-- Posted Thursday, 8 October 2009 | Digg This Article
| | Source: GoldSeek.com
Dec Gold: Open= 1045.7 High= 1062.7 Low= 104.8 Last= 1056.1 +11.7
The U.S. dollar set a 14-month low today, making a new low in this bear trend. News that the unemployment rate in Australia dropped from 5.8% to 5.7% underscores the weakness troubling the U.S. dollar. While the U.S. lost roughly 263,000 jobs lost month, Australia added over 40,000 jobs, which would be the equivalent of over 550,000 jobs in the U.S.
To rub more salt in our wounds, the World Economic Forum dropped the United States as the world’s top financial center. The top five ranking goes: the U.K., Australia, the U.S., Singapore, and Hong Kong. There was some good news today, as the initial jobless claims dropped more than expected, and the claims now appear to be trending lower.
While the economy appears to be recovering slowly, the White House is still considering a second, or part B, stimulus package. Of course, the U.S. will have to borrow or print the money to come up with the paper, further adding to the debt. With an easy money policy at hand and the economy starting to recovery, can the Fed risk pulling the plug on their policy before growth begins? While inflation is still muted, the loss of confidence in the dollar is causing commodity prices to remain higher than where they otherwise might be priced given the current slump in demand.
Production in many economic sectors is scaled way back, so if growth appears before the Fed has a chance to soak up a lot of excess cash with higher interest rates, then inflation could be a problem if more cash is demanding fewer goods. Likewise, the simple act of the dollar falling may push other nations to take defensive action, like buying and hoarding more commodities instead of holding dollars as a storage of value.
Traders need to be aware of any changes in U.S. policies regarding interest rates or fiscal matters. Any move to strengthen the dollar could cause a very sharp correction across the commodity sector, including gold. If the White House and Fed continue to remain passive about the devaluation of our currency, then trends are likely to continue.
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Thomas Hartmann
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-- Posted Thursday, 8 October 2009 | Digg This Article | Source: GoldSeek.com
