Gold Sets Record Highs With Every Tick Higher

Well, folks… Today it’s all about gold… Gold this, gold that, and hey you should know that gold right now is trading at $1,866! Future expectations of slower global growth, which means interest rates won’t be rising, thus keeping gold at the top of investor’s lists, and… Future expectations for inflation… Hmmm… Interesting, don’t you think, that I mentioned inflation in the same paragraph as slower global growth? I’m talking monetary inflation from all the printing presses working overtime (more on that in a bit)… Silver is hanging on to gold’s coattails but lagging at best…

The way gold has traded in the past week, one would have to think that gold has come to the forefront of what people consider money… I went through that explanation yesterday, so I won’t go there again… But consider this… With gold as money, then there would be a “gold monetary system”… And when the gold monetary system ramped up its price like this in a week, one would have to think that the monetary system is pricing in big black clouds for the markets…

So… The question right now is… Should investors rush out to buy more gold (hopefully not their first purchase of gold) with the gold price at $1,866? Hmmm… Well, let’s go back to when gold was trying to gain past $1,000… Didn’t people have qualms about buying gold at $1,000? Then the same for $1,100, and $1,200, and $1,300, and $1,400? And all the way up to now… Yes, they did… But trees don’t grow to the moon, right? Well… With all the money in the world, sitting around, one has to think that there’s no stopping here… And all those analysts that have been calling for gold at $2,000, are smiling like Cheshire Cats this morning….

Frank Trotter (the Big Boss), and I have long said that we believed that gold could go to $2,000, but agreed that we didn’t want to see what kind of shape the US economy was if gold was $2,000…

And gold isn’t just making new all-time highs with every tick up in price versus the dollar… Gold has reached all-time highs versus Swiss francs (CHF), South African rand (ZAR), New Zealand (NZD) and Canadian dollars (CAD), euros (EUR), pound sterling (GBP), and I’m sure more…

OK… I guess I should talk about some other things… As I wrote about yesterday, the currencies had given back their previous day gains in the Asian session… Well, the selling continued through the day, but not at a break-neck pace… Day in and day out, there’s always something to complain about in the Eurozone, but still the euro remains higher priced than the US dollars… Of course, that can always change, but think about that for a minute… The daily beatings on the Eurozone have gone on without a break for over a year now; one would think the currency associated with that market would be getting flogged or water boarded every day by the markets… But that doesn’t happen… So, what is one to make of that?

As I keep saying over and over again, I think of the dollar and the euro as two junk cars… They are beat up, wrecked, and rusted, but the euro car seems to look just a bit better than the dollar car. The euro car starts every morning, and gets you to work, while the dollar car starts and stalls, over and over again…

OK… If you didn’t like that one… How about a real explanation! The euro is the offset currency to the dollar, period. If there is dollar weakness then the euro gains, and vice versa… So, obviously, the markets feel as though the problems in the US are far worse than the Eurozone, even though they beat the Eurozone every day like a rented mule! (No animals were hurt in that description!)

I see where Japanese officials are calling on their G-7 colleagues to come together to intervene… Yes, Japan wants all the members of G-7 to sell yen (JPY), and buy something, most likely dollars, to stem the yen’s appreciation… Apparently Japanese officials have figured out that going at intervention alone is not healthy. So, they want a coordinated effort by their G-7 brethren. I doubt that will happen, but it does cause traders and investors who are buying yen to stop and think about it…

Yesterday the data cupboard was very busy here in the US with CPI, and everything else printing. CPI (consumer inflation) was stronger… The Weekly Initial Jobless Claims climbed back over 400,000 with last week’s number being revised up to 399,000… (Where was the government, who last week was all giddy about jobless claims falling below 400,000 yesterday?) Leading Indicators weakened (that’s not a good sign), and Existing Home Sales weakened… So, all-in-all, not a good day for US economic data…

And that brings us to what I‘ve felt for a long time that the Fed is going to do about all this economic and stock market weakness… Well… I think former Fed Vice Chairman Alan Blinder said it best yesterday when he told Bloomberg TV that “he sees a reasonably high chance of QE3 this year.”

OK… Now that’s 3 Fed heads, 2 current and 1 former, who have mentioned another round of quantitative easing… Is this just a co-inky-dink? I doubt it… They are starting a grassroots whispering campaign that will justify Big Ben Bernanke to announce more QE… Fed Head Dudley speaks today, he has been pretty outspoken about stuff, especially the dollar in the past, so it warrants us to keep an eye and ear on what he has to say… Could be more QE talk…

In Canada this morning… We’ll see the latest color of their CPI (Consumer Inflation) , which I believe holds the key to a rate hike in Canada…. The Bank of Canada’s Governor Carney, and Finance Minister Flaherty will be in Parliament to discuss the state of the economy… I think there’s going to be a lot of “push-back” from the members of Parliament to any discussion of a rate hike, due to the unstable stock markets around the world… But, if you want to contain inflation, you can’t be concerned with those things… But any talk of a rate hike could underpin the Canadian dollar/loonie… And any talk of ditching the rate hike will deep six the loonie…

I know, I said this would be short-n-sweet, so I’ll go to the Big Finish with this note… I heard that Bank of America is going to slash 3,500 jobs… I guess that’s 3,500 jobs the president will have to add to his plan that will be announced next month…

To recap… It’s all about gold today, folks… Gold sets a new all-time record high with every tick higher, and is up $33 this morning! Silver is following, but lagging at best… US data yesterday was all weaker or going the wrong way, as it was with CPI. Japan is calling for coordinated intervention to help them stem the yen’s appreciation, and former Fed Chairman Blinder adds some thoughts on more QE…

Chuck Butler
for The Daily Reckoning

The Daily Reckoning