Gold and silver have staged a decent comeback over the last couple of days, with gold up by around $40 since Wednesday, while silver yesterday recorded its strongest one-day price gain for 15 months – gaining more than a dollar per ounce.
Industrial commodities have also enjoyed gains over the last few days, while the dollar softened yesterday, though the Dollar Index still remains comfortably above 82.00. More appalling eurozone economic indicators – yesterday we learned that unemployment in Spain during Q1 was an eye watering 27.2% – could lend support to the dollar.
The tidal wave of newly-printed central bank money entering the banking system continues to lift equities, with America’s S&P 500 closing yesterday just eight points shy of its 1,593 record. And it’s not just banks and hedge funds shoving these markets higher: as Bloomberg reports, “Central Banks Load Up on Equities”. Of course, in America the Plunge Protection Team and the Exchange Stabilization Fund can buy pretty much any asset they want, but that other foreign institutions are now so openly buying shares is new.
The result is that stock markets are no longer any kind of useful indicator as far as the true state of business fundamentals are concerned – though rising stocks are a nice way for central planners to (they hope) encourage a broader sense of optimism about the economy, and thus get people’s animal spirits revved up. Which – as with the “data shift” which will bring about a magical 3% increase in US GDP courtesy of some handy new calculations – brings to mind Goodhart’s Law: “When a measure becomes a target of policy, it ceases to be a good measure.”