Morning Snapshot

01-May (USAGOLD) — Gold has been somewhat choppy again this morning; coming in higher initially on a weaker dollar and then selling off on the April ISM beat, only to recover into stable territory. The yellow metal remains firmly entrenched within the broad range defined by the 1920.50 high from September 2011 and the 1522.40 low from December. Yet as my colleagues and I discussed in the latest USAGOLD VideoRoundtable, there may be reason to believe that the protracted period of consolidation may not last through the summer.

Persistent expectations that the Fed will launch additional quantitative measures may ultimately prove to be the catalyst for such a breakout. These expectations have served to put a floor under the market, protecting the low end the range. With the number of double-dipping economies in Europe on the rise, it may be just a matter of time before the entire EU is back in recession. This risks pulling the US back into recession as well, and last week’s US Q1 GDP miss may be a harbinger of just such a reality.

Japan remains a mess with their economy continuing to contract. The BoJ announced additional asset purchases late last week, because the past 20-years of ZIRP and QE have proven so successful (not!) that they may as well keep going to the same well. On top of that, concerns about a hard-landing in China linger, despite some indications to the contrary.

Even commodity based economies are starting to feel the pinch. Canadian GDP for February came in at a weaker than expected -0.2%, dashing hopes for an imminent BoC rate hike. The Reserve Bank of Australia cut interest rates a larger than expected 50 bps today on rising risks to growth.

More debt. More ZIRP. More QE. More currency printing. And I’m not just talking about here in the US. I’m talking a global reality check. Everything that has taken gold from just over $300 a decade ago to more than $1900 last September is still very much going on, and may be on the verge of accelerating dramatically in the coming months. There is every reason to believe that the present consolidation is simply a pause withing the long-term trend.

• US ISM rose to 54.8 in Apr, above market expectations of 53.0 and weaker whisper, vs 53.4 in Mar.
• US construction spending +0.1% in Mar, below market expectations +0.4%, vs negative revised -1.4% in Feb.
• UK CIPS manufacturing PMI fell to 50.5 in Apr, below expectations of 51.7, vs negative revised 51.9.
• South Korea CPI 2.5% y/y in Apr, vs 2.6% y/y in Mar.
• South Korea Trade Balance-CC (USD) $2.15 bln in Apr, vs upward revised $2.5 bln in Mar.
• China PMI Manufacturing (CFLP) rose to 53.3 in Apr, vs 53.1 in Mar.
• Thailand CPI 2.47% y/y in Apr, vs 3.45% y/y in Mar.
• Indonesia CPI 4.5% y/y in Apr, vs 3.97% y/y in Mar.
• Indonesia Trade Balance (USD) $0.8 bln in Mar, vs upward revised $0.8 bln in Feb.
• RBA cut the official cash rate by 50 bps to 3.75%. A smaller 25 bp cut was expected.

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