Friday October 18, 2013 08:38
Markets maintained their gains overnight as the US dollar stabilized and the gurus try to assess exactly what happened yesterday. We suggested the deal was a dog, which would keep the Fed accommodative well into 2014. Asian buying continues to underpin the bid as flows of physical demand continue to be aggressive. In the very short-term, the metals will continue to compete against equity returns, but we believe dips should be bought. The damage caused is more opaque in nature than the fourth quarter numbers will show. Buying 90 T-Bills now comes into question. The deal may have soothed the American psyche, but, the world is by no means assured. Where do you protect yourself? Buy the Chinese Yuan as the next reserve currency? Not in my lifetime. Buy the Euro? Even with the dysfunction in Washington, the US economy remains ahead of the growth curve. More accumulation of gold, at least as a percentage play, in your portfolio should accelerate. Watch the ETF flows for signs that liquidation in that sector has ended and is reversing. Add this to China demand and we could be setting up for a sustained upside move. If the ‘leaders’ in Washington can show some real bi-partisan cooperation on reaching a longer term solution, which in turn will allow the economy to accelerate, we will revisit the secular bear case.