09-Jan (USAGOLD) — Gold has eked out new 5-week highs above 1185.04, buoyed by a softer dollar and a stock market that refuses to validate all those Dow 20,000 hats. There is also apparently some heightened doubts about the Fed’s call for three more rate hikes this year.
The 10-year yield is down 5 bps point today, which is checking the dollar’s recent rise. FedSpeak today has been generally towing the dot-plot line, but with some caveats. Boston Fed President Rosengren said the timing will depend on incoming data, global conditions and fiscal policy. Atlanta Fed President Lockhart says it’s too early to estimate the likely impact of any fiscal policy on GDP, but he only sees 2% growth.
That to me suggests that growth risks remain, and tighter policy is not going to help alleviate those risks. As we’ve noted repeatedly in recent years, we’re long past due for a recession. Since the Great Depression, the U.S. has suffered thirteen recessions. The periods of economic growth between recessions have been as long as 120-months, and as short as 12-months. The average is just over 59-months. The current recovery has just entered its 91st month.
It remains to be seen what impact President-elect Trumps fiscal policy might have on the economy and that uncertainty was reflected in Lockhart’s speech today. However, an important follow-on question about fiscal spending is where the revenue to pay for it is going to come from.
The likely answer to that is debt. With the national debt fast approaching $20 trillion and interest rates on the rise, there will likely be some repercussions. Will the positives outweigh the negatives. Time will tell.