Here we are, in the middle of 2011. Many interventions have come and gone and yet, as each stimulus has faded out in hopes of a strong economic recovery, unemployment and housing keeps falling. Yes, there has been some job creation — but at a pace barely keeping up with population growth. The percentage of American adults with jobs, which plunged between 2007 and 2009, has barely budged since then. The latest numbers suggest that even this modest, inadequate job growth is sputtering out. And as far as the housing market goes, that just keeps hovering amidst a cloud of gloom. So far, most Washington politicos and Wall Street bankers are in denial, refusing to see the worsening signs of renewed recession. Instead, they are arguing for restrictive economic policies that, if enacted, would exacerbate the developing downturn, that history books would liken to the policy mistakes of the 1930. — An already repeated version of the mistake of 1937, withdrawing fiscal support much too early and perpetuating high unemployment.
The economy is almost at a stalling speed which is supposed to be roaring out of recovery. The yield curve is full of hiccups and steeply sloping down. On the fiscal side, Republicans are demanding immediate spending cuts as the price of raising the debt limit and avoiding US default. If this succeeds, it will put a further drag on already weak economy.
All eyes and ears in the gold and world financial markets will be focused later this week on the June FOMC meeting and Chairman Bernanke’s press conference for the Fed’s assessment of the economy, inflation and employment prospects, and any hints of forthcoming adjustments to Fed policy. Republicans and Democrats will go head to head to solve the problem.
In essence, the problem is not on the supply side of the ledger, but on the demand side. American consumers, who constitute 70% of the total economy, cannot and will not buy enough to get it moving. They’re either out of a job, don’t have the money to spend, or justifiably worry that they will not be able to pay their bills and afford to send their children to college, or to retire.
If the Fed, indeed, ends its program of quantitative easing at month-end as scheduled, it will soon be forced by rising unemployment and sluggish business activity to resume monetary stimulus in one form or another. Perhaps not QE3 – a further round of quantitative easing might be difficult to swallow – but a rose of some other name.
In the meanwhile, as the incoming economic indicators are pointing to a second phase in what is quickly becoming a double-dip recession, clearly, gold-price direction and volatility will be affected in the weeks and months ahead by the economic developments discussed in the U.S.
Moreover, there is potential for events across North Africa and the Middle East to trigger a rush into gold . Instability spread to Iran and/or Saudi Arabia; should Afghanistan or Iraq deteriorate into all-out civil war; should democratic reform in Egypt or Tunisia be replaced with new tyrants less friendly to the West; should regime change in Libya, Syria, or Yemen herald in worse; or should oil supplies and prices become less secure. “There are many issues that are pushing forward for precious metals, one thing is certain this will be a golden summer” says President Ron Fricke of Regal Assets.
Whatever the immediate future holds in store, we remain firmly committed to our bullish gold -price forecast with the metal trading at or close to $1700 later this year with still higher prices in the years ahead.
Source: http://goldcoinblogger.com
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