Traders at several institutional desks whom we polled in New York this morning clearly attributed the greenback’s fresh strength to the perception that President Obama’s jobs plan was not a lump of impossible-to-realize promises but that it was/is in effect, more supportive of a stronger US currency than the Fed’s hitherto loose monetary policy. Speaking of that, Mr. Bernanke let a few specs down yesterday when he failed to deliver an unequivocal QE3 promise in his address and pushed back the mention of any concrete policy course until the FOMC meeting later this month.
In fact, one professional argued that gold had ‘voted’ on the Obama plan and in essence gave it a “thumbs up” by declining. At the end of the day, if the Obama jobs package shaves at least 1% off of the rolls of the US unemployed and possibly adds 2% to the nation’s growth rate, then it logically follows that continued dollar-selling is not exactly going to remain a productive endeavor for speculators.
Historically speaking, where the dollar goes, gold does not; even if that divergence has been eroded in recent weeks owing to the aforementioned speculative crowd that has been afflicted by the “buy everything” syndrome. “The dollar is strengthening and gold may have formed a so-called double top, which can be viewed as bearish,” Jesper Dannesboe, an analyst at Societe Generale SA in London, said today. “There are very good reasons why people long on gold may be taking profits.” For a quick primer on “why gold/how gold/when gold” see this CNN clip by Ali Velshi. You might just rethink some of the “rationales” for same that have recently been tendered by those who would like to have you own more of it than perhaps you prudently should, as a portfolio diversifier and as core insurance.
The first meeting of the Congressional Deficit Reduction Supercommittee took place in Washington yesterday. Its members are trying to come up with plans to shave $1.5 trillion from US governmental spending. Sacred cattle such as defense and Medicare might be impacted, but so might fat felines residing in swanky zip codes in America. Unless, of course, politics get in the way, the way they normally have a habit of doing…
The Supercommittee will set targets for “major” changes in the US tax code, albeit such alterations might only come about at the end of 2012. At that time, (barring the Mayan calendar’s predictions actually becoming a reality), the political wrestling match between those who see revenues coming from higher taxes and those who want them not to, will be perhaps a more intense event than that which the aforementioned calendar would have us prepare for…
In the meantime, let’s get back to the current calendar. On it, today, looms the G-7 meeting in Marseille. For starters. Have a pleasant weekend, everyone. Get off the roller-coaster and consider a nice walk.
PS Please note and do observe, yourself as well:
On Friday, September 9, 2011, CME Group will observe the tenth anniversary of the attacks on the World Trade Center. As a result, all CME Group markets on CME Globex will observe voluntary moments of silence at: 07:46 CT/08:46 ET, 08:03 CT/09:03 ET, 08:59 CT/09:59 ET and 09:29 CT/10:29 ET. We request that all electronic market participants refrain from trading all CME Group products on CME Globex and CME ClearPort during these moments of silence.
Jon Nadler is a Senior Metals Analyst at Kitco Metals Inc. North America