Gold had itself a real seesaw day yesterday, poking about $15 higher by the time New York opened, really taking off and rising as high as $768 in the first hour, but then encountering a steep falloff that dropped it nearly to $740 by noon, after which it edged higher again and leveled off to finish at $744.70, up $10.80 from Friday. Overnight, gold has slipped lower.

China unveiled yesterday (Sunday) what it described as a “massive” economic stimulus package – a planned capital infusion of $586 billion that it plans to use to reverse its slowing growth, to loosen credit and to offset slowing global growth by stoking domestic demand.

According to a recent report Chinese economic growth is being driven by domestic demand rather than exports. From Breitbart:

The report by economist Albert Keidel of the Carnegie Endowment for International Peace said China’s rapid growth is driven by domestic demand more than exports, and will sustain high single-digit growth rates well into the 21st century.

“China’s economic performance clearly is no flash in the pan,” Keidel writes.

Is this the year gold breaks from its seasonal pattern and enjoys a summertime rally?

The yuan-dollar peg has gone a long way in ensuring constancy. Chinese economic growth – we would argue, all economic growth – ensues under the auspice of a stable currency. But ties to the greenback have recently come with a price.

As the U.S. economy is slowing down, China’s manufacturing base is beginning to crumble. Rising cost, increasing exchange rates and sagging demand are forcing companies to close shop, or to outsource capacities to cheaper regions in Southeast Asia.

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