Morning Notes from Michael A. Berry Ph.D.
"The power of gold is evident elsewhere in the world this AM. The Spanish central bank has sold 80 tonnes of gold (plus US Treasuries and UK Gilts) in the past few weeks in line with its Washington Accord commitments. This has capped the price move to the upside. But gold has been resilient and has yet to break below $665. It is trading at US$671 this AM. Ambrose Evans Pritchard (UK Telegraph) notes that Spain’s current account deficit is 9.5% of GDP. That is why she has been a seller – and accordingly Banco D’Espana’s foreign currency reserves have fallen to 12 days of imports.
"The current account is completely out of control," said Alberto Mattelan, an economist at Inverseguros in Madrid.
"We have the worst deficit in our history and worse than any other country in the western world. It has not yet become a 'street concern', but I can assure you that it is of great concern to us economists. This will turn bad over the next 18 months,"
Observers of the Spanish situation believes the situation could worsen if there is a housing crisis in Spain. ECB bankers have now raised rates 7 times to 3.75%. It appears that Spanish banks with mortgage exposure could be at risk. It is not only the US Federal Reserve that has a thorny problem on its hands.
On Bloomberg this AM Canada’s Rob McEwen, Chairman of US Gold, said he believes US$2000 is in the 2010 timeframe.
You have been advised – choose your weapon!"
SM
