The Fed is openly contemplating a round of quantitative easing. So is the Bank of England. The Bank of Japan’s latest unsterilized intervention effort to reverse or at least stem some of the yen’s strength was quantitative easing in a different form. The Swiss National Bank has spent countless of resources to prevent the franc from firming and now some Asian countries, and even Brazil, are thinking about taking similar actions. The ECB already jeopardized the sanctity of its balance sheet during the height of the Eurozone debt crisis this spring.
No country wants a strong currency. All we have seen this year, and the past few years in fact, is a series of rolling bear markets in various currencies (for an example of this, just take a read of the article on page C8 of today’s WSJ — A Return to Beggar Thy Neighbor?), which is why gold has managed to hit new highs against a whole host of FX units this year. Just as an equity market strategist will always be focused on breadth, the same can be said in reference to bullion. And make no mistake, this latest leg up in gold has not been speculative at all — real long-term money, from what we are hearing, is coming into the bullion market.
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