Asian gold demand expert Koos Jansen joins the show this week to discuss why:
- In the End, Everyone Will Rush to Gold!
- Gold Will Rise to At Least $1600 in 2014 on Chinese demand
- Gold to replace US dollar as global reserve currency
- Cartel smashes metals on FOMC taper, but gold completes “Golden Cross” Friday
- Koos makes the case why he believes that China Is The Real Gold Manipulation Culprit, while Eric argues that the evidence points to the US gov’t
The SD Weekly Metals & Markets with guest host Koos Jansen is below:
Image credit: William Bonzai7
Another FOMC meeting, another trashing of precious metals. At least the powers that be are consistent. Meridian Macro researched gold performance leading up to and after FOMC meetings going back to June, 2013. They produced an interesting chart that was published at ZeroHedge March 19th, so the data related to the latest FOMC meeting isn’t complete. But it still shows the same sort of downside move one would expect.
It’s too bad they didn’t make a historical study going further back in time. I’ve seen other windows of history reviewed and the pattern is the same. When there are FOMC meetings, it’s one of the preferred periods the powers that be beat the stuffing out of the precious metals sector. The consistently of the pattern going back well over a decade can not be explained away other than by “denial theory.”
The Fed tapered, as expected, cutting $5 billion from mortgage back security purchases as well as $5 billion from the Fed Treasury buying program. That brings us down to asset purchases of $55 billion per month going forward. We have seen a small bounce up in some economic measures following the decline seen during the cold snap. But I’d argue there was excessive blame placed on cold weather, and the overall picture still suggests a downward move has begun. The Fed has room to make another $10 billion cut during the April 30th/May 1st meeting. The next meeting begins June 17th, which is far enough out in the future that we should know with much more clarity where the US and global economy stands. I’m still in the camp that expects a significant slow-down and a pause in tapering of the Fed’s asset purchasing program. But it looks like it might take a month or two more of $10 billion cuts before we see the Fed go on pause.
Keep an eye on the 10 year US Treasury yield and the dollar. The next FOMC meeting occurs on April 30 and May 1st. That’s plenty of time to see the 10 year move back towards 2.9%, which will certainly cause concern around the FOMC table. The Fed is fearful of a brake-out above 3% but they can’t fight that forever. Removing their function as the buyer of last resort in the Treasury market will eventually force rates higher. They can’t avoid this fact given tepid organic bond demand.
Koos Jansen and I discussed whether China or the US serve as the primary actor behind the management of gold prices. Jansen hypothesizes that China plays a more important role, and as you’d expect I made the case that the U.S. is the 800 pound gorilla. The discussion is certainly interesting. In my view China plays a tacit supporting role because — as Jansen correctly notes — it’s in China’s best interest to see gold priced as low as possible during their period of aggressive accumulation. We’ll definitely return to this conversation in a future broadcast.
Koos Jansen publishes fantastic research at his In Gold We Trust website. A couple of weeks back he published an outstanding review on Chinese gold demand. We referenced it in our show today. Click here to read it.
Given the Crimean vote to rejoin Russia, I highly recommend Ron Paul Institute’s John Laughland’s Thursday interview for perspective. Click here for weekend reading/viewing.
Have a great weekend — Eric Dubin
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