US GOLD - Comex gold strikes new record as weak US data, debt deal increases the likelihood of QE3 print [Print this document.] [Download this document as a PDF.] [Post this story to Facebook.] By Tom Jennemann, Correspondent [email protected] 973-204-3383
New York 02/08/2011 - Gold on the Comex division of the New York Mercantile Exchange raced to an all-time record Tuesday, as recent poor US economic data has traders believing that the Federal Reserve could launch a third round of monetary easing.
Gold futures for December delivery were last trading up $16.40, or one percent, at $1,638.00 an ounce and earlier touched a fresh lifetime high of $1643.70.
The US Senate today is expected to vote on a debt plan that would raise the country's debt limit by $2.1 trillion in exchange for around $2.5 trillion in spending cuts over the next decade.
But that vote, while allowing the US to avoid default, doesn't cure all of the country's ills, market participants said.
?The markets are looking past the debt deal and they realize that Congress has done nothing to actually improve the economy. America is still on the verge of losing its AAA rating while the latest GDP and PMI numbers were terrible,? a US-based gold trader said.
?All of this is leading up to what very well could be a disastrous [nonfarm] payroll number on Friday. There's no way that [Fed Chairman Ben] Bernanke can look at all this data and not act. Additional easing (Q3) is a near certainty at this point and that's why I'm buying gold today,? he added.
The macroeconomic news out of the US has been pretty bleak of late. The ISM manufacturing PMI index came in at only 50.9 for July. Any reading below 50 would imply that the sector contracted.
Additionally, the nation's GDP grew by a lacklustre 1.3 percent in the second quarter.
?The US, the world's largest economy, is evidently facing not only enormous debts but also economic stagnation, which will no doubt rekindle speculation about the ultra-loose monetary policy being continued. In this climate, there is still ample support for gold,? Commerzbank AG said in a note.
Dennis Gartman, author of the Gartman Letter, said that the US economy may actually get worse in the coming weeks and months despite the passing of the debt ceiling legislation.
?With each passing day we are more convinced that the American consumer and American business is hunkering down by conserving cash, paying down debt, postponing expansionary programs and waiting,? Gartman said.
The recovery elsewhere also appears to be stalling with the PMI for China and the eurozone dropping to 50.7 and 50.4, respectively, in July.
?Seasonally we would expect China?s PMI manufacturing data to improve in August and September; however, with further monetary tightening in our view a real possibility, we doubt manufacturing in China should see a stellar improvement yet,? said Standard Bank, which added that China?s PMI could even dip below below 50 in the coming months.
Gold also found support after the Bank of Korea announced it bought 25 tonnes of gold over the past two months, valued at $1.24 billion, or about $1,550 an ounce. This was the first purchase by the bank since 1998.
