The head of the investment bank’s commodity research unit, Mr. Nic Brown went a step further and told the Reuters Investment Outlook Summit in London yesterday that “For us the market that has most bubble-like characteristics is precious metals. As far as the gold market is concerned, it's a liquidity fueled bubble. One is low interest rates."
Mr. Brown also added that "It may be a bit too early to suggest end of QE2 will see massive increase in interest rates and gold prices will collapse,” but noted that as far as Natixis is concerned, “our base case is that within this liquidity-fueled bubble we're closer to the end than the beginning." That view is kind of the same situation as we are noticing with the Fed and with its accommodation. We are closer to an “end” than to a continuation of what has already been perhaps too much, in the perception of some, but not all. Currency strategist Axel Merk opines that the Fed is “simply baffled that all the money printed has not worked, and will wait and hope…for now.”
Mr. Bernanke’s general thrust on the ‘no-go’ for additional stimulus was echoed by Dallas Fed President Richard Fisher who said that the Fed has “done all it can” to provide the fuel needed for a US economic recovery and that it may have “given” more than enough already. The lack of a concrete offer of further monetary accommodation in the Bernanke speech quickly resulted in a dissipation in risk appetite in the markets and engendered a fifth session of losses (albeit modest once) in the Dow and an upward push in the US dollar on the trade-weighted index.
Some of that strength in the US currency was still manifest this morning, especially as the euro traded lower on perceptions that a confrontation may be in the offing between Germany and the ECB as regards the Greek situation. In addition, the greenback gained a bit of ground following a reported warning by Moody’s on the possible future status of the UK’s AAA credit rating.
And now, for something…completely different; pure conjecture. Just in case you thought that the head of the IMF was charged and jailed on account of certain “behaviors” of his vis-à-vis a Sofitel maid in New York, well, you can now throw all of that bit of “official cover” out the Sofitel window. That is, if you subscribe to the currently in-vogue and latest Roswellian flavored conspiracy theory making a splash out on “The Internets.”
Gold-oriented forum chatter is ablaze with theories that Mr. Khan was in fact not acting on account of his out of control libido, but was allegedly set up because he had discovered that all of the gold in Fort Knox is gone.
That is, because the bulk of the US’ gold stash of over 8,100 metric tonnes is actually held at…West Point, N.Y. (and, no, they are not some tungsten-filled set décor pieces fit for the next installment of “James Bond Vs. Goldfinger”). In any case, stay tuned. Who knows, maybe Congressman Weiner didn’t really do what he already admitted he has done, either. It could just be that he was “set up” because he tried to expose shoddy bullion dealer practices to would-be investors last year.
Jon Nadler is a Senior Metals Analyst at Kitco Metals Inc. North America