Gold is firmer, but still within the recent range as the FOMC commences
their two-day meeting. Despite some pretty discouraging US economic
data, particularly on the housing front, consensus suggests that much
like the March meeting, policy will remain steady without any overt
hints of further QE. We'll find out tomorrow at 16:30GMT.As the Fed ponders monetary policy, the ECB seems to be maintaining the position that they've done enough and that salvation of the eurozone lies in the hands of the politicians. However, those very politicians are already paying a heavy price for the fiscal policies being foisted upon them. In just the last couple of days we saw a rather stunning electoral upset in France and two governments fail; one in the Netherlands and one in the Czech Republic. Have no doubt that the governments in the other periphery countries under severe economic duress are taking note.
One might reasonably argue that countries that implement severe austerity measures to reign in deficits risk being ousted by voters. Yet, failure to implement such measures risks the withholding of critical troika financial life-lines. There is no easy solution to the debt inspired woes that are plaguing Europe, which have resulted in renewed risk aversion. Investors are seeking shelter in German bunds and US Treasurys, even though their yields are below the rate of inflation.
Despite the hardline being taken by the ECB — and in particular the German contingent — shorter-term bund yields dipped once again below those of their Japanese counterparts yesterday. This is rather interesting in light of the uptick in hawkish sentiment in Europe and the widely held expectations that the BoJ's next move will be to ease further. When this initially happened last week, for the first time in more than 20-years, the FT reported that the Eurozone is starting to look Japanese.
'Risk-off' sentiment is also underpinning the dollar, which has conspired to keep gold fairly well contained. The gold market is teetering on the edge of backwardation, and even out to the October contract on COMEX there's only about $5 in time premium. On the surface this would suggest that further consolidation is in the offing for the yellow metal, but on the other hand — and particularly given the robust physical demand we've been seeing — one might deduce that pressures are building.
The latest IMF data show that Mexico, Russia and Turkey were all big buyers of gold in March, perpetuating the central bank gold buying spree. We view the shift in central banks from net gold sellers to net buyers over the last couple years as an extremely important paradigm shift. See the headline article in the latest USAGOLD Newsletter entitled, Surging central bank gold demand adds new dimension to bull market.
It was suggested yesterday on the ZeroHedge blog that gold might be the cheapest event-risk hedge going. I think that is in fact a practical way to look at gold, sort of beyond what is frequently sited as is primary roll as an inflation hedge. In the eyes of our firm and the vast majority of our clients, gold is above all else long-term wealth preservation, whether the risk dejour is inflation, deflation, systemic or event driven.
Speaking from experience - both as a gold owner and as a gold broker - waiting until black swans wing over the horizon to secure wealth preservation assets can be both expensive and stressful. Not only does buying in times of price stability and relative quiet, much like we have seen over the past few weeks, allow you to rest easier, it has in the past proven to be a very financially rewarding strategy.
• US consumer confidence fell to 69.2 in Apr, below market expectations of 70.0, vs negative revised 69.5 in Mar.
• US new home sales plunged 7.1% in Mar to 328k, above market expectations of 318k, vs positive revised 353k in Feb.
• US S&P Case-Shiller home price index for 20-cities -0.8% to 134.2 (nsa) in Feb, vs negative revised 135.2 in Jan; -3.5% y/y.
• Switzerland trade balance CHF1.7 bln in Mar, on expectations of CHF1.4 bln, vs negative revised CHF2.6 bln in Feb.
• Australia Q1 CPI +0.1% q/q, vs unch in Q4-11.
• Hong Kong trade balance -HKD43.9 bln in Mar, vs -HKD45.8 bln in Feb.
Peter Grant is USAGOLD's resident economist and a well-known analyst globally in the forex and precious metals markets.
source : http://www.usagold.com/dailyquotes.html
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