-- Posted Monday, 9 February 2009 | | Source: GoldSeek.com
By: Pete Grant, USA Gold
Feb 09 a.m. (USAGOLD) -- Gold continues to consolidate ahead of important resistance at 930.10 (Oct high). Dips last week below $900 were viewed as buying opportunities.
Friday's nonfarm payrolls data showed another huge drop in employment, to the tune of 598k jobs in January. That pushed the unemployment rate up to 7.6%
Focus this week will remain on the US stimulus package, which has been modestly pared by the Senate to $827 bln. While the Obama administration and congressional Democrats are pushing for quick passage, it seems like there could still be some political wrangling regarding spending versus tax cuts.
Additionally, Treasury Secretary Geithner's announcement on how the second half of the TARP funds will be spent has been pushed back to Tuesday. The delay has been attributed to the Obama administration's hope that the stimulus plan may clear the Senate today.
They apparently didn't want the reemergence of controversial TARP discussion to muck up the works and possibly steal the news cycle. However, with banks continuing to struggle, Geithner needs to release his plan and hopefully re-install some confidence in the ailing sector.
The Geithner plan is expected to include a PR makeover. Look for some new terminology, possibly a new acronym completely. The remaining funds are also likely to have a lot more strings attached, possibly making the plan more palatable to American taxpayers, but probably less palatable for the banks themselves.
Geithner is unlikely to request additional funds tomorrow, but I wouldn't be surprised if there is a soft illusion to the possibility that more funds might be required down the road. With more and more people losing their jobs, banks are faced with the likelihood that more loans -- those initially thought to be safe -- will be defaulting.
With everyone focused on the stimulus bill and TARP 2.0, Treasury announced plans last week for the largest quarterly refunding ever. Beginning this week, Treasury will be selling a staggering $67 bln in new 3-, 10- and 30-year debt. That's on top of $84 billion in shorter-term debt.
Not surprisingly the supply is already weighing on prices, driving up yields. This comes at a time when the Fed and Treasury are trying to drive mortgage rates closer to 4% as a means of bolstering the housing market. Quite a conundrum.
PIMCO's Bill Gross suggests that if the 10-year auction awards yields above 3%, it could result in Fed intervention. If the Fed starts buying treasuries, essentially monetizing our own debt, an upside breakout in gold becomes increasingly likely.
A short-term breakout above 929.37/930.10 would likely trigger a quick run-up to 950/960, although 988/1,000 would be the objective at that point. Above the latter, the all-time high at 1032.20 attracts.
Opinions expressed in commentary on the USAGOLD.com website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. Centennial Precious Metals, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD - Centennial Precious Metals does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.
-- Posted Monday, 9 February 2009 | Digg This Article
| Source: GoldSeek.com
