16-Aug (USAGOLD) — Gold remains well bid in the wake of solid gains on Thursday. The
yellow metal eked out new eight-week highs in early New York trading, following another round of mixed economic data., and appears poised to post about a 4% gain on the week.
U.S. productivity beat expectations, rising 0.9% in Q2. However, there was a big offsetting negative revision to the Q1 figure from +0.5% to -1.7%. Housing starts rose 5.9% in July, but missed expectations. The Michigan consumer sentiment index (preliminary) dropped to 80.0 in August, on expectations of 85.0.
Most analyst continue to believe the Fed will begin tapering asset purchase next month, but Thursday’s sharp retreat in U.S. equities apparently sowed some seeds of doubt. Gold benefited on two separate fronts, rising on diminished taper expectations and a softer dollar, as well as safe-haven interest as the stock market looks increasingly vulnerable.
The NY Fed reported on Wednesday that total household debt fell by $78 billion in Q2 to $11.15 trillion, the lowest level since 2006. Clearly the great deleveraging of household balance sheets continues. While this is generally good news for most households, the Fed itself is likely nonplussed.
After all, the U.S. economy is driven by consumption. The whole purpose of the central bank’s über-accommodative monetary policy is to discourage saving and encourage the borrow-and-spend mindset. However, the fact that households continue to delever suggests to me that a new-found prudence prevails in the wake of the financial crisis. Additionally, the American household likely still has some doubts as to the sustainability of the so-called “recovery”; something that may be reflected in today’s confidence miss.