I looked at the gold price over the past weekend and thought that if it cleared $1800 oz. on the
way up, I would consider shorting it again. I overlooked the signals early this week that it
was having trouble with resistance at $1800, and found today quite interesting when Fed Chair
Bernanke mentioned in testimony before The House that the FOMC would have to keep the
fast improving employment situation in mind, policywise. Gold tanked apparently because some
players feared the Fed could be stepping away from further quantitative easing and this on the
day when the ECB completed another round of ECB style easing.
It remains interesting that the Fed's balance sheet has increased only modestly since mid - 2011
while foreign central bank holdings of Treasuries has also declined. This monetary indicator --
total central bank holdings of Treasuries -- has not supported a rising gold price for some time.
Now there have been other positive factors: increasing Asian demand for gold, a positive
short term reversal in forward indicators of global output growth, and the ECB's large collateral
backed loan program. So, the interesting part of today's action was the dramatic reaction to a very
hedged hint by the Fed that the size of the punchbowl could be large enough. You could infer from
today's action that some good sized gold players had QE 3 in their forecasts for the year. Keep an
eye out for further negative follow through.
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!