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And Japan Shall Not Lead Them
Forget that Japan has been strapped into a diving bell that has taken them to the bottom of the sea of deflation and stagnation for two entire decades. Forget that they have a real competitor in Asia now. Forget that there is a growing cadre of educated youth who can't find jobs in Japan. They have decided to stand pat on their stimulus and interest rates moves - for the moment anyway.
"The BoJ has given the market the impression that there will not be any more stimulus," said Carlos Perez-Santalla at brokerage Marex Spectron.
Somehow the precious and equities markets have taken this to mean that other industrialized economies, namely the United States, must follow suit. Let's take a look at that irrationality.
Indeed, the U.S. saw some higher-than-expected jobs growth in May. However, the unemployment rate actually went up. And yes, credit-rating bureaus have upgraded U.S. sovereign debt issues (which doesn't mean anything since Treasury paper of all sorts has been finding a brisk market for years now).
But partially because of lack of direct stimulus and partially because of ill-advised and ill-timed spending cuts, the American economy is wavering. The rest of the world's economy is wavering right along with big dog America.
Is that what the Fed has had in mind for all these years of massaging, prodding and jawboning? We think not. The absence of a true fiscal policy from the legislative branch is what has been driving QE for almost 5 years.
Also, as we noted throughout last year and into this, the Japanese are habitually shy of 1) committing to large and continuing acts of intervention in their economy, and 2) once in gear, Japanese stimulus programs have a tendency to be smaller than promised. Just last month, the BoJ was pontificating about how it was going to re-inflate its economy. No such luck for the rest of the world. The Japanese would prefer to let others take the risk and then reap the benefits.
On a brighter note, fund selling in the gold market is showing signs that it may bottom soon.
The world's largest gold-backed exchange-traded fund,, SPDR Gold Trust said that its largest inflow in over a month occurred on Monday with 2.7 tons added. Its holdings remained near four-year lows, however, down 340 tons this year. we shall see if the addition is the start of a trend or a blip.
In general today, all markets saw pressure selling, especially the international bond market, where the yield of Greek bonds pushed above 10%. Equities in London and New York were also sold off, although the U.S. market has rebounded a bit.
Gold's downside was tempered substantially by a fall in the U.S. dollar. That brings us full circle to the question: "With the U.S. economy weak, industrial output declining the world over, and inflation as meek as a newborn bunny rabbit' why would the Fed announce an end to easing 'soon'?"
The answer is, they won't. The debate will go on for some time, but no change is imminent.
Bond yields are on the rise again, even as inflation has shown it has no teeth. U.S. bonds are particularly attractive, with 30-years at 3.38%. 10-years are at a 14-month high of 2.21%. Yet, when the U.S. fell off the AAA credit-rating perch, yields were lower, inflation higher, and the economy looked as if it were poised for robust growth.
No one seems rational. Have faith that inflation will eventually emerge again.
Wishing you as always good trading,
Gary S. Wagner - Executive ProducerMarket Forecast:On a technical basis today’s intraday low in gold I believe to be a significant number. As you will see in today’s video when we create a Fibonacci retracement from the recent lows of 1320 to the recent highs around 1485, a 76% retracement takes us to 1359. Therefore the intraday low of 1360 fell precisely to a 76% retracement. Is my current belief that we will continue to see gold trade in a tight and narrow range. It is also my current belief that silver will remain under pressure with no real support till about $20 per ounce. On that note if one looks at the current gold silver ratio you will see that it has hit the highest point since August 2010, this according to Reuters news service. If silver remains under the kind of pressure I believe it will look for that ratio to move even higher. One trade or played might be along the lines of a gold silver spread, in which you would sell silver and by gold. Video archives:http://thegoldforecast.com/video/april-2013-archives-daily-shows http://thegoldforecast.com/video/may-2013-archives-daily-shows
Market Sentiment: Range bound sideways market no open position
From the week of 06.07. 2013 COT LINK See previous weeks in Historical Commitments of Traders Reports. |
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Gary S. Wagner - Executive Producer