Gold Not Convincing Investors Yet

It's amazing at times to see how quickly investors forget lessons in safety, and blindly believe the mainstream narrative on the state of the economy and stock market.

For that reason, along with the Fed's manipulation using its lack of commitment and visibility concerning interest rates, it is keeping investors paralyzed in regard to moving more of their capital to gold. Since they don't know what the Fed is going to do, they're seeking safety in cash or Treasuries instead.

With the world now plunging toward global recession, it's amazing the disconnect many investors have between the world and America, as if what happens everywhere else won't have an impact on the American economy.

It's going to take a harder landing to reveal the real weakness of the U.S. economy, and it will definitely come in the not-too-distant future. Smoke and mirrors can only do so much before it comes falling down.

At that time gold will be the go to place of safety, and it once again will soar in price.

U.S. GDP Can't Break the 3 Percent Growth Mark

As has been the case for the last ten years or so, the U.S. economy continues to grow at a rate that has failed to meet expectations. The recently released numbers from the Commerce Department show GDP growth is at only 2.3 percent, significantly below the expected 3 percent being looked for.

It has been a full decade since the last time the GDP has grown above a 3 percent rate, making it the weakest recovery in about 70 years. Economic growth hasn't surpassed the 3 percent mark since 2005, according to the Commerce Department.

Another key factor is the continual drop in productivity, which according to the Labor Department, reached a high in 2002. Being a number of years before the Great Recession, it can't be considered the primary source of the drop in hourly output.

more on U.S. economy

Credit Suisse (CS), Federal Reserve Miss on Reasons for Lack of Corporate Spending

While Credit Suisse (NYSE:CS) and the Federal Reserve on correct on their conclusion that corporate America isn't spending, they're wrong in their conclusions as to why.

Neal Soss, chief economist at Credit Suisse, wrote in a note to clients, “The persistent accumulation of cash, as opposed to investment in new equipment and technologies, is not conducive to long-term growth. And if businesses aren’t growing, they certainly will not be expanding their payrolls fast enough to drive down the country’s worrisome unemployment rate.”

Soss concludes “[I]t is difficult to be persuaded by accusations of generalized corporate greed. Rather, we attribute the hesistancy of American firms to spend larger percentages of their cash flow mainly on an extremely rare and powerful money demand shock that encompassed the nation during the Great Recession.”

The idea of greed doesn't even make sense, as anyone that has run a business knows if there is opportunity a business will invest.

There is nothing more to this than the fact that there is no reason to spend money. The idea of businesses spending money in order to generate attempt to create a recovery is a governmental and socialist idea, not one a business would even think of.

In other words, businesses aren't spending because there isn't something out there they're confident will bring them a return on their investment.

If there was, they would be spending money. That's why the idea we're in a recovery is a joke. Just because the share prices of companies are bid up doesn't mean in any way the economy is growing. All that has to do with is investors and traders believing the companies will grow, not that it is a fact that they are growing.

Economic Forecasters See U.S. Economy Slowing Even More

Confirming the fact the U.S. economy is far from recovering and still in a recession, a survey by the Federal Reserve Bank of Philadelphia's survey of 43 professional forecasters revealed they expect the economy to slow down from prior estimates, and unemployment to continue on at present levels.

When asked about economic growth in the fourth quarter, forecasters said they see it dropping to an annual rate of 2.2 percent, down from the previous estimated economic growth rate of 2.8 percent.

The unemployment rate is expected to remain at the current level of 9.6 percent, even though seasonal hiring for the Christmas season has added some temporary jobs to the economy.

Don't be fooled by the increase in jobs in the private sector recently, they're going to be gone not long after January 1, 2011 arrives, as retailers and others get rid of their temporary help.

For the next year, job creation is expected to be lower than before as well, with nonfarm payroll employment estimated to grow at about 86,600 this month, and 104,200 a month after that. That's down significantly from the 114,100 projected for this month, and 159,300 from there. That's about 55,000 less a month than anticipated before.

In what is sure to be faulty conclusions, those forecasters looking forward to inflation see it coming in at 2.2 percent over the next decade, as measured by the CPI.

Of course that's largely a bogus measure, as it doesn't include food and fuel, which has already risen in price strongly, and will continue into the future.

US Dollar, Economic Influence, Waning on Global Stage

The rebuke and rejection of the request by the U.S. to pressure China to into increasing the value of the renminbi by the G-20 underscores the declining economic influence of America in the world, as well as the U.S. dollar, which has become a disaster.

Not only was the idea of pressuring China on their currency rejected, but the U.S. and the disastrous Federal Reserve were castigated by economic powerhouses like China, Germany, Brazil, France and Korea for their policy of acquiring U.S. government debt and flooding the world with U.S. dollars.

Even with all of that being true, it's interesting to see European countries hit out at the U.S. when Europe is still a disaster as far as sovereign debt goes, although Germany and France are healthy in that regard.

It's the unwillingness of the Obama administration to introduce austerity measures like most countries in Europe have that is outrageous to most, who have said the U.S. must stop the economic strategy of growth through going into deeper debt.

Europe has already proven these socialist plans don't work, and even though there will be a lot more pain to go through in Europe, the pain is coming from taking the right steps, not from misguided policies.

Many laugh at the foolishness in Europe from their coddled classes who have become "kept" by the governments, but how far is the U.S. behind that scenario, as the inability to pay for reckless promises by the U.S. government over the decades is coming home to roost.

