Disappointing unemployment benefits and housing data shows a fragile US economy and has many believing that another round of quantitative easing will be coming. While gold is currently flat, it has seen a 8.6% rise in price so far this year.
Disappointing new unemployment benefits and housing data from the US cast a shadow over markets yesterday, underscoring the still fragile nature of the US economy. Sales of previously owned US homes in March unexpectedly fell for the third time in the last four months, while new claims for unemployment benefits fell less than expected last week. Gold and silver had been falling prior to this news, but rallied higher once investors digested this – bearish news grist for the “QE3 is coming” rumour mill.
Wednesday saw the release of the World Gold Council’s gold investment statistics commentary for the first quarter. The three key themes? Rising prices in all major currencies, with gold up 8.6% in USD terms over the three months. Volatility was generally positive, in contrast to other commodities. And the long-term correlation of gold to equities remains statistically insignificant – despite gold’s above average correlation to equities and other risk assets during the quarter.
So despite the recent flat lining in the price, the yellow metal has actually done reasonably well since the start of the year. It is as James Turk says in his latest King World New Blog interview: “The precious metals bend a little with these bouts of selling pressure being put on them, but they come right back, which is why I describe them like a spring being wound up. So when this spring starts to unwind, which it will, look out above.”
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