Gold prices end higher on a weaker U.S. dollar and bargain hunting. U.S. stocks retreated from daily highs, still set for weekly gains. Gold last traded at $1,336 an ounce. Silver at $20.31 an ounce.
Times have been good for holders of gold so far in 2014 despite predictions of lackluster performance from big financial institutions. Analysts weren’t expecting much from gold this year. Many big banks were forecasting average 2014 prices below $1,300 an ounce, down from last year’s average of $1,413. But the precious metal has already managed to outperform U.S. stocks, bonds, emerging markets and the dollar.
One factor that has prompted investors to turn to gold is concerns over the future prospects for the Chinese economy, the 2nd largest economy in the world after the USA. Data indicate that the Chinese economy is losing momentum. CBB International’s China Beige Book survey, published this week, showed China’s economy slowed this quarter, with industries including retail and mining showing weaker revenue growth while loans through non-traditional channels became more expensive.
“The pace of Chinese economic expansion has plainly slowed,” Leland Miller, president of survey publisher CBB International, said.
A future factor for which gold could be called on to provide shelter might be trouble in the US banking sector.
In the event of a deep recession in the United States, steep declines in home prices, and recessions in the euro area as well as Japan; 30 major banks in the U.S. would lose a total of $501 billion over nine quarters, according to the latest round of stress testing from the Federal Reserve.
One bank, Salt Lake City-based Zions Bancorp, wouldn’t meet the Fed’s minimum standards for capital in a worst-case scenario. However, there is another bank that private sector analysts have concerns about and it isn’t a small bank. It’s Bank of America. Goldman Sachs believes that most U.S. banks came out of the recent stress tests looking pretty good, with one notable exception: Bank of America.
The second-largest bank in terms of deposits passed the test but left some analysts wondering just how strong its cash position is. Goldman Sachs expressed its concerns in a note today.
When the one bank that is causing private analysts to be concerned is the 2nd largest bank in the country, that isn’t very comforting, no matter what the Federal Reserve may say about its “stress” testing overall.
On a final note for the week, in case anyone still clings to the illusion we can trust the so-called “mainstream” financial media, Bloomberg’s CEO stated this week that the news agency should have suppressed negative stories about China in the interests of promoting its own business enterprises there …a rather bald-faced admission that manipulation is alive and well.
Swiss America 