Just as I was about to enjoy the last day of what has been more work than vacation time, gold gets hammered on the back of news the punch bowl may be running dry. Throw in the fact that it always seems to get assaulted around the monthly employment report and one can certainly feel like its Deja-vu.
The latest plunge started yesterday when the Fed minutes showed some members want to be able to slow or stop their purchases well before the end of 2013. Others didn’t see a need for a specific timeframe for ending what we know as “quantitative easing”
Forgetting for a moment that other governments are still stimulating their economies like Japan (will likely increase its inflation rate by increasing asset purchases while adding to fiscal stimulus) and China (which plans to increase infrastructure spending and sustain loan growth), it’s a fairytale to think the FED can actually do anything but keep its foot on the gas pedal.
Why? The United States is up the creek without a paddle. Its political process has blown up and the FED knows the inmates are now running the asylum that’s responsible for fiscal policy. Because Ben Bernanke painted the FED into the corner and has run out of paint, he and his entrapped group has sent a “Hail Mary” towards the front door of the asylum letting the inmates know the punch bowl has no more kick to it and they somehow need to pull a rabbit out of the hat and get serious on deficit and entitlement reduction policies.
If you believe the inmates will do so and the FED can and will actually drain liquidity (allowing interest rates to rise due to actual tightening) well, I not only have a bridge to sell you but would urge you to stop reading this blog immediately.
Gold has been in a trading range of $1500 – $1800. It shall be pressured for the near-term and can retest the lowest part of the range. But after a decade of overcoming an overwhelming number of anti-gold waves from the investment community and the media that follows it, I believe this is just another bump in the road that leads to a $2,000+ gold price in 2013. The fact that such a view seems as far-fetch as a rookie winning the Super Bowl this year at the start of the NFL season, I’ll remain on board the mother of all gold bull markets and hope I’m not related to Captain Edward Smith.
Resemblance?
About Peter Grandich
Grandich is the founder of Grandich.com and Grandich Publications, LLC, and is editor of The Grandich Letter which was first published in 1984. On his internationally-followed blog, he comments daily about the world’s economies and financial markets and posts his views on social and political topics. He also blogs about a variety of timely subjects of general interest and interweaves his unique brand of humor and every-man “Grandichism” expressions with his experience gained from more than 25 years in and around Wall Street. The result is an insightful and intuitive look at business, finances and the world, set in a vernacular that just about anyone can understand. In his first year, Grandich’s wildly-popular blog had more than one million views. Grandich also provides a variety of services to publicly-held corporations on a compensation basis.
Grandich’s autobiography, Confessions of a Wall Street Whiz Kid, was publiched in fall 2011.
He is the also the founder of Trinity Financial Sports & Entertainment Management Co. [www.TrinityFSEM.com], a firm with a Christian perspective which he started in 2001 with former NY Giant and two-time Super Bowl champion Lee Rouson. The firm offers services to celebrities, athletes and average folks. Peter Grandich is a member of the National Association of Christian Financial Consultants, and a long-standing member of The New York Society of Security Analysts and The Society of Quantitative Analysts.
Grandich is also very active in Christian sports ministries including the Fellowship of Christian Athletes and Athletes in Action.
He resides in New Jersey with his wife Mary and daughter Tara.
