Gold looking at fourth day of losses on China anxiety

In the Lead: “Dot-Com…modity Bubble?”

Switching locales, reports out of China appear to indicate that the country is far, very far, from the scenario that seems to be continually on offer in various hard money publications. You know, the one about China suddenly getting a serious case of an allergic reaction to the US dollar and US debt instruments, and diving headlong into gold –to the tune of hundreds or thousands of tonnes.

Well, the US Treasury tallied an increase in China’s holdings of Treasuries $1.18 trillion in February. Japan was not far behind China, taking $1.096 trillion of same. In all, not only is China not getting ready to dump things American on the financial side, but aggregate net purchases of US Treasuries climbed to $5.1 trillion- a record. Just don’t tell that fact to your favorite “US Doomsday Monthly” publisher. They might cut your subscription off, for you.

Meanwhile, over in the USA, the Dow had a very, very good day indeed (best one in a month, actually), gaining nearly 200-points on the back of a tech rally powered by (who else?) Apple and IBM. Later in the day it was also explained that US stocks climbed on account of the easing if immediate fears about Europe in the wake of a relatively successful auction of Spanish bonds. Crude oil enjoyed a good day as well; a barrel of black gold climbed by $1.32 in value to finish above the $104 level following encouraging IMF projections for the global economy.

The International Monetary Fund lifted its estimates for planetary economic expansion after several previous cautionary statements about the same in recent weeks. The institutions now expects that the unwinding of the financial crisis (yes, unwinding) and the improvement in financial conditions (yes, improvement) will make for a potential rate of economic growth near the 3.5% level in the current year, and for a possible 4.1% rate of similar progress next year. However, there are still signs of fragility in the process and places such as Spain had their growth estimates cut by the IMF, owing to current “difficulties.”

As for the American economy, the most recent set of statistics reveal that Mr. & Mrs. Joe Sixpack ignored the price of gas at the pump, that they did not blame President Obama for such, and that they took to shopping once again and thereby helped the US economy get back on track. Along the same lines, while builder confidence slipped in April, the number of permits for new construction being applied for belied that manifest sentiment of doubt.

Similar findings are on tap in the employment scene in the US. The recent decline in retail payrolls in March could well be regarded as a mere blip and not a game-changer. Bloomberg News notes that “[US] retail sales added to signs that growth is strengthening, with last month’s 0.8 percent gain almost three times as large as projected, according to the US Commerce Department.”

Merchants ranging from Jamba Juice to Mattress Firm have shown that, as far as they are concerned, hiring more folks will be the name of the 2012 game for them. One of the things worth noting in the hiring plans of such firms is the fact that it is ultimately decent store sales that engender the filling of new positions. It is also worth remembering that 25% of American workers are employed in the retail sector.

Another development that is flashing signs of disappointment to those speculators who are still looking to the Fed to come to their ‘rescue’ with a fresh helping of QE, is the fact that the US is now seen as not repeating last year’s foray into an economic soft-patch. All of the important metrics concerning the balance sheets of banks, the level of retail activity, the number of loan delinquencies, etc., are lined up in a fashion that would make quite difficult for the Fed to rationalize the launch of yet another asset purchase plan; even an inflation-sanitized one for that matter.

Thus, unless external shocks (think: China or the EU) impact the US economy with a hard, surprise blow out of left-field, the Fed will likely remain “on hold” as it comes together next week and it may thereafter gradually alter language it uses in connection with its monetary policy in order to “let the markets down gently” as the time for its first rate tightening approaches. Do bear in mind that “Operation Twist” comes to a conclusion in June…

The aforementioned signs of real progress on the economic front (in the US for starters) and the abatement of the intense crisis-flavored sentiment manifest from 2008 until late last summer made for somewhat more difficult conditions for the world’s producers of gold and silver bullion coins. Sales reports from Australia, the US, and other major coin-producing countries reveal a decrease in investor offtake in March. Clearly, declining bullion prices played a role in this trend as well, but the overriding sentiment-changer still appears to be the ebbing of the crisis that gripped investors’ psyches over the past several years.

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