Composite Euro CPI came in at 0.5%, lower than the expected 0.7%, and miles away from the 2% consumer inflation that the European Central Bank wants to see. This all but insures that the ECB will introduce some sort of economic stimulus and/or quantitative easing at their policy meeting on Thursday.
Equities and precious metals are both pausing to see of ECB president Mario Darghi is going to put on his helicopter helmet and make like Ben Bernanke. Precious metals are near yesterday’s closing price, as we enter the slow part of the season. Stocks also see a slowdown in June and July, enshrined in the ditty “Sell in May and go away, buy again St Leger’s Day” (a famous British horse race is held on St Leger’s Day, making it an easy date to remember.) The regular seasonal slow period has combined with an evaporation of safe haven demand over Ukraine to produce last week’s slump.
Stocks are down in Europe, and opened lower in the U.S., after Wall St. touched another record yesterday. The Nikkei was up on a weak yen, while Hong Kong was up on improving Chinese factory output.
Frik Els at Mining.com takes note of the ETF Securities report on gold and the stock market. Gold is now the cheapest against stocks since the eve of the 2008 financial crash. Even though gold is near four-month lows today, it is still up 4% on the year. The report notes:
The institutional investment advisers based in London says this begs the question: “Is gold a cheap insurance option right now?”
“The VIX equity volatility index declined to near its lowest level since 2007. Meanwhile the S&P 500 extended its longest winning streak above its 200-day moving average since 1998, helping drive the gold/S&P 500 ratio to 0.65, near the lowest level since January of 2008.
“In our view it is difficult to believe volatility can remain this low indefinitely. Therefore now may be a good time for investors to consider looking at gold as insurance against a potential rise in volatility.”