Gold pushed ahead to establish new four-month highs as the uptrend in the yellow metal since the first of the year continues. The intraday high thus far is 1338.97, a level last seen in late-October.
The latest gains are attributable to persistent growth risks evidenced by the recent spate of poor economic data. This reality promoted the G20 to stress in it’s final communique that “monetary policy needs to remain accommodative in many advanced economies.”
While the G20 also acknowledged that “the global economy remains far from achieving strong, sustainable, and balanced growth,” they pledged to “develop ambitious but realistic policies with the aim to lift our collective GDP by more than 2 percent above the trajectory implied by current policies over the coming 5 years.”
That’s all well and good, but the U.S. government has failed miserably at advancing any kind of fiscal reforms for more than five-years. This forced the Fed to keep it’s foot firmly planted on the monetary gas pedal, recent tapering not-withstanding. You may recall that previous iterations of QE were tapered as well, only to be followed by new versions of QE as the economy faltered.
With Congress still hopelessly divided in this midterm election year, I don’t see any forthcoming meaningful changes to fiscal policy. That will leave things in the court of the Federal Reserve and at least one FOMC member is already expressing reservations about plans to wind-down the current QE operation by 2015.
St. Louis Fed President James Bullard said that recent economic data may force him to reconsider his support of the taper. Could he be a dissenter at the March FOMC meeting? Of course, if new Fed chair Janet Yellen is assessing the data similarly, there may be no need to dissent.