Gold extended to the upside in overseas trading, establishing a new four-week high and pressuring resistance at 1240.20/1242.07. Risk aversion seems to be mounting amid a myriad of geopolitical risk, the ebola scare, but perhaps most significantly now, growth risks.
The recent IMF meeting in Washington was unabashedly bleak. Just about every policymaker that spoke expressed some measure of concern about global growth. “There is a general recognition that economic recovery has become weaker than [was] expected in the spring and has also become more uneven across the entire universe of advanced and emerging economies,” said ECB President Mario Draghi.
Weak growth, despite massive monetary accommodations over the past six-years; so what are policymakers to do? Clearly they are leaning toward even more accommodations. Draghi continues to say that all measures are on the table. Swiss National Bank President Jordan continues to threaten negative rates to defend the EUR/CHF floor. BoJ’s Kuroda said they would continue with their QE program as they are only halfway to their 2% inflation target.
As I have said repeatedly on these pages, the age of über-accommodative monetary policy is nowhere close to being over. Even Fed vice-chair Fischer suggested that the Fed might delay tightening in the face of overseas weakness. “If foreign growth is weaker than anticipated, the consequences for the U.S. economy could lead the Fed to remove accommodation more slowly than otherwise,” said Fischer.
Stocks continue to look toppy in the face of all this ‘official’ gloom. With shares on the rope, gold seems to be regaining some of its shine.