"There's no denying it, the $US Gold charts look shaky and are at critical support levels. On the other side, we have indisputable proof that many non-US investors are expecting an upmove on Gold - soon. The last time they did so, they were proven right."
(Gold Commentary - August 4, 2000
Yes, the $US Gold price has now risen (week on week) for two whole weeks in a row. Nothing big, mind you. So far, Gold is up $US 5.20 from its spot future low close of $US 271.60 set on August 11. Nonetheless, the May lows have held so far. And while daily volume on the futures markets remains derisory (see the table above), the open interest figures have picked up a bit. All in all, Gold bulls are still very hard to find, and Gold's performance (or lack of same) is not a big thing in the mind of U.S. investors, most of whom don't pay any attention to Gold at all.
And now, with the Democratic convention in LA having come to a merciful conclusion, the U.S. is gearing up for two events. One takes place in Sydney, Australia next month. The other takes place right across the U.S.A. in early November.
We are sure it is a coincidence, but it remains a fact that the Olympics and the U.S. Presidential elections take place in the same year. It couldn't happen in most other Western nations, where elections take place whenever the party in power sees fit to call one. But in the U.S., the timetable is fixed. And this year, the Olympics start in Sydney, Australia on September 15.
"gold - Gold - GOLD!" That's a famous Aussie yell, first belted out by a Mr Norman May who got a bit carried away over an Aussie victory in the swimming pool quite a few Olympics ago. All over the world in the last half of September this year, the word "Gold" will be emblazoned in front page headlines. Everyone will be talking about "Gold". Everyone will be eager for their nation to amass as much "Gold" as they possibly can.
Of course, people will not be taking leave of their senses (or coming to them). They will simply be talking about Gold medals. Sad, isn't it. Gold is still sought as a symbol of achievement on the sporting field, and in many other fields as well. But it is utterly ignored in the field where it really counts.
The Olympics is the only "Gold rush" that the modern world has left. It's ironic that Gold is awarded as a symbol of the ultimate achievement, but it is banned from playing any role in the process of trading the results of achievement. We can "invest" in Gold, but we can't use it as money.
In the U.S., the Olympics are not such a big deal as they are in many other nations around the world. The U.S. expects to win more medals than anyone else, and it almost always does. And when the Olympics are not held in the U.S., they are usually treated as a bit of a sideshow.
The real show (literally) are the Presidential elections. Sure, less than half of the eligible voters ever actually bother to vote, but everyone follows the campaign. It is almost impossible not to, the media - online and offline - is filled with very little else. And as far as the various U.S. establishments are concerned, there is one ironclad rule which pertains to the rest of the world. "Thou shalt NOT disturb us when we are having an election!"
Nobody, inside or outside the U.S., is supposed to rock the boat. And this year, that is especially important when it comes to U.S. investment markets, the U.S. economy, and above all else, the U.S. Dollar. U.S. markets don't go down while the election is ON. The Fed doesn't raise rates while the election is ON (it's quite OK to lower them). No one makes any waves on international markets (like the currency or precious metals markets) when the election is ON.
We have a hunch that this year just might provide the "exception which proves the rule". No one expects the Fed to do anything but sit on its hands on August 22. We don't either, but it would not amaze us if they actually did tack on another 0.25%. If for no other reason, they might do it to make as sure as they can that the Dollar holds its strength between now and November.
And, as far as Gold is concerned, the only thing that could shake it out of its present slumber is a sudden and unexpected dive in the international value of the Dollar. There are any number of reasons why that could happen, but nearly all of them depend on an action by one of the nations which holds vast quantities of U.S. Treasury paper. All these nations have held this paper for a long time, and they are well aware of the ironclad rule of the U.S. establishment.
But big events almost always happen when no one expects them to happen. That is why we are going to be watching the lead up to this U.S. election with more than our usual interest. Stay tuned, it could be a very interesting three months coming up.