Gold Forecaster

The present situation
The’ better-than-expected’ poor employment figures of last week were generally taken as a sign that the recovery is there, but L-shaped with a slightly rising bias.   The new stimuli from government will be positive and hitting where they should.   Tax breaks on new equipment and infrastructural development tastes the same as digging holes and filling them in did in the 1930’s.   We have to wait and see if the economy will respond.   We sincerely hope it will.   But do investors even in the U.S. believe that a recovery will see a fall in the gold price?   We think not!

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In typical Keynesian fashion, the Gaurdian is reporting that Bernanke is facing pressure to "prop up" the U.S economy.

At the end of a week of gloomy reports, Bernanke faces mounting expectations from markets that the Fed will step in to prop up the US's faltering economic recovery. News of stalling business activity and dismal home sales have fanned talk of a double-dip recession at a time when all the easy options have run out. At the same time, divisions appear to be emerging among his committee of policymakers

Exactly how is the Fed supposed to prop up the US's faltering economic recover?

The Financial Times is reporting that banks are marketing the renminibi to their corporate clients instead of using dollars for trade with China.  And why shouldn't they?  The Fed is about to open up the spickets for quantitative easing part II.

In today's New York Times, the economic lead article chips in on how the Fed is going to take bolder steps:

John P. Hussman, Ph.D.

A week ago, the Federal Reserve initiated a new program of "quantitative easing" (QE), with the Fed purchasing U.S. Treasury securities and paying for those securities by creating billions of dollars in new monetary base. Treasury bond prices surged on the action. With the U.S. economy predictably weakening, this second round of quantitative easing appears likely to continue. Unfortunately, the unintended side effect of this policy shift is likely to be an abrupt collapse in the foreign exchange value of the U.S. dollar. Click here for rest of the article.