Gold advances as Libyan conflict unresolved

Another, similarly less-than-uber-bullish opinion comes from Ms. Pauline Shum, an associate Professor of Finance at the Schulich School of Business at York University. Ms. Shum cautions that "it is unrealistic to expect gold to repeat its performance [of the last decade] in the next 10 years." Meanwhile, another academician is a tad more…blunt when it comes to dispelling the prognostications and assertions being made about gold nowadays all over the blogosphere. According to Economics Professor Michael Dooley at UC Santa Cruz, and a partner at Cabezon Capital Markets LLC, those who suggest that gold and silver are the new currency, “They are nuts. Gold and silver will never again be used as currency or to back currencies.” Now there is one Marketwatch piece that will very likely generate several hundred comments (and flames) before the day is over. Emotions are running high enough that it has already elicited 85 impassioned posts since when it appeared at midnight last night. (complete with allegations that it is nothing but a “hit piece on gold”).

Of course, at a time when “news” that is really not news (heard it dozens of times, ever since India bought 200 tonnes of gold), but a lot of bullish noise is still being made about it, such as the latest Chinese academic advising his central bank to sell dollars and buy gold, one can clearly see that the bull/bear camps are as divided as ever, and that the ‘twain shall never meet on neutral ground. That neutral ground – quite possibly – could be that same 10% set-and-forget allocation strategy that ignores annual gold price movements and focuses on the core presence of gold in a portfolio, instead.

In the market’s background today, the US dollar was down 0.15 on the trade-weighted index and was quoted at 76.64, while crude oil remained resilient and was indicated at $105.14 following a small, 12-cent rise. The pivotal 76.20 mark in the US dollar on the charts has not yet materialized, but traders are keeping a close eye on it potentially being touched and sparking further weakness (towards the 74 area) if in fact a close at or beneath that key figure does become reality.

Something that will very likely soon become a reality, are higher interest rates. Over the past month, more and more central bankers have started to sound more and more hawkish, despite the perceived threat that Col. Gaddfi’s descent into madness is thought to possibly pose to the world’s recovering economies. Spiking oil prices have prompted NYU Prof. Nouriel Roubini to prognosticate another dip and another round of QE to come from the Fed.

However, on Tuesday, European Central Bank Governing Council member Axel Weber said he doesn’t want to defuse market expectations for as many as three separate [!] quarter-point hikes in the ECB’s benchmark interest rate, and that they are likely to take place this year. Mr. Weber told Bloomberg News that he “wouldn’t do anything here to try to correct market expectations at this point. It was the intention of the ECB to bring forward market expectations and I see no reason at this stage to signal any dissent with how markets priced future policies,” he said.

Over in the US, the latest report in a relatively light-on-statistics week shows that mortgage applications gained 16% in the week ending on March the 4th, and that was the largest such rise since June of 2010. Purchases and refinancing on the rise may be signaling that the US housing market is finally stabilizing. Housing conditions and the jobs situation are the two pivotal “to-watch” items on the Fed’s and the Obama administration’s current agenda.

Until tomorrow, carry on with your own to-watch list

Jon Nadler is a Senior Analyst at Kitco Metals Inc. North America

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About the Author
Jon Nadler Jon Nadler is a Senior Analyst at Kitco Metals Inc. North America
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