Conflicting Economic Data and Golds Priceband

September 9, 2008 | By | Reply More

Trying to guide our readers through the minefield of conflicting economic data without sending out any false signals has never been as difficult in our experience.

We took a two-week break to take advantage of the fabulous Mediterranean summer but kept a daily eye on the precious metal markets in the hope that we could get an early warning of any developing trend.

Spot gold kept within its $800-$850 priceband and there it lingers in mid morning European trading today, Tuesday

Thanks to the Fed, stock market players think the sub prime fiasco is no longer a major issue – or is there some government inspired market manipulation?

Despite the plethora of economic bad news that even the deliberate and obvious statistical spin has failed to mitigate, the dollar shows no sign of giving up its new found strength in the face of yet another bottomless pit for the currency to disappear into in the shape of Fanny and Freddie.

The US taxpayer and their descendants will have a bitter price to pay!

But you could argue that the Euro faces the same problems.

However we do not think that Eurolands’ politicians are prepared to put their economy in such jeopardy as their American counterparts. Not that their survival instincts are any less, simply that the European political systems are less corrupt and more transparent than in the US.

Pity we can’t say the same thing about the UK, the current bunch of incompetents do not have the combined intelligence to run a corner shop profitably, yet are determined to hang on to the fruits of office as the nation spirals out of economic control.

Be very aware of the dangers of playing the UK stock markets and holding any other assets solely sterling denominated with the possible exception of gold.

The resistance that gold is showing by mainly staying above the $800 an ounce mark despite the stronger dollar, the weaker price of oil, pressures on liquidity, etc., and even the premise that even the BRIC nations and oil producers are following the US into recession gives us gold bulls some comfort that the yellow metal has underlying strength just waiting to break out to the upside.


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Of course the US is not in or even approaching recession.

The Fannie Mae and Freddie Mac bailouts have cured all those problems as the unemployment figures will reverse into positive territory, consumers will take advantage of the cheaper and easier credit to restart the housing market and jack up their retail spending!

All will be well as the US leads the world back to the good times we enjoyed until the doom mongers had their way last year.

Seriously though we still have faith that gold, silver and their producers are the safest long-term havens for investors.

That is not just our blind leap in faith as we note that some minters of gold coins have called a halt due to shortage of available bullion, that silver coins are enjoying a premium over content not seen for many years, that India, the largest buyer of retail gold, is just beginning its seasonal splurge on the yellow metal.

Add the fact that costs are significantly higher putting marginal producers and explorers under pressure and that world production is down yet again as South African power outages show no sign of improvement and labor and safety costs take their toll.

Just how many bullish signals does it take to get the market moving?

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