Gold cautious going into Fed Week

Gold continued to cautiously hover in the neighborhood of $1300 per ounce as the G-7 meeting in Quebec kicks off today and we prepare for Fed Week – a time typically challenging time for the precious metals. This time around, however, with so many problems in the global economy – all front and center at the same time – it might be a different story. We won’t go to the trouble of running once again through a well-known litany. If you do want some details, though, simply scroll through the posts below and you will be up to speed in a matter of minutes.

We thought the Wile E. Coyote reference yesterday from Ben Bernanke particularly apt under the circumstances, though a bit of a surprise that he would be so candid. Rather than 2020 as the date to mark on your calendar as he suggests, we see the potential for the “cliff event” anytime between now and then – and we believe it will have the distinct look and feel of one of Nicholas Taleb’s black swans.

Quote of the Day
“It was significant that we didn’t see any bears at either venue despite doing a 7.30am, 13 mile valley floor hike! I’m sure the absence of fellow bears was a significant countertrend sign. I learned something else on my trip worth sharing. We took the Yosemite Tram tour of the valley floor and the ranger gave a very interesting talk about fire. Until 1970 Yosemite Parks was extinguishing regular small-scale fires to prevent property damage. The resultant rise in dense small tree growth meant that although fires were less frequent, they quickly got out of control. Since 1970 they have allowed more fires to burn, resulting in less damage. . . It is therefore reasonable to argue that the US has already faced a ‘normal’ tightening cycle and any additional rate hikes are taking us into territory not seen in recent times. This already may be enough for the Fed to have broken something.” – Albert Edwards, SocGen (with thanks to ZeroHedge)

Chart of the Day

Chart note: As currency and sovereign debt repayment problems mount among emerging countries and the list of problem countries grows longer by the day, investors living in those countries might be tempted seek shelter in either the U.S. dollar or yellow metal. As this chart illustrates, the better option since the turn of the century has been gold. In twelve of the last 18 years, including 2016 and 2017, gold has outperformed the dollar and sometimes by a spectacularly wide margin. Cumulatively, there is no comparison even when gold’s strong correction in 2013 is taken into account. Recent history’s verdict is clear. When it comes to safe-haven investing, gold remains on the throne and “king dollar” is the failed usurper.

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