Relax everyone, Wall Street has seen a bright new future.
August 24, 2011 – NYMEX is at it again, bucking the rest of the world with its evaluation of gold bullion. The London PM fixing was down just a buck and a half yesterday – but then we took over, lopping some $60 off the price. And it’s happening again today – even more so.
Obviously the traders here have peered inside their crystal balls and seen something big that will calm investors’ fears, but what could that be?
Perhaps a major war is about to break out. That’s an oldie but goodie Keynesian fix. Maybe even an invasion from outer space is pending, as one pundit suggested. But the odds of either of those happening are mighty slim.
Barring that, since nothing else of any import is on the docket this week, it must have something to do with Woods Hole. Have they foreseen QE3? Under the circumstances that seems quite unlikely, but Wall Street salivates like Pavlov’s dogs over the faintest scent of another Bernanke handout.
But let’s get back to the real world, where Korea has added their central bank to the growing list of those gobbling up the world’s gold supply (some 25 tons of it in the first round). If the European crisis has abated, nobody told me. Moody’s downgraded Japan another notch (an unavoidable consequence of a prolonged policy of zero interest) and China’s Dagong Global Credit Rating agency knocked the USA down a peg and gave our debt a negative outlook because the government “has not improved its solvency and the increasing government debt burden will deteriorate the US sovereign debt crisis.”
Meanwhile our economy has taken a massive $539 billion hit – that’s more than one half trillion, by the way – in the form of a gap between forecasts and actual revenues in California. If you think that’s a problem only for the state, think again. We’re all in this together, regardless of how deeply the Fed sticks its head in the sand.
So let the NYMEX beat the price down. The price of gold bullion could very well drop below $1700 before the market here regains its senses.
In the words of Tom Lehrer, “Angels we have heard on high, telling us go out and buy.”
