Archive - Mar 30, 2012 - Story

Gold has been trading in a tight box around $1,660/oz today, as eurozone finance ministers meet in Copenhagen to discuss the scale of the permanent “bailout fund” set for July. Gold has been stuck in range of roughly $1,630/oz to $1,700/oz in recent weeks as risk appetite has returned after the latest European debt “solution” which saw the battered can kicked down the shortening road once again. Nothing has been solved with regard to the European debt crisis, and debt crises in Japan, the UK and the US now loom. The misguided panacea of heaping debt upon debt and shifting debt onto government balance sheets, debt monetisation and currency debasement is leading to continuing currency devaluations internationally. Despite this or maybe because of this - risk appetite returned with a vengeance as evidenced in equities internationally rising to multi-month and multi-year highs and the slight weakness in gold in March. So far in 2012, gold has performed well and is set to end the first quarter in 2012 with gains in all major currencies. Gold is 6.3% higher in US dollars, 3.2% higher in euros, 3.1% higher in pounds, 2.25% higher in Swiss francs and 12% higher in Japanese yen which fell sharply in the quarter.

• Greek PM does not rule out new bailout package (Reuters)
• Euro zone agrees temporary boost to rescue capacity (Reuters)
• Madrid Commits to Reforms Despite Strike (FT)
• China PBOC: To Keep Reasonable Social Financing, Prudent Monetary Policy In 2012 (WSJ)
• Germany Launches Strategy to Counter ECB Largesse (Telegraph)
• Iran Sanctions Fuel 'Junk for Oil' Barter With China, India (Bloomberg)
• BRICS Nations Threaten IMF Funding (FT)
• Bernanke Optimistic on Long-Term Economic Growth (AP)

A bevy of economic data misses overnight, including German and UK retail sales, Japan industrial production, UK consumer confidence, and a European economy which is overheating more than expected (2.6% vs 2.5% exp, although with $10/gas this is hardly surprising), and futures are naturally green. The reason: the broken record that is the European FinMins who are now redirecting attention from the slowly fading LTRO impact to the good old standby EFSFESM, which according to a statement by de Jager has now been agreed on at €800 billion, lower than last week's preliminary expectation for €940 billion in joint firepower. That this is nothing but a headline grabber is as we have noted before, as there is much doublecounting, capital allocation to and by the PIIGS as well as funding already assigned. It will likely take stocks some time before the realization dawns that this is not new capital and liquidity entering the markets, unlike QE on either side of the Atlantic, while the amount is largely inadequate to fill the multi-trillion liquidity shortfall, let alone "solvency" of European sovereigns and banks. So for now enjoy the greenness all around.