Before the mid-week - April 24-25 - FOMC meeting just concluded, the "ruling body" of the US central bank had not officially met since March 13. When they did meet on March 13, there was basically nothing left for them to say. The last gesture towards "monetary easing" had been taken at the January 24-25 meeting when the FOMC announced that they were going to preserve their ZIRP until late 2014 at the earliest. That was it, there was nothing else. The announcement of the extension of ZIRP in January had led to an instant surge in Gold. Between January 24 - 26, the price climbed $US 62 on the realisation that the Fed's "free money" policy had at least another two years to run. On March 13 at the second FOMC meeting of 2012, the Fed claimed that they could discern the outline of a pickup in economic "growth" as an excuse for not revealing any new stimulative policies. Gold reacted accordingly, it plummeted $US 50 on the day.
Now, the Fed has met for the third time this year and issued a press release which is all but a carbon copy of the March 13 missive. Gold didn't do much of anything in the lead up to the meeting. The metal fell $10 bucks on April 23 and promptly rose $11 bucks on April 24. Once the meeting was out of the way, however, the Gold price did spark a bit, rising a bit more than $20 bucks over the last two trading days of the week. There were two catalysts for this rise. Once was the announcement by S&P that they were downgrading Spain by two notches. The other was an announcement by the US Labor Department that more Americans than forecast had filed for unemployment benefits in the latest reporting week. This last, in particular, was immediately latched onto by Wall Street as rekindling hope that the Fed was about to spring a new round of QE. Gold - and the US Dollar - reacted accordingly. But in both cases, the reaction was rather muted.
In the US, daily volume on the paper Gold market is WAY down - as is open interest. In Europe, there are increasing rumours that hedge funds and banks are shorting or outright selling Gold to raise capital to shore up their beleagured balance sheets. The ECB is adamant, at least to this point, that the two Long Term Refinancing Operations (LTRO) they unleashed at the end of 2011 and early this year are not going to be repeated. On both sides of the Atlantic, the monetary and political powers that be are staring at the IMMENSE pile of thin air debt "money" which they have already decanted into their systems. The thought of having to decant yet more is giving them pause. How long that pause will last is anybody's guess, and everybody is guessing.
Meanwhile, outside these two cradles of financial "civilisation", the rest of the world goes about its messy financial ways. Increasingly, barter is coming to the fore. This is most obvious in the case of Iran oil sales, but it is gradually seeping over into other areas as the risk of "deferred payments" becomes more obvious all the time. The risk to the US Dollar too is as clear as ever. Over the past week, the Chinese government gave permission to many of their banks to hold short positions in the US Dollar - just in case they need to hedge their exposure. And as usual, the IMF put everything into the too hard basket and deferred any decision making until the G 20 Heads of State meeting in June.
The world has muddled through another month. There are now six more to muddle through until Americans go to the polls in early November. Let's hope they have a choice this time. Ron Paul has emerged as the last man standing between Mitt Romney and the Republican nomination. Granted, Dr Paul's chances are minuscule at best, but he's still there.
(Chart appears here in original analysis)
The significance of the table above is that it shows the all time high for Gold denominated in what is probably the most representative major "commodity currency" in the world - the Australian Dollar. That high was set on February 20, 2009, a month before the US Fed embarked on QE1 for the express purpose of rescuing the global market for US paper assets.
Gold in terms of the other three major currencies shown in the table has since gone on to set major new highs considerably above the levels reached in February 2009. At the end of July 2011, Gold hit new all time highs in terms of US Dollars, Euros, Canadian Dollars, Pounds and many other currencies. By August 4, 2011, there was a BIG change in the table as the Aussie Dollar Gold price took out its February 2009 high. It maintained those levels until the last week of 2011
When Gold reached its all time high in Aussie Dollar terms in February 2009, the Aussie Dollar was trading at $US 0.6377. This was at the height of the huge US Dollar rally which took place in the aftermath of the Lehman Brothers crisis of September/October 2008. The Aussie Dollar gained parity with the US Dollar (for the first time in nearly 30 years) on November 3, 2010, the day that the US Fed officially announced QE2. It then climbed steadily and accelerated in April 2011. On April 29, the Aussie Dollar reached almost $US 1.10. Over the last week of July 2011, it hit that level for a second time. Then the combination of a falling Aussie Dollar and a rampant $US Gold price pushed the $A Gold price into the black on the table above.
Gold in terms of the other three currencies in the table is a long way above the level it reached in February 2009. Gold's percentage gain in Euro terms had almost caught up with its US Dollar gains in late March this year. In Australian Dollars, Gold slipped below its February 2009 levels over the last week of 2011 and did so again on the week ending on March 16, 2012. At present it shows a very small gain - in stark contrast with the other three currencies in the table.