Essay by Meghan Brown “If the story of the past quarter of a century has a one-line plot summary, it is the rediscovery of market capitalism.” – Alan Greenspan, The Age of Turbulence, p.14 For the past thirty years, neo-liberal economic thinking has been the dominant orthodoxy governing policy and shaping development. Born from Adam Smith and his ideas of the ‘invisible hand’, this theory prevails in many well-connected and highly influential institutions such as the International Monetary Fund (IMF), the World Bank (WB), and the US Treasury, together known as the ‘Washington Consensus’. This essay will explore the theories behind neo-liberalism, which contend that unfettered markets provide the best arrangement for the allocation of resources and to which prominent thinkers such as Jagdish Bhagwati, Thomas Friedman and Martin Wolf subscribe.
Gold fell yesterday (both gold and silver were down some 1%) in volatile trade which saw some very determined selling each time gold looked set to break out above $930/oz. There appears to be support at $890/oz to $910/oz and resistance between $930/oz and $960/oz. As usual gold's safe haven properties were seen yesterday as most international equity indices were down some 3% to 5% while gold fell only marginally.
Gold and silver succumbed to profit taking (gold down 3.2% and silver down 2.5%) last week as risk appetite returned to markets with the tentative recovery in equity markets continuing. Gold’s performance was lackluster, despite increasingly bullish news with regard to growing acceptance that the international monetary system must be reformed and the strong probability that gold will again play a more significant part in the international monetary system.
Adrian Douglas of Market Force Analysis writes that in his experience, most ordinaly people have difficulty understanding why gold is the investment opportunity of a life time. Blaming the messenger, he explains it in simple terms, making a distinction between consumables and collectables:
Gold and silver rose ($939.80 up $4.40 - Silver $13.65 up 18 cents) yesterday on deepening concerns about the dollar and fears that its reserve currency status is threatened. Next week could see sharp moves in financial markets as the dollar’s dominance in the international monetary system is set to be questioned at the G20 Summit (Thursday, April 2nd). The US creditors in China and Russia are proposing creating a new supra-national reserve currency, thereby lessening dependence on the dollar.
Gold and silver fell yesterday ($923.30 down $29.70; Silver $13.34 down 52 cents) on profit taking and renewed risk appetite which saw equities rally internationally (prior to a late sell off in the US) and the dollar rally after its recent sharp falls. Macroeconomic, systemic and monetary risk has seen the dollar, the euro and more particularly sterling fall versus gold in recent months.
It was a historic week, with the Federal Reserve opting for the "nuclear option" of money creation on a trillion dollar scale. Gold and silver rose 2.7% and 4.5% respectively.
Gold surged 8% yesterday (as is the norm, the far smaller market that is silver surged by even more and was up by 13.3%) as the shock Federal Reserve announcement led to concerns regarding the dollar and the inflationary implications of massive money printing and debasement of the currency. The dollar has fallen sharply against all currencies and particularly against the finite commodity and currency of gold which cannot be debased.
MDC activist Sam Chakaipa returns to his village in rural Zimbabwe to find his friends and neighbours starving to death, reduced to panning gold powder from the rivers to exchange for food at an exorbitant rate. The Guardian via Youtube:
Gold fell in US trading hours yesterday for no apparent reason; but on the Fed announcement, gold surged by nearly 7% in afterhours access trade. Gold leapt from its session low of $884.10/oz to a high of $946.20/oz, a jump of nearly 7 per cent and silver also surged some 7%.
Gold fell yesterday for the first day in 3 and was down some 0.8%. Gold was flat in Asia but has fallen again in Europe to $915/oz.
Moneyweek's Dominic Frisby writes that he is detecting a certain amount of bullishness in the UK housing market. People with cash are talking about buying to take advantage of lower property prices and interest rates. Nevertheless, he says,
Gold and silver rallied over 1% and 2% yesterday as stock markets barely made gains in the US.
Gold fell 2.2% yesterday (silver -3.1%) as increasing risk appetite saw stock markets in the US surge. A rally in stock markets was overdue but the sustainability of this latest rally is doubtful and equity markets in Asia were mixed and after a lower start, are tentatively higher in Europe.
After the bounce in recent days, gold sold off again yesterday and was down 2.77% (silver -3.2%). After the falls seen in the last two weeks a period of consolidation will be needed and gold may fall further prior to rising strongly above the psychological and technical level of $1,000/oz. With $50 trillion having been wiped off the value of assets internationally (primarily property and equities) there will likely be a long term shift towards risk aversion and wealth preservation.
Gold's recent downward trend may have ended last week after gold closed moderately higher for the week (gold +0.03% and silver +1.75%). The performance was impressive considering the continuing steep declines in stock markets (Nasdaq , DJIA, S&P down 6.1%, 6.17% and 7.03% respectively). Gold's outlook remains extremely positive especially as big money interests are once again realizing the safe haven attributes of the yellow metal.
As expected gold bounced yesterday after its recent sharp falls. Gold's lack of correlation with equities (gold has occasional very short term correlation with equities) was seen again as gold and silver were up some 2% while major US indices were down by some 4%. Citigroup, once the world's largest bank, fell below $1 per share and General Motors is struggling to avoid bankruptcy.
Gold fell for the eighth straight session yesterday to have the longest losing streak since June 2006 (silver broke its losing streak). Gold is clearly oversold in the short term and due a bounce.
Gold fell for the seventh straight day yesterday and is now down nearly 9% from its recent high just above $1,000/oz - see chart below). Gold had become overbought in the short term and had risen over 24% in just over a month ($806/oz on January 14th to over $1,000/oz on February 20th ).