In America, the Fed would face huge pressure to hold onto its bonds rather than crystalize losses as yields rise — in other words, to recoil from unwinding QE at the proper moment. The authors argue that it would be tantamount to throwing in the towel on inflation, the start of debt monetisation, or “fiscal dominance”. Markets would be merciless. Bond vigilantes would soon price in a very different world.
Investors have of course been fretting about this for some time. Scott Minerd from Guggenheim Partners thinks the Fed is already trapped and may have to talk up gold to $10,000 an ounce to ensure that its own bullion reserves cover mounting liabilities.
What is new is that these worries are surfacing openly in Fed circles. The Mishkin paper almost certainly reflects a strand of thinking at Constitution Avenue, so there may be more than meets the eye in last week’s Fed minutes, which rattled bourses across the world with hints of early exit from QE.
Russia and Kazakhstan expanded gold reserves for a fourth straight month in January, while Azerbaijan acquired bullion for the first time in more than three years, as central banks sought to diversify their assets.
Russian holdings climbed 12.2 metric tons to 970 tons last month after gaining 8.5 percent over 2012, according to International Monetary Fund data. Kazakhstan’s hoard grew 1.5 tons to 116.8 tons, following last year’s 41 percent expansion, data on the IMF website showed. Azerbaijan’s holdings rose 1 ton, the first gain since May 2009, when it held 64 ounces.
“Central-bank buying is a floor for the market,” said Nick Trevethan, a senior commodities strategist at Australia & New Zealand Banking Group Ltd. (ANZ) “Gold prices should accelerate in the second half on improving demand from India & China
“I bought some silver investments for myself last week when I felt we washed out…but you know what, I think we’re really done here. There’s only so much [they] can do on the short side…and you saw that volume in the silver futures market last week. It’s not sustainable. When those people want to get out [the shorts], that will lead us higher.”
When asked if any new interest came into the market, he said, “[Right now] it’s all the same people, and we’re all still playing in the same paddling pool. Until it turns into a swimming pool, and then an ocean—we’re going to be range-bound.”
Altimus Capital Director of Portfolio Management Chris Gersch discusses the price of gold. And why it’s going much higher
It’s not possible to stop QE with a federal debt of $220 trillion, including unfunded liabilities….
Gold is headed for a major uptrend this year, driven by the U.S. economy, says an analyst at UBS.
Will the U.S. economy make or break commodities?
That was the question posed by UBS in a note to investors on Monday, as gold and other precious and base metals enjoyed a snappy little recovery. April gold GCJ3 +0.37% was up nearly $20 an ounce. Gains were helped in part by a global equities rally that looked to be taking hold Monday. Read more on gold trading.
So, the conclusion from UBS? As analyst Julien Garren explains in a note, the role the U.S. economy plays in influencing commodity prices is a delicate dance, but providing investors can be patient, it’s a winner for gold. Part of the selloff for gold last week was blamed on Fed minutes that triggered worries the central bank would wrap up its big asset-buying program faster than expected. That means holding gold as an alternative to the U.S. dollar, seen as vulnerable to the Fed’s stimulus policies, is less urgent….
Today Ben Davies told King World News that we may well be seeing a “V-shaped bottom” in the gold market right now. But first, here is what the rising star had to say about the recent smash: “It feels like a smash to some extent. I think that’s because the market had been trading sideways for a while, so the release lower feels much more aggressive than perhaps it is. We’ve ostensibly come off about 5% or 6%.”
Ben Davies continues:
“Not withstanding that, it still feels quite aggressive. It’s disappointing for the bullion participants there is no doubt about it. When a market is giving you the best fundamentals in the world to be invested in, but is consistently showing a poor response to bullish news, you have to take note.
I believe when I last came on (to KWN) last time we talked about our trend system being ‘trend ready.’ The markets released lower, and now we’re into extremes that I haven’t seen in terms of sentiment since 1993 and 1997….