As far as the trade surplus that always comes up in difficult economic times, American consumers have made the decision to buy quality and inexpensive products from China and other countries. This same nonsense was brought up when Mexico was producing many of the goods Americans bought.

That has to do with the overpaid American workers, especially those in unions who can't compete with their counterparts in other areas of the world. Until those problems are addressed, America will have this problem no matter which country is the latest to enter the manufacturing sector.

The Obama administration, as have most previous administrations, give lip service to this to play to their base, but the cat has been long out of the manufacturing bag, and there's no bringing back what has been a past that is no longer relevant.

America's economic day is over. They've allowed the Federal Reserve to destroy the value of the U.S. dollar and create a class of consumers based on debt consumption, which had been driving the global economy. That day is now past, and will never return to levels before the economic crisis hit.

The only reason the U.S. dollar even remains the reserve currency of the world is no one else really wants to allow their currency to replace it, as it would drastically reduce the flexibility they now enjoy.

If a country like China eventually were to allow their currency to become the reserve currency, it would only be done for national pride and not for any benefit to themselves. I wonder if they'll end up getting suckered into that?

Some nations in the East have already been making transactions without the U.S. dollar being part of it, and calls for a variety of different ways of going forward have already been suggested, including possibly a basket of currencies, or even returning to some type of gold or commodity standard currency could be based upon.

For the U.S., they need to drop their being the policeman of the world, drop being a nanny state, and get their hands out of the free market. Until that happens, the country will continue to spiral downward economically itself, and in its economic influence around the world.

Barrick (NYSE:ABX), Ivanhoe (NYSE:IVN), Eldorado (NYSE:EGO), Agnico (NYSE:AEM) Rise with Surging Gold Prices

The jobs report in the U.S. showing further terrible results have gold prices today jumping and gold miners rising with them. Barrick Gold (NYSE:ABX), Ivanhoe Mines (NYSE:IVN), Eldorado Gold and (NYSE:EGO) and Agnico-Eagle Mines (NYSE:AEM) are all in positive territory in anticipation of the inevitable inflationary move by the Federal Reserve, which will pump more money into the American economy.

Ivanhoe Mines made the highest move of the gold miners mentioned above, rising to $24.59, gaining $0.86, or 3.62 percent, as of 2:40 PM EDT. Following them was Agnico, which pushed to $72.78, a gain of $1.38, or 1.93 percent. Barrick also increased, standing at $48.40, adding $0.72, or 1.51 percent. Eldorado finished the grouping off, rising to $18.57, an increase of $0.21, or 1.14 percent.

A number of diversified miners also benefited from the fall in jobs, anticipating higher metals' prices because of the falling value of the U.S. dollar, which will worsen from the Federal Reserve's inflating of the money supply.

Commodity prices in general will continue to increase in price because of the falling value of the U.S. dollar and inflation from the Federal Reserve's actions.

Bank of America (NYSE:BAC) Says Quantitative Easing Will Pressure Gold

In a recent note to clients, Bank of America Corp (NYSE:BAC) said quantitative easing by the Federal Reserve will put upward pressure on gold prices, as the U.S. economy continues to sputter.

Bank of America said, "Since the first round of QE, precious metals have perhaps become the biggest beneficiary of money printing. In a way, gold is playing out as a second act of the credit bubble, with the first act being the spike in TED spreads that started back in August 2007.

"Just as commercial banks became extremely distrustful of each other's credit profile due to the severe drop in US house prices, Central Banks are quickly becoming distrustful of each other on the back of widening sovereign credit spreads, unilateral policy moves to ease quantitatively or unexpected interventions in the foreign exchange markets."

The Fed continues to hint, through various representatives, that they are ready to intervene in the market again if the American economy doesn't improve. Almost every week as data confirms things will remain slow for some time, someone from the Fed mentions quantitative easing as the remedy.

That will further erode the value of the U.S. dollar, which continues to fall against the euro. That will also push the price of gold higher and increase inflation. All of which is good for investors in gold.

Gold Prices Surge on Weak Economy Comments from Federal Reserve

While we don't need the Federal Reserve to tell us the U.S. economy is weak and anemic, gold investors and others were looking to see what they would say and announce, as it would definitely have a temporary impact at minimum, and a longer term one, depending on what they said.

For once the Federal Reserve said they weren't going to do anything at this time, and would wait to see if the economy could heal itself.

Too bad the schizophrenic central bank doesn't retain that policy. But then again, gold prices wouldn't be doing what they are doing if they didn't interfere.

The conclusion of the Federal Reserve wasn't any different than the last FOMC meeting, and that was they were still concerned about the economy, and stood ready to throw more money at it if they thought is is needed.

Like $1.7 trillion thrown down the hole wasn't enough last time.

If there weren't elections coming in November, the spending-addicted Fed would probably have interfered again, but since the Democrats are already going to get hammered, they didn't have the will to do what their addiction pressures them to do.

But gold prices responded to the comments on the weak economy, and they surged quickly once the news of the contents of the meeting were released.

Because it's nothing new, it's doubtful it'll have any significant effect on gold prices, although it does remind everyone of how bad the U.S economy really is.

Gold in the short term should continue to run up on the fundamentals, and the after the elections we should see an announcement from the Fed that they're ready to implement quantitative easing again, which will cause gold to soar price.

Of course that could happen without that, as many other factors outside the U.S., like growing geopolitical stress in Asia, along with the ongoing sovereign debt debacle in Europe, could push gold prices up quickly if and when any new changes come about, which they are almost sure to.