Gold and silver prices help up fairly well at the end of last week, considering the washout in equities and the broader commodity complex on Friday, following disappointing US nonfarm payroll numbers. The silver price chart is not looking too healthy at the moment, with support at $30, but short-term momentum running against the bulls. The gold price has slipped further from bulls’ short-term target of $1,680; though given the volatile nature of markets at the moment and dampening sentiment, gold could easily retake its losses from last week. A few dovish words from Fed officials are all it usually takes to make the shorts cover.
Elections in France and Greece yesterday brought few surprises, with the incumbents receiving a drubbing and voters rejecting “austerity”, as was easily predicable. Francois Hollande is France’s first Socialist president for 17 years, while in Greece, the two major parties won just a third of the vote, with doubts over whether or not a “unity” coalition can be formed.In Germany, Angela Merkel’s Christian Democrats lost power in the state of Schleswig-Holstein. No surprises then to see European markets down this morning, with the EURUSD at one point breaking below $1.30 to make a new three-month low.
Last week was one of the worst weeks of the year for equities, while as Trader Dan reports, the poor nonfarm payrolls number bought further pressure to bear on commodities – with WTI crude losing close to $4 a barrel on Friday. Further drops in equities and commodities will increase the likelihood of more quantitative easing from the Federal Reserve, particularly if the Dollar Index continues to rise and the CNYUSD falls.
Regardless of short-term fluctuations, rising prices for basic commodities are an unavoidable long-term side effect of the Fed’s weak dollar policies, something that is resulting in a kind of “biflation”. As NY Fed chief William Dudley correctly observed a year or two back, iPods are getting cheaper, but food and fuel most certainly isn’t. “Where is the inflation?” Gregor Macdonald asks over at SeekingAlpha. It’s in the poverty.