To print or not to print? Odds are that Fed Chairman Bernanke has been contemplating this question while drafting his upcoming Jackson Hole speech. The one good thing about policy makers worldwide is that they may be fairly predictable.
The purest form of a debt free asset is gold. Gold is true money, the only form of money that isn’t someone else’s liability. While central banks might be able to lower the gold price by dumping their own reserves, central banks cannot print more gold.
Good news: Vice Presidential candidate Paul Ryan may put the focus of the presidential campaign on the sustainability of the US budget. Bad news: Ryan’s plan delivers some tough medicine; if the European experience is any guide, “austerity” makes bad politics.
From what we see, central banks have been scared into holding gold since the onset of the financial crisis. Beyond that, we don’t see an active strategy at the ECB to keep its gold reserves at 15% of total assets.
The midweek trading session in New York started with fresh declines across the precious metals’ price boards as the US dollar resumed its ascent on the trade-weighted index in the wake of an “uncooperative” Fed.
The new trading week started off on a downbeat note in commodities, equities, and a crisis-beset currency across the Atlantic. Risk assets headed lower on a combination of anxieties surrounding global economic expansion, and persistent systemic troubles in the euro zone and China.
Sharp losses in the gold mining sector Friday and last week could presage further weakness today but the higher weekly closes for gold and silver were constructive from a technical perspective. After initial gains in Asia, gold fell in Asian trading.
Commodity prices are correcting lower in early European trade after Friday’s sharp rebound in risk appetite. Sentiment-linked crude oil and copper prices followed share prices higher while gold and silver found a de-facto boost as the safe-haven US dollar retraced downward.
Spot metals dealings in New York this morning opened on the plus side for all components in the complex but gold. The yellow metal was quoted at $1,591 down about $3 while silver climbed 15 cents to $28.68 the ounce.