Yesterday the U$ Index did hold $75 and is bouncing today. The importance of the dollar trade since March cannot be over-stated. As the U$ dollar has fallen the past 8 months, most other assets have soared into bubble Dom. Who knows what staying power this dollar bounce may have, but while it holds, a long-overdue correction in other risk assets (including gold) is likely to follow.
The supply demand picture for gold continues to be bearish: increasing supply from producers spurred by soaring prices is overwhelming weak consumption demand. The World Gold Council today announced that Q3 2009 saw a 30% year over year drop in jewellery demand. Investment demand which includes gold ETFs, bars and coins was down 46% from Q3 2008, and even retail investment demand for bars and coins remains 31% below the third quarter of 2008. We note that despite the weakness in demand numbers, the World Council entitled their report “Gold demand remains robust.” On the other hand, they do admit that “World Council’s mission is to stimulate and sustain the demand for gold and to create enduring value for its stakeholders.” At least they openly admit their bias!
Meanwhile gold mania has gone mainstream see ABC video: Gold Fever. I received a media call Tuesday asking if I could be “the gold bear" on Fox Business. You know bulls are raging, when Fox has trouble finding a gold bear in all of North America... more »
