A Battle Outside Raging

A number of things are going on today that might be moving gold.

The usual suspects are: the Ukrainian crisis; the upcoming FOMC meeting; and pending payrolls reports reflecting progress or regression in April.

But let's talk about the big slide in equities today. And let's start with a quote from Bob Dylan's "Subterranean Homesick Blues."

Must bust in early .. May Orders from the D.A.

Now it's not the D.A. telling investors, traders and market movers to sell off in May (which apparently is coming early this year in stocks). It's tradition and common sense. And it's only natural (and right) that precious metals, especially gold should benefit.

As we mentioned in a previous Daily Email, once earning season ends, equities investors start worrying again. That worry equates to sell-offs based on profit-taking.  

But why May and not April or June? Behaviorists who study sociological phenomenon are sincere when they say that in the beginning of the year, January TFN, people have a positive outlook. New Year, new broom, new outlook, new resolutions, etc.

By mid-year, disillusion sets in. So do facts. Things are never as rosy as we think they're going to be. (Think of all the huzzahs and brass bands that send young people into war and what the mindset is a short while later.)  

So, money begins shifting out of more volatile assets and into safer ones. Bonds are the usual beneficiary of this kind of money migration. However, given its track record up until last year, gold gets its share as well.

This doesn't mean that gold is going "major bull," but it does mean that investors are asking for more compelling reasons to stay in or get into stocks and that can only help gold rise.

Of course Ukraine will continue to be a factor. But with the FOMC on what seems like a pre-determined course, why would another tranche of QE3 cutting hold much meaning except among the staunchest speculators? And what if the unemployment rate dips closer to 6%? Chairwoman Yellen seems to have indicated she's looking for a much lower rate. And if the Fed is seeing much inflation, they know as well as we that some of those prices are playing catch up when they rise.  

This is specifically the kind of period in precious metals trading that is tailor made for technical and not fundamental analysis, although events do have a knack for turning this way or that on a dime.

As always, wishing you good trading,