To say the prospect of higher gold prices has been lifted this week is a Gross understatement. I'm talking Bill Gross, that is, of Pacific Investment Management Co.
This week, a Bloomberg report, says Mr. Gross has been selling Treasuries because they have little value in the context of a $75 trillion total debt burden. It seems the data would bear this out as the report also cites data released by Bank of America Merrill Lynch, showing Treasuries have lost investors 0.1 percent of their investment in this first quarter.
This little ditty came on the heels of a March 28, Marketwatch report that puts gold at $2000 an ounce by year-end. Then to finish off this medley of headlines, we read that the Minneapolis Fed's President, Narayana Kocherlakota, said inflation risks were rising and we could see higher short term rates by the end of 2011.
In response to this bombardment of news, stocks today turned lower while gold held on to significant gains. Fear is that any recovery could be thwarted by higher interest rates. But to believe this you have to first believe we are in some kind of recovery.
Housing data doesn't provide any evidence of recovery as now a double dip is said to be a possibility. Jobs data lends no more comfort either as weekly unemployment claims still hover near 400,000. And, if you are looking for a positive outcome to Congress' current budget battle, even if Republicans win their $60 billion in spending cuts - Big Deal! At the outset, this year's budget deficit was set to rise to the same levels of deficit (approximately $1.4 trillion) attained considering $700 billion of TARP stimulus, Cash for Clunkers and a First Time Home Buyer Credit.
In effect, Congress is trying to cut $60 billion out of a $1 trillion increase to the deficit. And this they fight over amid threats of shutting down government? I have good friends in the trades and out of nine $50 million dollar construction projects getting underway in our area, all nine are government funded.
Make no mistake, money is being printed faster than ever. The outlook for gold prices to rise is better than ever - at least in my humble opinion! Watch for the markets to become very interesting in the days ahead.
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