The Daily Nugget: Pricing In QE

The gold price decided to hold steady after dropping slightly yesterday, this morning it sits back above $1,730 but is facing resistance at $1,739. Yesterday it remained at a six and a half monthly high and briefly touched a new record, last seen in September 2011, reaching EUR 1,360.23.

Analysts do not expect gold to move by much in the run up to the FOMC meeting and Bernanke’s speech on Thursday as well as the German Court ruling tomorrow. It seems the market has already priced in QE, although the debate as to whether this will happen continues to rage.

Gold dropped slightly yesterday as it appeared investors were ruling out another round of quantitative easing (QE), however the Fed then released US Consumer Credit data which showed a fall in consumer credit, in July, by nearly $3.3bn. This was mainly thanks to Americans paying off their credit cards. This prompted further speculation that QE3 will go ahead as some see this contraction as a forewarning of a further economic slowdown.

And there is the measure of our economy today – markets worry when people are paying off their debts and refusing to spend on credit cards.

Eurozone chain or domino?
Meanwhile both France and Italy reminded everyone that things in the eurozone will continue to get worse with both seeing significant falls in GDP.

Merkel continued to remind us that it is her prerogative to change her mind frequently, as yesterday Der Spiegel reported that she appears to be warming to Draghi’s latest bond-buying plan. CityAM this morning say she has "switched from the chain theory, in which Greece is seen as a weak link which can be removed for a stronger eurozone, to the domino theory where a Greek collapse could be contagious."

Elsewhere data showed that Eastern countries continue to be harmed by the Western crisis. China reported a fall in exports whilst South Korea added nearly £3.3bn worth of fiscal stimulus to that already in place.

Gold standard of daft questions
Yesterday, yet another corker from the mainstream media; Emma Rowley of the Daily Telegraph tried to explain why we couldn’t return to the gold standard because there just isn’t enough gold and the supply of gold just isn’t growing fast enough.

Do people who criticise a return to the gold standard not think that those who have proposed it have gone through the obvious issues of ‘there isn’t enough gold’? I suppose when you solve every monetary issue with "oh, we’ll just print some more" the idea that you need more money in order to create wealth or grow an economy seems a fairly sensible one.