Gold back as a safe haven? (June 2nd 2012)

From June 2nd 2012

Around lunchtime on Friday gold recovered its safe haven status in the U.S. During the afternoon it moved up by $66, an almost unprecedented jump, from $1550 to $1626 smashing through old resistance points like a knife through butter. Hedge funds panicked into covering exposed positions, accelerating the leap:

The HUI, the gold bugs equity index, had an equally stellar day on the North American markets, up by 6.74% to 444.50:^HUI

Similar moves were seen on the XAU:^XAU&reco=1

Meanwhile, the DXY, that beacon of fiat safety dropped below 83 showing some distinct signs of breaking an upward pattern established for the last three months:

So what has driven this dramatic turn?

1) The U.S. NFP came in at 69,000 less than half the 150,000 expected by the markets.

2) The U.S. Chicago PMI released on Thursday is turning down, along with other U.S. LEI’s.

3) China LEI’s are now falling; there is fear of a hard landing.

4) Europe remains a basket case, paralysed by indecision and weak leadership more prone to eternal debating society level summits.

5) Bond yields in the U.S. and U.K. are now the lowest in history. German bunds are also at similar levels and you have to pay the Swiss to hold your money.

It’s just dawned on the markets, of which the U.S. is still the biggest player, that there is nowhere else to go. If sovereign debt looks safe, you had better watch out for QE3 and a similar policy in Europe. Expect that tiny return on bonds to evaporate with inflation when the big print starts.

And don’t think that retaining funds in USD is any safer. U.S. debt is already at $15.8 trillion and will crash through the $16.2 trillion limit before the U.S. election; Obama is already sending out signals about a $20 trillion limit.

With a U.S. economy turning down, the inflationary spectre of QE3 on the horizon and an uncontrollable debt burdon, already over 100% of GDP, how long will the USD retain its status a safe haven? How many years has it got left as the globe’s primary reserve currency?

So what’s all this got to do with us?

Well gold is obviously off the starting block. The North American PM sector has already made some initial moves but the full implications of what is happening has not been completely understood within the AIM PM sector. Some of the larger players inched ahead on Friday, but nowhere near the moves seen in post-Europe-close trading on the North American markets.

Our first moves have yet to be seen.

It’s time to make a move.

Anything Condor, Ortac or Red Rock specific will be accentuated once we see a firm sector trend move up. Gold will help arrest the old decline pattern, not Greenland.

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