Olympic Calm Before Coming Financial Storm
Monday, 13 August 2012
Gold inched up again on Monday, continuing the climb for its 7th session as world economies falter – increasing the likelihood of further central bank policy action – which may again prove futile.
The yellow metal will become sought out by investors as an inflation hedge when quantitative easing is pursued again and huge amounts of money are again dumped into the financial system in what seems like an increasingly vain attempt to stimulate growth.
In line with China’s poor data on Friday, Japanese data earlier today showed that their economy slowed greater than expected in 2Q.
Gold and silver markets have been extremely subdued of late with Bloomberg terminals abandoned in favour of the marvellous spectacle that was the London Olympics. Many traders, decision makers and institutional participants were off on holidays and or enjoying watching the Olympics.
The precious metals have been strangely becalmed despite significant volatility being seen in stock markets. Economic data has been poor and largely gold positive and this could result in a bout of buying with the return of important market participants.
The distracting spectacle of the Olympics may have led to market complacency and the cocktail of macro risks and geopolitical risks such as the euro zone debt crisis and events in Syria and Iran could lead to the Olympic calm giving way to a volatile and stormy Fall.