The April trend of a troubled month for gold continued today as gold fell once again below $1,200 with a little stronger dollar. We did get a move up in mining stocks off the bottom today so they seem to possibly be leading gold right now. I still want to see gold over $1,200 to be more than just “leaning” long as I said I was yesterday. But I am still leaning long despite today’s price action. A move under $1,190 again would have me possibly change my mind.
Many of us are tired of this range for the metals. Silver was a little weaker than gold today and needs to have a boost soon. Now would be a good time.
Russia did a little more buying today but that didn’t help boost the price.
The over 200 point gain in the DOW didn’t do anything to help gold but this also could be why the mining stocks rebounded by the end of the day.
Interest rates are still under 2%. It is my opinion they will come closer to 1% before 3%. If you look at the rates for many nations, they are closer to zero or some even negative. How can this be? This is what leads to hoarding as central banks try to force people to put money into the markets. They of course want this so the money in circulation stirs the economy. With the economic activity comes some degree of inflation and their game can continue. They need inflation to make things work. Their enemy is deflation and they will do all they can to prevent it. But the overall degree of the deflationary credit contraction is causing havoc with their plans. This leads to drastic measures like QE, Operation Twist, and not just lower interest rates, but negative interest rates in some cases.
See: Why has the ECB introduced a negative interest rate?
Would the Federal Reserve ever introduce a negative interest rate here? Heck yes they would. The reason can be found in the chart below showing money velocity.
This chart shows how the velocity of money is in uncharted territory just like central bank action and future action to try and stimulate. Gold will eventually benefit from what the central banks do. For now, the metals struggle with competition from stocks and bonds waiting on deck.
Gold is presently up $1.50 in Asia to $1,195.20 and silver up about a penny to $15.90. They need a little push.
Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
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