Morning Snapshot

12-Apr (USAGOLD) — Gold is up sharply again today, bolstered by rising QE3 expectations and whispers that China’s Q1 GDP may come in higher than expectations on Friday. Today’s higher than expected initial jobless claims print seems to have been the straw that broke the will of the QE3 doubters that emerged in the wake of last week’s release of the March FOMC minutes. All of the losses in gold related to diminished QE3 expectations from last Tuesday have now been reversed out of the market.

Fed Vice-Chair Yellen set the stage in a speech on Wednesday, hinting that the central bank might have to continue it’s über-accommodative policy stance beyond the end of 2014 due to sluggish growth. Yellen went on to say, “I anticipate that the U.S. economy will continue to recover only gradually and that labor market slack will remain substantial for a number of years to come.”

The growing acceptance that Europe is probably already back in recession lends itself to a growing acceptance that ZIRP and other forms of central bank accommodations are likely here to stay for an indeterminate period of time. Be assured that a European recession would be an additional drag on the US economy, providing little incentive for tightening here. In fact, it could well prove to be the catalyst for additional easing in the form of QE3.

Of course recent market gyrations could be the result of a well orchestrated management of short-term expectations: Stocks fall, increasing the likelihood of QE3 in the minds of investors. This in turn prompts stocks to rise, lessening the likelihood of Q3. Lather, rinse, repeat. In the collective mind of the Fed, having stocks confined to a broad range certainly beats the heck out of a new bear market. They seek to buy time until real economic growth can become self-sustaining. But how can that possibly happen if markets are prevented from clearing and finding their true value? Ask the Japanese about that…

The ones who really pay for this arguably misguided policy stance are savers, as ZIRP nets them a negative yield in real terms. The wealth of those saving in dollars, euros, pounds and yen is being consistently eroded by yields that are below the rates of inflation. Savvy savers hedge that reality, by keeping a portion of their savings in gold.

• US initial jobless claims +13k to 380k for week ended 07-Apr, above expectations of 355k, vs upward revised 367k in previous week.
• US trade deficit narrowed to -$46.0 bln in Feb, inside expectations of -$52.0 bln, vs -$52.5 bln in Jan.
• US PPI unch in Mar, below expectations of +0.3%, vs +0.4% in Feb; 2.8% y/y, vs 3.3% y/y in Feb. Core +0.3% on expectations of +0.2%.
• France CPI +0.8% m/m in Mar, vs 0.4% in Feb; 2.3% y/y, above expectations of 2.2%.
• Sweden CPI +0.3% m/m in Mar, on expectations of +0.2%, vs +0.7% in Feb; 1.5% y/y.
• Eurozone industrial production (sa) +0.5% m/m in Feb, above expectations of -0.2%, vs negative revised unch in Jan; -1.8% y/y, below expectations.
• Greek unemployment rate rises to record 21.8%.
• Australia unemployment rate steady in Mar at 5.2%.
• South Korea M2 +5.3% y/y in Feb, vs negative revised +4.8% in Jan.
• Bank of Indonesia holds steady on rates at 5.75%.
• India iIndustrial production +4.1% y/y in Feb, vs big negative revision to 1.14% y/y in Jan, from 6.8% pace originally.
• Thailand FX Reserves (USD) $178.0 bln in Mar, vs $180.0 bln in Feb.
• China M2 +13.4% y/y in Mar, vs +13.0% y/y in Feb.
• China Loan Growth +15.7% y/y in Mar, vs +15.2% y/y in Feb.

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