Gold and the dollar are both down in early New York trading, while silver and palladium are showing a bit of a rebound. Gold is near six-week lows after dropping below $1,300 yesterday. March is a traditionally slow month for gold, and bears are searching to find where the support level is, now that the Ukraine crisis has calmed down. Watch for some bargain hunting to appear and prices to rebound if the $1,385 level holds.
Gold ETFs have recorded a net 9.6 metric tons of inflows for the month, and the Indian spring wedding season is about to get into gear. The lower price should entice physical buying from Asia and other emerging markets, as they worry about rising inflation rates reducing their purchasing power.
Speaking of purchasing power, the euro is near three-week lows on deflation fears out of Spain. Consumer prices in Spain dropped 0.2% in the latest report. This is ramping up expectations that the European Central Bank will start Fed-style bond buying on the open market, especially since the Bundesbank has decided that it may be necessary to keep deflationary pressures from seeping into the core EU countries.
Quantitative easing was already on everyone’s minds, and China’s leader Li Keqiang told state-run media that the government was going to start implementing targeted stimulus measures to support the nation’s economy. Beijing is trying to ratchet down non-bank speculative loans, known as “shadow banking”, and deflate a massive credit bubble before it pops. This may take the form of assistance to healthy sectors of the economy, while letting the over-capacity industries go through a shake-out.
The idea of QE in Europe and China has made Wall St. positively giddy. All three major indices opened higher, and rose sharply, following the lead of European stocks. The Nikkei edged up 0.5% to a three-week high to close the week, and the only two exchanges that seem to be in the red this morning are the Shanghai composite and Taiwan’s TSEC. In the U.S., the Commerce Department reported consumer spending rose 0.3%, and household income rose the same amount. Consumer sentiment, however, was down a bit, to 80.0 from 81.6.