates across the world.

[source]

PG View: Of course the BoE sees the deflation risks as transitory. If they prove not to be, all they have to do is spool up the printing press again.

Posted in Deflation |

The Daily Market Report: Gold Corrects as Euro Drops on Threat of Further QE


19-May (USAGOLD) — Gold was initially holding up pretty well in the face of a sharp dollar rebound this morning. However, when U.S. housing starts beat expectations by a wide margin, the yellow metal extended the pullback, as markets were quick to celebrate a little bright-spot in what has otherwise been a series of misses.

Those dollar gains were actually more the result of euro weakness: The euro came under heavy pressure today amid comments that the ECB planed to accelerate its bond purchases in May and June. Christian Noyer added that the central bank may in fact extend its QE program in order to achieve its inflation target.

These comments strike me as yet another salvo in the currency war. The ECB is apparently not content to sit back and watch the euro retrace the losses achieved since the first began threatening QE about a year ago. The message: There’s more where that came from!

As a result, the euro was off more than 1% against the dollar before the U.S. housing data even came out. Those euro losses mounted when the dollar got a boost from a 20.2% housing starts surge in April.

The firmer dollar weighed on gold, but after five consecutive higher closes, the yellow metal was probably overdue for a pullback. At this point, the market seems to have found support ahead of the $1200 level.

There has been much talk recently about the McKinsey & Co report on global debt. The report shows that global debt is now approaching $200 trillion; closing in on 300% of global GDP. The world has added $57 trillion in additional debt in the last 8-years since the financial crisis nearly caused a total meltdown of the global economy.

Basically, the world has clawed its way back to mediocre on the back of massive additional debt. Unless there’s a substantive turnaround in growth prospects, which is looking increasingly less likely, I see two options for governments and policymakers: They can let economies reset, which would result in another devastating recession, or worse. The alternative is to continue borrowing prosperity from the future.

The latter is the path we were on presently and I fear it is the path of least resistance. Policymakers will look to forestall the next economic disaster as long as possible, hoping that if it has to happen, it happens on somebody else’s watch. In adding to the already massive pile of debt, the only way to service that debt is to continue to debase one’s currency.

In light of this grim reality, it behooves you to take appropriate defensive measures to preserve your wealth. The safest of the safe-haven assets is of course gold, in physical form, in your possession.

Posted in Daily Market Report, Gold News, Gold Views |

Central banks playing with fire in growth push – Raghuram Rajan

19-May (Reuters) — The “specter of deflation” is spurring the world’s major central banks into a dangerous struggle for stronger domestic growth that imperils financial markets and ignores the needs of developing nations, the head of the Reserve Bank of India (RBI) said on Tuesday.

RBI Governor Raghuram Rajan, making a familiar argument for better global coordination on monetary policy, said central bankers in developed economies should bear in mind their international responsibilities.

“The current non-system in international monetary policy is, in my view, a source of substantial risk, both to sustainable growth as well as to the financial sector,” Rajan told an audience of economists and investors in New York.

“I fear that in a world with weak aggregate demand, we may be engaged in a risky competition for a greater share of it,” he added. “We are thereby also creating financial sector risks for when unconventional policies end.”

[source]

Posted in Central Banks, Economy, Monetary Policy, QE |