-- Posted Friday, 1 May 2009 | | Source: GoldSeek.com
Gold fell 1% yesterday as risk appetite returned with equity markets in Asia and Europe rising prior to a mixed performance on Wall Street.
US bonds continue to come under pressure and the yield on the benchmark 10-year Treasury bond rose to 3.124%, the highest it has been since late 2008. The bond may have broken down technically and this would in normal free market circumstances lead to higher long term interest rates. But the US government is printing money to buy their own bonds and this artificial manipulation of monetizing debt may lead to rates remaining near historic lows, at least in the short term.
The markets appetite for risk (particularly in equities) remains remarkable as the myriad of negative financial and economic fundamentals is daunting. The bulls as usual herald this resilience as proof that the worst is over. However, it is likely no such thing rather the markets are being irrationally exuberant in the short term prior to the very poor fundamentals reasserting themselves in the coming weeks.
The WHO yesterday raised its six-tier alert to 5 and said the world's first influenza pandemic since 1968 may soon be declared. A pandemic would further badly affect international economies with unemployment surging, tax revenues collapsing further and government spending and deficits set to surge massively.
It would be hard to write a script that could be more positive for gold than the current global macroeconomic one.
‘Sell equities in May and go away’ may never have been a more appropriate a strategy than this year.
Conversely, buying gold in May will likely be seen as very wise in the coming months as the long period of correction and consolidation may soon run its course prior to the resumption of the gold bull market.
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