Gold Rallies to $1,800 Again!

At one point yesterday, it looked as though the dollar was about to get a root canal, as the euro (EUR) climbed back to 1.45, the Aussie dollar (AUD) $1.05 and so on… The currencies were rallying so much that gold climbed into the back seat and let the currencies drive for a while… But, this morning… Gold is back in the driver’s seat, with the currencies backing off their charge against the dollar.

The backing off came in the Asian session after some weak data from the region pushed Asian stocks lower, and took the “risk trading” off the table… The one piece of data that really shook up the region printed in Singapore, where overseas sales slumped for the first time in 3 months… Malaysia saw their economy grow at the slowest pace since 2009, but the real meat was the Singapore data. You see, Singapore depends on overseas demand; they don’t have an economy the size of China that can switch to a domestically demanding economy… This is a little disturbing, but not like having one’s credit rating downgraded, so… Let’s see what comes next here before we scream that the sky is falling.

The data, though, is really pushing down currencies, as they have now been handed over to the European session, which didn’t see any reason to prop them back up. So, our Tub Thumpin’ Thursday is starting off as a “Risk Off Day”… But, in recent days… Risk off affects currencies, commodities and equities… Not gold…

I’ve said this before, but it bears repeating… Gold is more than just a commodity… It’s real money! And… An excellent way to diversify an investment portfolio! As I tell audiences all the time… Gold has independent pricing mechanisms that the other assets you hold don’t. Gold smoothes the volatility in an investment portfolio especially in highly volatile times. Gold is not subject to any form of liquidity risk, and does not contain credit risk, and finally it has no liabilities attached to it!

Yesterday, we saw the color of the latest PPI (wholesale inflation) report here in the US. July’s PPI showed a 0.2% increase for the month, which didn’t erase June’s -0.4% print… But did get people talking about inflation again. But we won’t find inflation in today’s printing of CPI (consumer inflation)… That just won’t happen, folks… The hedonic adjustments department will make certain of that!

It will be a busy day for the data cupboard, as CPI will be joined at the printer by Weekly Initial Jobless Claims, Leading Indicators for July, the Philly Fed (manufacturing), and Existing Home Sales… None of it will be too revealing to us… I like to see what’s going on with Leading Indicators, as it is a forward looking report…

I had a reader ask me why I hadn’t commented on the riots going on in England… Well, that’s because I would really like to imagine them not happening… You see… For the last 3 years, whatever’s happened in England, ends up happening here about 6 months later… And while I’ve always known that back in the deep dark closet, that kind of social unrest could come to this country (because of austerity measures that will have to be taken in order to seriously change the course of this country’s finances), I’ve always hoped that a hoola-hoop could be invented to alleviate the whole mess…

I was sent another note by a reader that reminded me that the Rugby World Cup was being held in New Zealand, right now, and the forecasts for people coming to New Zealand to watch the games were understated… So… Kiwi (NZD) could very well see a short-term rise, based on the activity in New Zealand…

And I already told you how the Asian stock market dip caused the Aussie dollar to slide… Well, that holds true for the New Zealand dollar/kiwi too… There was a guy talking on the Bloomie TV this morning, saying that “investors should buy the Aussie dollar on any significant dips”… Hmmm… I don’t think today’s price slide would be considered as a “significant dip”, but a couple of weeks ago, when the Aussie dollar slid to $1.00… THAT was a significant dip!

So… The two central banks that keep coming back to the intervention table – the Swiss National Bank (SNB) and Bank of Japan (BOJ) – are being watched by the markets like a hawk… The SNB has lost so much money intervening… But I think the threat is enough to keep the markets from going “all in” on francs (CHF)… And the BOJ may very well pull the intervention card out of its hat if yen (JPY) gets below 76…

I see where Norway announced a HUGE oil discovery… There had been some recent talk that Norway’s oil fields were drying up… Well that talk can now be put to bed! And the country with the absolute best financial balance sheet will continue to remain at the top of that list!

We’re turning Japanese, yes, I really think so! Turning the page back to the ’90s when Japan cut interest rates to the bone and kept announcing budget stimulus, just plain stimulus, job packages, quantitative easing, and what did it get them? Nothing, absolutely nothing! Unless that is you’re talking about a government debt that has exploded…

And now here we are in the US we’ve gone down the stimulus road a couple of times now… We’ve cut interest rates to the bone… We’ve gone down the quantitative easing road a couple of times now, so what’s next? Ahhh, grasshopper… The US president announced yesterday that he will present a jobs package next month… So, as of next month, we will have gone down every road the Japanese went down…

And then there was this… As reported in The Wall Street Journal

Major websites such as MSN.com and Hulu.com have been tracking people’s online activities using powerful new methods that are almost impossible for computer users to detect, new research shows.

The new techniques, which are legal, reach beyond the traditional “cookie,” a small file that websites routinely install on users’ computers to help track their activities online. Hulu and MSN were installing files known as “supercookies,” which are capable of re-creating users’ profiles after people deleted regular cookies, according to researchers at Stanford University and University of California at Berkeley.

Many of the companies found to be using the new techniques say the tracking was inadvertent and they stopped it after being contacted by the researchers.

You know… The majority of Americans, like me, just want to be left alone, no big brother, no government prying into our personal lives… This privacy invasion by everyone is becoming a real problem…

To recap… The currencies enjoyed a strong performance yesterday, only to see the rug pulled out from under them by some weak Asian data… Malaysia’s GPD was weaker, and Singapore’s overseas sales slipped… These two ripples led to an Asian stock sell off and that was handed over to Europe, who kept the weakness going… Gold however, has taken its place now as THE safe haven currency, and has rallied this morning. It will be a busy day for the data cupboard today.

Chuck Butler
for The Daily Reckoning

The Daily Reckoning