Gold bucking market cross currents today


Gold is bucking some market cross currents this morning at $1345 and down about $6. Silver though is trading on the upside at $17.26 (+6¢). The most damaging of those crosscurrent comes in the form of yield on the 10-year Treasury note approaching the psychologically important 3% mark. ‘We have easing of geopolitical tensions in the world, we have higher commodity prices, we’re in the ninth year of an economic expansion, and the Fed looks like it will raise rates in June,’ said Gary Pollack, head of fixed-income trading at Deutsche Bank Private Wealth Management.” Though, the items Pollack lists add up to a positive for gold, they also provide fuel for gold traders who see Fed interest rate policy as the prime mover in the gold market these days. The market, as a result, is tracking to the downside.

Chart of the Day

Chart notes: Often forgotten, or in some quarters deliberately ignored, gold performed extraordinarily well in the disinflationary aftermath of the 2007-2008 financial crisis appreciating from $650 per ounce in January, 2007 to over $1800 in August, 2011. The consumer price index, on the other hand, was bumping along either side of zero and had the potential to evolve to a full deflationary spiral. Inflation, in short, was not an issue. Though gold is generally considered an historically-proven inflation hedge, it is also an historically-proven disinflation hedge as the post 2007-2008 example demonstrates. Investors from 2007 on were interested in gold for its safe-haven characteristics and as a refuge from a potential full-out financial system breakdown. One of the great advantages of being a gold owner is that it is an investment for all seasons protecting its owners against inflation, disinflation, deflation or hyperinflation.
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