Gold Will Remain Boring Until Jackson Hole

Yesterday we saw the gold price slip to its lowest since August 3rd, below $1600. This was most likely to due to investors scaling back expectations of imminent stimulus thanks to the release of better than expected retail sales data in the US.

Analysts believe the drop in the yellow metal however, was limited due to the release of yet further depressing data from the Eurozone. Whilst both France and Germany pleasantly surprised markets with their data, the ‘improvement’ was only slight and has clearly not warded off any fears of a further downturn.

CPI in the UK increased yesterday, calming excitement of further QE any time soon from the Bank of England. Of course, what they don’t know is that gold is a far better, quicker indicator of monetary inflation than consumer prices. So whilst gold has doubled alongside the doubling of central bank assets, consumer prices have not. What a surprise that will be when they all catch up with one another.

Billionaire investors are onto gold and show that not everyone is pandering to the ‘will they, won’t they’ dilemma of more QE. Bloomberg reported yesterday that both George Soros and John Paulson increased their stakes in the SPDR Gold Trust, the biggest gold-exchange traded fund backed by gold, to 884,000 shares and 21.8million shares respectively.

Even those who are in gold for a quick buck should be aware that Q3 has historically proven to be one of the best periods for gold, that’s what many should be holding on for as analysts expect gold to continue trading in this narrow range as announcements of further easing from central banks remain muted.

Today will be a busy day for the UK as the Bank of England releases their MPC minutes this morning and unemployment data is released. Little change is expected from the latest unemployment rate measure of 8.1.

Both the UK’s data releases and those coming from the US today will no doubt do little to help answer investors’ questions as to when the next round of QE will come in.

As we said yesterday, the gold price is likely to remain quite boring and quiet until Jackson Hole at the end of August.

The gold price movements in recent days are a perfect example of how no-one knows what is going on and no one knows what they want to happen. The markets hope for more QE, but when this will happen who knows. It almost seems Bernanke and Draghi were both hoping blowing hot air would have the same impact as actually printing cash.

One thing we are all sure about is that this isn’t going to get any better, sure, data may show some signs of life before it gives out altogether, but who wants to be messing around with that? Gold isn’t there to hold your hand all the way through the highs and lows. It just sits there, it’s just a protector of your wealth. It looks after you when everyone else screws up and makes a mess, and boy what a big mess they’re trying to hide from us right now.