One of the earliest warning signals that the recovery is strong will come from the consumer.   He will spend more on needs first.   Wisely, he goes to the cheaper end of the market, usually meaning imports from China.   At the moment imports from China are dropping slightly, but should rise if the recovery gains solid traction.  Imports from the East are the first beneficiaries of a U.S. recovery.     

Now look at oil imports.   The oil price is strong but nowhere near as strong as at its peak.   At this level, prices are sustainable, indicating consumer acceptance and a slight advance into wants spending.   The rise in the Trade deficit in November was assisted by higher oil prices.  Since then oil prices have stabilized not fallen, so the Trade deficit oil component should stabilize until oil takes off again.

It is tragic that overall, the U.S. Trade deficit is perhaps the best signal of the arrival of a ‘real’ recovery in the States.   As the U.S. economy regains its health, its Trade Deficit keeps rising.   As it rises, the flood of Dollars adds velocity to a falling $.   This leads to an increase in $ surpluses held by foreigners, already glutted with them, now looking for ways to spend or diversify from them.   Result; U.S. economic health equals a falling $ and worried creditors of the U.S.!   A falling $ in the eyes of the U.S. investor means a rising gold price.

In November, the U.S. trade deficit widened by 9.7% to $36.4 billion, which is partly accounted for by higher oil prices.   Exports rose for the seventh straight month, but imports rose at a faster pace in November.   The government also revised the deficit in October to $33.2 billion from $32.9 billion.  As a result the deficit for the year now totals $340.6 billion, down from $654.1 billion in the same period last year and $720 billion the year before.   Overall, there is little evidence in these numbers that points to any vigor in the ‘recovery’.   So it is right that the Fed continues to hold back.   Consequently we have at least part of the reason why the $ has held/rallied of late and the gold price consolidating.  

Where will this take the Gold price?

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This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.  Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina only and are subject to change without notice. Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina assume no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this Report.

-- Posted Monday, 18 January 2010 | Digg This Article