Friday, 23 August 2013

The Daily Market Report

Gold Remains Firm Near 9-Week Highs

Gold continues to pressure the upside, undeterred by a firmer dollar. The yellow metal retest the nine-week high from Monday at 1384.50, although this level has contained the upside thus far.

Today’s gains come on the heels of yesterday’s much anticipated release of the minutes from the July FOMC meeting. While members of the committee expressed that they were “broadly comfortable” with the taper scenario laid out by Chairman Bernanke back in June, there was no further clarification as to a likely timeline.

While the stock market and Treasuries were ‘broadly uncomfortable’ with the comfort level of the FOMC, dropping sharply intraday, gold recovered quickly from a modest drop to set new highs for the day in late trading. Today’s follow-on gains, largely on strong physical interest, offer further encouragement to bulls.

The debate over the scaling back of Fed QE will seemingly continue until the next FOMC meeting on September 17-18, which will include economic projections and a Bernanke presser. Just maybe the clarity that wasn’t provided yesterday will be revealed at that time.

Over on the other side of the pond, even BoE MPC member Martin Weale says he could “certainly envisage circumstances in which it would be sensible to undertake further asset purchases.” In other words, if the “economy needs further support,” even a hawk like Weale would be on-board for further asset purchases.

In making a generally favorable case for QE, Weale also commented on the unevenness of the recovery. “[A]nyone who thinks the future will unfold smoothly is not taking account of everything that has happened in the past five years,” he said.

That my friends is the tacit case for gold as well. Nobody truly knows what the future holds, so having a portion of your portfolio dedicated to the truest of safe-haven assets is just plain sound investment strategy. With gold still in the lower half of the 1920.84/1179.83 range, now is good time to start building — or adding to — your strategic hedges.

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