Breath-Holding Is An Art Form

Until Europe acts, as German President Angela Merkel has indicated her country will finally do, the world will be in stasis economically. Europe and the U.S. are inextricably bound together financially, economically, culturally and historically. The resistance to Keynesian market stimulation by Europe is grating on the rest of the world's nerves. And it is what is slowing down the equities markets.

The slowdown in U.S. stocks is also an acknowledgement that, while China is predicting it can maintain 7.5% growth, the markets aren't buying its accuracy or importance. First, because the books are well-cooked. Second, because China's roughly $6 trillion dollar real economy increasing at, (let's be generous), 4%, does not have the same impact on the world as a $17 trillion dollar economy growing at 3%.

Although the equities were down again today across the globe, in the U.S., at least, the loss of blood was stanched a bit.

Were gold bulls beneficiaries of the falling stock prices? No, they were not, yet again.

The dollar is just too strong and driving gold prices down too far for regular trading to overcome that market drag.

An item that has to be reckoned with now... In less than a month, U.S. mid-term elections will be held and predictions have it that Republicans will either take over the Senate or come very close. While we think this makes little real difference to the political scrum in D.C., before the election, it will create more anxiety in markets and therefore more volatility.

We are also looking at the possibility that investors and traders are going to step in very soon and begin buying stock again, which would curtail interest in gold.

We have to keep crude and Brent prices on our radar, as well. As discussed yesterday, those falling prices will have an effect on inflation and that, in turn, will have an effect on Fed thinking vis-a-vis rates.

Roll all those factors up into a ball and punt it. You can easily see why everyone is holding their breath. Uncertainty in October is as common as falling leaves.

As always, wishing you good trading,