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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum
GLD 453.99-0.1%Feb 4 4:00 PM EST
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To: TobagoJack who wrote (70508)1/22/2011 5:46:55 AM
From: elmatador  Read Replies (1) of 220024
 
gold ETF holdings dropping precipitously over recent weeks. The reversal follows the recent improvement in US economic data – the bellwether for the global recovery at large – coupled with rising sovereign stress in Europe and looming slowdown in China. These have simultaneously made a back-slide into recession seem unlikely while pointing to a rebound that amounts to a long, hard slog over the years ahead.

AUD Positioned to Follow Gold Prices Lower

Curiously, the Australian Dollar’s bearings are best revealed via the currency’s clear correlation with gold prices, with the high yielder set to follow the yellow metal lower in the week ahead as investors’ dominant forecast for the evolution of the global post-Great Recession recovery shift away bullish and bearish extremes.

Gold had decoupled from the risk-on/risk-off dichotomy of recent years, reflecting its appeal as a store of value for bulls and bears alike as the former camp called for catastrophic inflation on the back of ultra-loose monetary policies while the latter projected renewed collapse across asset classes as fiscal stimulus expired. However, investment demand suffered a major setback, with gold ETF holdings dropping precipitously over recent weeks. The reversal follows the recent improvement in US economic data – the bellwether for the global recovery at large – coupled with rising sovereign stress in Europe and looming slowdown in China. These have simultaneously made a back-slide into recession seem unlikely while pointing to a rebound that amounts to a long, hard slog over the years ahead.

Interestingly, the increasingly apparent shift inthe overall consensus toward this kind of recovery bodes ill for the Aussie much the same as it does for gold. A slow, protracted recovery suggests that major central banks will now get their chance to catch up as the Reserve Bank of Australia– until recently the leader in post-crisis monetary policy normalization – as Glenn Stevens and company look increasingly likely to sit on their hands for much of the coming year. Indeed, a Credit Suisse gauge of priced-in rate hike expectations argues for no more than a single increase over the next 12 months.



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