Gold: Trumping all though caution warranted

Despite the overnight pullback in metals prices, it’s been another strong month for gold, with record ETF inflows, and prices moving decisively above USD $1200oz. Lately, the move in gold has coincided with risk assets rallying, no doubt driven by dovish activity in Europe and Japan. The movement to NIRP in Japan has been described as a ‘trifecta of absurdity’, with Bill Bonner noting that “First, the money is phony. Second, the borrower is insolvent. Third, the interest rate is less than nothing.” Further easing can’t help but lead more investors to ponder the sustainability of our economic model, and the health of financial markets. True, this could continue to support ‘risk assets’, much as it has since 2009, though we doubt we're alone in thinking the upside for hard currency is more significant. This is especially so given current valuations in equity markets, the earnings GAAP on Wall Street, and the trillions of sovereign debt already trading at negative real yields. Short term we see gold (and silver) consolidating, but this move is just getting started. (VIEW LINK)