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A raft of corporate earnings reports and a harvest of US economic data kept the early morning action on the boil in New York on Friday. The trading focus remained fixated on the one and only factor that has defined the past seven weeks of chart results for many a commodity: the US dollar and its seemingly relentless descent to now three-year lows.

The euro flirted with the $1.50 pivot point as of this morning, while the Swiss franc climbed to a new all-time record high against the beleaguered buck. The latter was seen trading at the 72.91 level on the trade-weighted index, showing a bit of a sign of stabilizing somewhat, after having plumbed the aforementioned lows against certain currencies. The week’s news highlight will undoubtedly come to be not the royal wedding but the royal “divorce” that is defining the current state of affairs between the Fed and the US currency.

The greenback has now suffered a string of five weekly losses on the index and has shed 3.8% in just the month of April. While the drop has been characterized as “orderly” by currency strategists on CNBC on Wednesday, the 7.6% decline that the dollar has undergone since the start of the current year has been a boon the risk appetite and the orgiastic revelry taking place in the commodities’ space. On the other hand, the 7% gain that gold experienced in just April is nearly twice as large as the dollar’s decline has been, prompting some to point out the obvious, just in case anyone had doubts. As Divyang Shah over at IFR Markets succinctly puts it “it is difficult to hold a risk-averse stance to the markets when the Fed is keeping the punch bowl filled.” Yes, and this week the Fed spiked the thing with a dash more Wild Turkey.

US consumer spending rose last month, in large part due to the fact that energy and food costs have taken toward the skies. The average price for gasoline surged to $3.90 nationwide in the US as of this morning. Personal income, on the other hand, showed a slowing in growth and recorded only a 0.3% gain. The figure underscores the lack of wage pressure when computing core inflation and it reinforces the Fed’s perception that there is no reason to (yet) fret about inflation. The US savings rate remained stable at 5.5% in the latest reporting period. Finally, the markets also learned this morning that US consumer sentiment improved this month, seemingly ignoring the changing-by-the-minute figures at the gas station.

Early market news this morning revealed that the pace of inflation in the eurozone increased more than had been anticipated, and that the 2.8% mark in monthly price gains has been reached in April. That would put regional inflation at its highest level since 2008. Once again, as has been the case in the USA, the finger-pointing for all of this is concentrating on soaring energy and commodity values. Also as has been the case in America, the spike in the prices of “stuff” in Europe has managed to dent economic optimism, if not yet GDP levels (as has already been reported in the US this week).

Underscoring just how much of gold’s “performance” is really the lack thereof by the US dollar, a quick glance at the market fact box reveals that gold priced in euro terms has actually declined by 2.5% year-to-date. As veteran analyst Ned Schmidt recently pointed out, “the wild enthusiasm for precious metals, particularly silver, is largely centered in North America. It is of interest to investors globally, but not to the same extent. People in North America, perhaps more prone to fads, now believe that they will be wealthy beyond their dreams by owning precious metals, as they did with internet stocks.”

Spot metals dealings opened once again with gains this morning, to no one’s surprise if they were on dollar-watch at all. Gold was indicated at the $1,537.60 bid level with a gain of $1.80 per ounce. The yellow metal had hits a high at $1,541.70 in the wee hours and was on course to finish its seventh week of gains. Meanwhile, silver added 53 cents to Thursday’s closing values, opening at $49.01 the ounce.

Interestingly, the harvest of bearish, top-calling, “sell silver”-related headlines has witnessed an explosion since the second attempt at demolishing the $50 barrier has come into the picture. Hardly any market pundit now appears comfortable with the record-book-worthy final price achievement that silver has turned in since Valentine’s Day. Then, there are also those, such as investment analyst On Yi Ling at Phillip Futures in Singapore, who opine that “in the long term, if we see silver prices at such a high levels, then it could hurt the industrial demand [for it].”

Platinum and palladium also got off to the races on a hot galloping pace this morning. The former added $9 to open at $1,845.00 the ounce, while the latter climbed $10.00 to start the session off at $782.00 per troy ounce. Rounding out the noble metals’ complex, rhodium remained static and was quoted at $2,210.00 per ounce. Yet another carmaker has reported stellar profits on account of robust sales for its vehicles in China. Daimler AG, the world’s second largest manufacturer of luxury cars showed a 71% gain in Q1 profits as the burgeoning wealthy class in China snapped up its swanky conveyances.

Speaking of China and of the plethora of newsletters that see nothing but insatiable demand from that country’s consumers for centuries to come, a bit of a…statistical dampener. It turns out that China has just declared “victory” over rapid population growth. In fact, the main concern for the country’s government has now become how to deal with a rapidly growing older population. While China remains the planet’s most populous nation, its birth rate now lags that of India and that is a legacy of the thirty years’ worth of “one-child, please” policy that was the norm.

This development in the Chinese demographic sector raises the potential for China’s economic growth to slowly drift away from the torrid, near 10% pace it has been experiencing for many years now. It also raised the odds that less “stuff” will be needed as such growth moderates. Now, that is not quite one reads these days when parsing various investment advisory letters, but it is worth an “early” look as such trends are not generally and historically reversible. A growing segment of Chinese individuals now have to deal with the stark prospect of getting old before getting rich.

Actually, when it comes to demographic trends, it turns out that the USA will have a higher percentage of under-15-year-olds when this decade comes to a close in 2020. While the over-65 group is definitely growing and posing all sorts of challenges for the country, the youthful segment is exploding and it represents a trend which, at this time, is apparently being blissfully ignored by the investment community at large.

Well, it is time to put those slippers on and go puttering around the house in true, middle-age-and-turning-old-faster-than-expected, fashion.

Until next week,

Jon Nadler
Senior Analyst
Kitco Bullion Dealers Montreal
http://www.kitco.com/