A Canary In The Gold Mine?

On Friday I attended a conference at the Federal Reserve Bank of San Francisco, which included a very interesting presentation by Fed Chairman Ben Bernanke on long-term interest rates.

By Evariste Lefeuvre: The USD is benefitting from safe haven flows once again as a lower RRR (required reserve ratio) in China and renewed political uncertainties in Europe are forcing investors into "risk-off" mode. Could this move also be driven by fundamental factors? It has been suggested that the U.S. currency may also benefit, in the medium-to-long run, from improved external accounts, and more generally for the correction of global imbalances.

On Monday, an old friend of mine — a mechanical systems trader in Europe — emailed to request my thoughts on gold (and the general state of markets). It should be noted we still have long gold and silver positions on — with partial profits taken and stops above breakeven — as a modest hedge against our growing short book. That said, this was my out-of-consensus reply:

Goldman Sachs cut its 2013 gold forecasts on Wednesday and said gold’s current price cycle will likely turn next year as a rise in real interest rates on the back of improved growth offsets any further balance sheet expansion from the Federal Reserve. Goldman cut its three, six and 12-month forecasts for gold prices – currently near $1,700 an ounce – to $1,825 an ounce, $1,805 an ounce and $1,800 an ounce respectively. It also introduced a 2014 forecast of $1,750 an ounce, suggesting price growth could tail off.

Here are a few very interesting charts from Steen Jakobsen, chief economist at Saxo Bank in Denmark. click on any chart for sharper image Central Bank Balance Sheets

The Billion Prices Project @ MIT just released daily online price index da

Gold’s been knocked down lately, but several enduring factors have conditioned the yellow metal for an inevitable comeback.

Gold’s been knocked down lately, but several enduring factors have conditioned the yellow metal for an inevitable comeback.