Gold extended to yet another four-month high on the heels of more disappointing U.S. data. The yellow metal probed above 1340.00 as stocks came under pressure, and despite a modesty firmer dollar.
The Richmond Fed index fell to -6 in February, well below market expectations of 5, versus 12 in January. Consumer confidence was also a miss, dropping to 78.1 in February, on expectations of 80.1, versus a negative revised 79.4 in January (was 80.7).
Additionally, the S&P/Case-Shiller home price index (20-cities) notched its second consecutive monthly decline. While the declines have been modest to be sure, and the annual pace of gains remains a robust 13.4%, the waning momentum is most troubling as the indices return to mid-2004 levels.
David M. Blitzer, Chairman of S&P’s Index Committee at S&P summed it up thusly:
“Recent economic reports suggest a bleaker picture for housing. Existing home sales fell 5.1% in January from December to the slowest pace in over a year. Permits for new residential construction and housing starts were both down and below expectations. Some of the weakness reflects the cold weather in much of the country. However, higher home prices and mortgage rates are taking a toll on affordability. Mortgage default rates, as shown by the S&P/Experian Consumer Credit Default Index, are back to their pre-crisis levels but bank lending standards remain strict. Mortgage default rates, as shown by the S&P/Experian Consumer Credit Default Index, are back to their pre-crisis levels but bank lending standards remain strict.”
The general bias of U.S. data since the first of the year has eroded the optimism that was building late in 2013, which ultimately led to the Fed taper. As we noted in yesterday’s DMR, St. Louis Fed President James Bullard is already backtracking on his support for the taper.
Growth risks — not just here in the U.S., but globally — will continue to underpin the safe-haven appeal of gold. Meanwhile, the supply and demand fundamentals of the gold market remain supportive as well, with some renewed interest from ETF investors evident to boot.
The disappearance of the Mt. Gox Bitcoin exchange is making headlines today. The website of Mt. Gox, once the world’s biggest Bitcoin exchange, “suddenly went dark on Tuesday with no explanation,” according to a Reuters article.
Cryptocurrency Bitcoin exploded on the scene in 2009 with wild swings in its value driven largely by speculators. There have been past issues with exchanges, thefts and a number of countries have recently issued warnings about Bitcoins. And yet, Bitcoin was touted in some circles as a viable alternative to gold.
To that I say nonsense. I fully understand the desire to remove oneself from government and central bank controlled currencies, but an alternative that has been around for a mere five-years, with notorious speculative driven volatility; not to mention the sudden disappearance of a major exchange… I’ll stick with gold as my means of wealth preservation, thank you very much.
Zerohedge posted this quote from hedge fund manager Paul Singer this morning, which sums things up nicely:
There is no more reason to believe that bitcoin, a computer-generated, algorithm-driven currency of supposed limited supply, will stand the test of time than that governments will protect the value of government-created fiat money. One difference: Bitcoin is newer and we always look at babies with hope.
If you are looking for an alternative currency, look into gold. It has stood the test of thousands of years as a medium of exchange and a store of value. Better yet, it is not just a computer entry out in the ether somewhere, and it was last seen available at a good price.