Gold and silver have dramatically taken back some of last week's losses in afternoon trading in New York. Heavy short covering and bargain hunting plus a robust physical/bullion market have ignited the one-day rally. Or are markets coming to their senses? (And for conspiracy theorists, it might be that there has been a leak of the FOMC minutes due out this week.) 

There was an implied threat from Moody's that it would again downgrade U.S. government bonds, but that elicited more of a shrug than making anyone's hair stand on end.  

If you read reports from Asia and Europe you will hear many an optimistic note about the U.S. economy, which the whole world is looking to as a beacon for revival right now. But, below the surface are many troubling facets to the slow, painful slog out of the recessionary pit. 

Housing starts plummeted in March and are sluggish in April according to preliminary data. Consumer confidence is up. Manufacturing growth has all but stalled. The dollar surges, the yen tumbles. 

All three major U.S. indexes have so far gained around 16% this year on a combination of glacially improving economic data and continued support from the Fed.

But many investors have been spooked recently by comments from some Fed officials suggesting it could begin to scale back its bond-buying program sooner than later.

"There's a tug-of-war within the Fed about an exit strategy," said Peter Tuz, portfolio manager at Chase Investment Counsel. "We should hear more about that this week."

On Wednesday, Ben Bernanke testifies before an already hysterical Congress, angry about just about everything, when it should be angry at itself for not taking the country and the world in a clear economic direction. That Congress has passed the trillions of bucks to the Fed speaks volumes about the lack of leadership in Washington.

Silver is also up substantially today in late trading (almost 3.5%), despite rumors that it is going to be pushed well below $20 an ounce, back where it was 3-1/2 years ago. Some prognosticators are saying it could go as low as 14. 

Gold is in a curious and precarious state certainly. Equities are the most obvious culprit but the overlooked accomplices are Treasury bonds, even though they have handed investors a 1% loss in the last month.

"The Treasury market is cheaper than almost any other comparable market on a relative value basis," Jim Vogel, an interest-rate strategist at Memphis, Tennessee-based FTN Financial, said on May 15. "There is the thought out there that Treasuries are expensive when in reality they offer the most value."

Gold has many technical barriers to overcome. We need it to stabilize and lose some of its volatility before a clear move can be ascertained.

With summer just around the bend, look for equities players to begin taking profits so they can enjoy the Hamptons, Berkshires and the French, Italian and Jersey Riviera. Their absence could help gold and silver.