Breakaway or Fake-Away?

Overcoming the serious drag presented by a rising dollar, gold and silver rose today on the rising tensions in the eastern part of Ukraine. Nobody, especially the equities markets, wants this conflict to go any farther. However, Tsar Putin seems to keep pushing and pushing.

He seems intent on fulfilling the adage, "Push anything hard enough and it will fall over." What Vlad doesn't seem to grasp is that, while other countries will be hurt, it is Russia that will bear the brunt of the damage.

Even the most vulnerable of all the European nations, Germany, receives only 8% of its energy from Russia and that can be partially made up through alternative supplies, drawing on reserves and through conservation.

Russia, however, cannot afford the loss of markets for its products, nor the catastrophic decline in business and consumer confidence such a "hot" crisis would engender. The other thing that Germany and the rest of Europe have in their favor is warming weather, which of course reduces demand for nat gas.

A foolish Russian economics minister has even suggested that Russians with money laying about offshore repatriate their assets by stoking fears of confiscation by the West.

Financial markets have yet fully to price in the risk of matters spiraling out of control. To be sure, shares in Europe wobbled on Monday and the price of crude rose slightly, but it was nothing out of the ordinary.

Wall Street opened higher on a bounce back in retail sales following the harsh winter in the US. Donald Tusk, Poland's prime minister, may think the world stands on the brink of conflict, but the markets are not really listening.

The U.S. Commerce Department said retail sales increased 1.1% last month, the biggest gain since September 2012, with receipts rising in almost all sales categories.  

That news helped to push the dollar up and curtailed even greater gains in precious metals today.  

As always, wishing you good trading,