Gold Drop May Be Buying Opportunity Ahead of Inflation Expectations Ramp

Gold Drop May Be Buying Opportunity Ahead of Inflation Expectations Ramp

Gold came under further pressure in thin holiday trading, falling through the early-October low at 1240.80. Given the absence of a corresponding move in stocks (bonds are closed today) and the delayed reaction in the dollar, the move in the yellow metal seems technical in nature.

Zerohedge reported that someone dumped more than 85,000 gold futures contracts (>$10 bln notional) on a (partial) holiday. That’s not typically something you would do if you were looking to get the best price. More likely it was a trader — or traders — taking advantage of the thin market conditions to run the stops below support.

Perhaps not surprisingly, Fed vice-chair Stanley Fischer indicated today that the central bank welcomes the possibility of fiscal stimulus from Washington, DC. The Fed alone has been shouldering the burden of trying to reinvigorate the economy via monetary policy for quite some time now, despite considerable evidence that it wasn’t working.

“On more expansionary fiscal policy, I think many members of Open Market Committee and Federal Reserve Board have commented that it would be useful to have a more expansionary fiscal policy. These statements were made over several months recently. I’m on record with that as having believed that.” — Stanley Fischer

While there seems to be some hope that President Trump and the GOP majorities in Congress will end the legislative gridlock and cut loose with some government spending, you still have to ask how they are going to pay for a massive infrastructure program. Jim Rickards called Mr. Trump the ‘Helicopter Money President’ in a Bloomberg interview yesterday.

As noted in yesterday’s DMR, the debt ceiling is set to be reinstated in March and Mr. Trumps is going to need considerable additional clearance if his campaign promises are to be realized. Those same GOP members of Congress that demanded austerity and spending cuts in 2013 and 2011 are going to have justify any about-face in their positions. Similarly, Democrats in Congress that demanded a hike in the debt ceiling without any concessions may have some explaining to do as well.

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