Gold, and the other precious metals, opened down in morning trading and continued their slide into the early afternoon, capping off a year that saw gold slightly down from it's open last Jan 1st. With all four major metals well into the red during morning trading, gains realized yesterday evaporated with impunity as the Dow, Nasdaq, and S&P all surged on strong economic growth numbers, despite increases in jobless claims.
So what was the story for gold in 2014? The resurgence of the US dollar and the reemergence of America as a global economic power. Yes, China's aggregate GDP did finally eclipse that of the United States. However, many more important economic indicators continue to lie firmly in the US's column. Namely, GDP per capita, the growth rate of technology, and the strength and ubiquity of the US dollar.
The US is big. In fact, the United States is the third most populous nation on earth, yet our GDP per capita is still nearly 7 1/2 times that of China. Technological advances in energy production and automobile manufacturing are steadily increasing economic efficiency as fuel demand in the United States is finally starting to level off. Then there is the "mighty once again" United States Dollar, which saw gains against every major world currency this year, and is With Europe on the edge of a possible deflationary crisis, Russia on the edge of economic implosion, and China looking down the barrels of long term growth problems and a quickly aging population; the United States is set to finally reassert its position as THE world economic leader.[polldaddy poll=8554340]
For all the negativity that has surrounded America's economic and geopolitical position globally over the last decade, it looks as though the Red, White, and Blue has it's economic house more in order than it has since the late 90's. And with many economists predicting a strong dollar and downward pressure on precious metals in early 2015, the stage is set for the return of wealth in America. I don't know about you, but strong dollars that buy lots of gold sounds great to me.
Yesterday in Markets
Yesterday saw an early surge in precious metals despite continuing slides in other commodities such as crude and natural gas. However, the gains were short lived as positive economic news domestically continues to swirl around the approaching new year. The news wasn't so rosy for those in the Eurozone and Russia, as political unrest in Greece threatens to destabilize the whole of the former; and continued economic warfare on the latter has Vladimir Putin writhing in frustration at his inability to circumvent the omnipotent US dollar. Stocks and other equities recorded modest gains in yesterdays trading, as Wall St continues to ride high.
Factors Affecting Gold
Unrest in Russia Leads to Protest
As though things weren't already bad enough for the embattled, KGB thug turned dictator, Vladimir Putin; Tuesday and Wednesday are bringing more bad news in the way of protests at the steps of the Kremlin in Moscow. The protestors had gathered in response to the continued consolidation of power engaged in by Vlad, particularly his suppression of political rivals.
More than 100 protestors were arrested during the event including opposition leader Alexei Navalny, an anti corruption advocate and harsh critic of the Putin regime. Mr. Navalny, who had recently been convicted on fraud charges, was detained and returned to his home where he where has has been placed on house arrest in connection with the recent fraud convictions. For his part, Mr. Navalny and his supporters claim that his conviction for fraud was a politically motivated retaliation by the Putin Cartel for his staunch opposition against them.
The Putin machine released a statement with regards to Alexei's claim stating, "We could never wrongfully accuse and convict a man for fraud because he wouldn't stop exposing us for being an autocratic impediment to freedom (Okay, we made the last part up)."
Heck of a Year for the Dollar
There's just now way around saying it, the US dollar had a darn good year. The the dollar is more than than 12% against the dxy, a composite basket of six major world currencies used to measure relative values of world currencies. This is the best year for the dollar since the housing boom of 2005 when the value of the dollar rose by more than 13%. Investors seem to be riding high on the greenback at the moment, with many having incredibly dovish outlooks for the coming 2015 year. Is the dollar really as strong as they're making it out to be, or is this just another case of irrational exuberance spurred on by a stock market bubble and loose monetary policy?
Energy and Crude Continue Tailspin
With the recent rise in stocks, 2014 may end on record high levels, however energy shares continue to plummet along with crude oil prices. Global grades have fallen by more than a dollar per barrel. A loss of approximately 1.8 million barrels was experienced by American crude inventories last week. America’s gas stocks received a 3.0 million barrel increase while distillate stocks ascended 1.9 million barrels last week. Refiners have also increased capacity utilization to 94.4%, according to reports by the Energy Information Association. And in its largest drop since 2008, Brent crude has fallen 49% in 2014. In 2008, Brent crude was more or less bailed out when OPEC decided to curtail production.
Recently, after experiencing their largest decrease in supply in 6 months, OPEC has opted to protect its market share by avoiding cutbacks. The recent drop in supply has undoubtedly been spurred by developments in Libya. The North African country is now producing under 300,000 barrels a day. On Tuesday the Obama Administration decided to repeal the longstanding ban on domestic crude exports. This decision is expected to provide a slow influx of condensates into the global market.
Don't, it's New Years Eve. Happy New Year from the staff here at the Gainesville Coins content department. Remember, drink lightly, laugh heartily, and don't do anything I wouldn't do. If you happen to be accosted by a police officer tonight, offering to let them come party with you ISN'T going to buy you their favor.