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Wednesday, March 25, 2009

Debt Monetization, Money Printing, Dollar Weakness AND Gold Weakness!

Despite a move by the Fed to monetize debt (print money) Gold (GLD) has "only" managed to move up to about $95... even as the USD came under significant pressure.


Gold, Silver Fall as Bank-Asset Plan May Curb Demand for Metals: “Gold fell the most in almost a week on speculation that a U.S. government plan to rid banks of toxic assets will revive lending and the economy, eroding the appeal of the precious metal. Silver also declined.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, dropped from a record yesterday for the first time since March 6. The U.S. Treasury’s latest bid to help banks boosted optimism that the economy will recover from the biggest recession since the Great Depression, spurring gold sales. Before today, gold rose 7.7 percent this year.

“Let’s not forget that gold is one of the best barometers of pessimism still out there,” said Jon Nadler, an analyst at Kitco Inc. in Montreal. Gold gained this year as investors bought the metal as a store of value against financial turmoil, analysts said.

Gold futures for April delivery fell $28.70, or 3 percent, to $923.80 an ounce on the Comex division of the New York Mercantile Exchange, the biggest decline for a most-active contract since March 18.

Silver futures for May delivery dropped 51.8 cents, or 3.7 percent, to $13.357 an ounce on the Comex. Silver still has gained 18 percent this year while gold is up 4.5 percent.

The precious metals fell as equities climbed in Europe and Asia, while in New York the Standard & Poor’s 500 Index pulled back from yesterday’s 7.1 percent gain. Still, the S&P pared an earlier drop of as much as 1.6 percent. Yesterday’s rally in U.S. equities was the biggest in five months.”
Fed to Start Purchasing Treasuries to Unfreeze Credit (Update1): “The Federal Reserve starts purchasing long-term Treasuries today, aiming to bring down borrowing costs by employing tools last used in the 1960s.

The first operation in the $300 billion effort is targeted on notes maturing from February 2016 to February 2019, the New York Fed Bank said in a statement yesterday. In the coming eight days, the central bank plans to buy debt maturing between March 2011 and February 2039, according to the tentative schedule.

The Fed joins central banks in the U.K. and Japan in extraordinary purchases of government debt, broadening efforts to unfreeze credit and end the recession after cutting the benchmark interest rate close to zero. The Fed’s purchases may ultimately be overwhelmed by new government borrowing to finance a budget deficit projected at $1.5 trillion this year.

“Over the short-term, the Fed purchases of Treasuries will lower rates, but the need to issue over $2 trillion in securities over the next 18 months will make this less than effective,” said Mark MacQueen, who helps oversee $7 billion as co-founder of Sage Advisory Services Ltd. in Austin, Texas.

Policy makers, led by Chairman Ben S. Bernanke, announced the Treasury-purchase decision last week along with a plan to more than double purchases of housing debt to $1.45 trillion, hoping to reduce rates on home loans.”


SS said...


What is your view on base metals and softs, same way as gold or inflation driven? Best


Unknown said...

I hope gold and silver keeps dropping. I keep hearing rumblings about nations starting to dump parts of their reserves to 1) take advantage of high prices and 2) prevent a flight out of reserve currencies.

Bentley H said...

Very thooughtful blog