The Daily Market Report: Gold Jumps to Trade Higher on the Week, Despite Dollar Gains

10-Apr (USAGOLD) — Gold has rebounded smartly, retracing more than half of the losses incurred since establishing a 7-week high at 1224.23 on Monday. The yellow metal is up over $10 on the day and modestly higher on the week.

Gold is gaining along with the dollar today. The greenback got an additional boost after Fed hawk Jeffrey Lacker suggested today that the case for a June rate hike remains strong. That strikes me as terribly optimistic, but consistent with the Fed’s likely desire to convey a mixed message and keep investors on their back-foot.

Today’s action may be partially attributable to short-covering, but the longer-term bias remains to the upside as rate hike prospects for 2015 have in reality dimmed significantly in the past week.

The perpetuation of easy monetary policy and accommodations — and not just in the U.S. — prompted Citi analyst Jon Bergtheil to predict that the global epidemic of money-printing and currency devaluations will eventually result in inflation. The central banks want inflation, so they will keep trying to push prices higher through currency debasement until they are successful.

“Money-printing had almost always resulted in inflation but in today’s excess global production capacity environment and with the oil price having collapsed, that inflation has been deferred.” — Jon Bergtheil

Bergtheil seems to think that the slack in the economy may be resolved at some point next year, saying “the 2016 to 2020 period could be supportive for gold.” If the central bank’s do in fact achieve their 2% inflation goal in 2016, one must wonder how they will genie back in the bottle. Given the massive amount of liquidity that has been released worldwide, the overshoot could be considerable. That’s an environment where gold can truly shine.