We educate first-time investors.
Daily Gold Market Report
Gold Softens Within Range on Firm Dollar, Expectations of ECB Easing
by Peter A. Grant
November 25, AM
U.S. durable goods orders rebounded more than expected in October, after declining in the two previous months. Initial jobless claims fell more than expected as well and personal income matched expectations. On the negative side of the ledger was a miss on spending and a negative revision to University of Michigan sentiment.
Based on Fed funds futures, the market still sees a 70% probability of a rate hike in December. With the dollar index continuing to probe above 100.00, near the highs for the year and levels not seen previously seen since 2003, tighter policy still seems terribly imprudent. That is especially true given mounting global debt, persistent deflationary pressures and rising expectations that the ECB will ease further in December.
In a piece published yesterday entitled What is money?, the ECB attempts to explain the "changing essence of money"; from something with actual value like a gold coin, to a banknote exchangeable for a certain amount of gold or silver, to the present state of "fiat money".
According to the ECB, fiat money "has no intrinsic value – the paper used for banknotes is in principle worthless – yet is still accepted in exchange for goods and services because people trust the central bank to keep the value of money stable over time.
Stable over time? Earlier this week, Mike posted a great chart that shows just how "stable" the purchasing power of the dollar has been since it was detached from gold in 1971. It has lost 83% of its purchasing power!
Again from the ECB piece:
“Money-printing” is the colloquial term for the ECB’s asset purchase programme, a form of “quantitative easing”. . . In this process, the ECB does not actually print banknotes to pay for the assets but creates money electronically, which is credited to the seller or intermediary, e.g. a commercial bank. The seller can then use the additional liquidity to buy other assets or, in case of a commercial bank, extend credit to the real economy. The purchases contribute to improving monetary and financial conditions, making it cheaper for businesses and households to borrow so they can invest and spend more. — European Central BankBorrow more to spend more. Swell. And now the ECB is widely expected to debase the euro further come December.
As noted on our site, renowned author and publisher of the Dow Theory Letters Richard Russell passed away last weekend and the age of 91. Russell is a legend and he had some final thoughts on gold that are pertinent in the current world of fiat currency debasement:
“The end of capitalism will be due to the unbelievable amount of debt that is currently being created. This will create monster inflation that will destroy every currency. The only currency that cannot be destroyed is gold. When investors realize this, we’ll have the makings of the greatest bull market in gold ever seen.” — Richard RussellI'd like to take this opportunity to wish all of our clients and friends a very happy Thanksgiving. Our offices will be closed Thursday, 26-Nov and Friday 27-Nov.
Opinions expressed in commentary on the USAGOLD.com website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. USAGOLD, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.