Gold Shining Brightly

The USD essentially traded in a consolidated range versus the major currencies on Monday on a very light day of data globally. The real story of the day was Gold as it smashed upwards to new highs breaking the 1400.00 USD an ounce price. The precious metal continues to find a complex group of supporters who include those worried about inflation, investors who fear the lack of stability in the currencies, and speculators. It will be another relatively quiet day of releases from the States on Tuesday. Wholesale Inventories will be brought forth today, but tomorrow weekly Unemployment Claims and Trade Balance numbers are on the schedule. The Unemployment Claims number will be a day early due to the holiday in the U.S. on Thursday. Wall Street turned in a mixed day yesterday highlighting that many questions remain unresolved regarding the U.S. economy. Also starting to make some news are whispers that Bank of American may be facing some tough financial obstacles in the coming months.

The EUR and GBP both found rather muted trading sessions as they languished with the rest of the market. German Trade Balance numbers came in slightly better than expected and the European Sentix Investor Confidence reading beat estimates also. Today will see little in the way of critical data from Europe, but the U.K. will release Manufacturing Production and it is expected to match last month’s outcome with a 0.3% gain. Industrial Production statistics will also be published. Tomorrow the U.K. will bring forth its Inflation Report and this will be of interest to investors. Mervyn King the Bank of England Governor will also speak along with other BoE members as they comment about the Inflation Report.
The major currencies continue to trade in light of many comments coming from a variety of corners around the world who are expressing concerns about the notion that the Federal Reserve is trying to weaken the USD at the expense of emerging nations. The impact on exports from emerging nations in the face of their own currencies gaining in value is worrisome for many. And this in no small measure has sparked some of the concern among investors who have found Gold to be a reasonable avenue with so many questions hovering over the stability of the USD, EUR, GBP, and JPY.

The JPY gained against the USD yesterday proving that its losses before going into the weekend were merely a range bound movement. The JPY remains strong and has shown little inclination to break out of its tight pattern. The AUD must continue to be watched as the price of Gold trades at highs. The AUD does not only reflect the price of Gold, it is however considered a commodity currency by many, and commodity prices have been rising. Also the strength of the AUD continues to occur because the Australian economy has been stellar.

The currency markets are at an interesting juncture taking into consideration that the USD has traded meekly against most of the major currencies for the past two months. It has shown in the short term that it may be starting to find some backers who believe its decline may have been too pronounced, but the shadows from the Federal Reserve remain strong and this will lead to plenty of opportunities to test its ranges. One of the questions that investors are asking is how much the Fed can allow the USD to weaken and where exactly is a self imposed breaking point? Many cracks remain in the financial world and concerns about government bonds are rampant, as are worries about austerity and deficits. Added to the mix as of late is talk about protectionism and the perils this could cause if nations feel that currencies are being manipulated and thus try to impose measures to combat this to protect their own countries products with tariffs.

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