Like A Centipede

The centipede has a hundred feet, give or take. When shoes start dropping, well, everything goes crazy in centipede land.

Fundamental players in gold trading are waiting for any one of dozens of shoes to drop, although right now, all footwear seems to be remaining firmly in place.

A worsening of the situation in Iraq. A re-stoking of the fires in Ukraine. Something nasty by the Chinese in the South China Sea. A good or bad word from a maverick member of the Fed. A natural catastrophe. A ripple of deflation. A bigger ripple of inflation.

We could go through the whole shoe store. The fact of the matter, though, is that we are in the midst of a flat summer sea. All U.S. equities indices were up modestly, but all those in Europe and Asia were down.

The buggy news of the larger-than-expected U.S. GDP contraction got under the overseas wigs and sent them scratching. By the time the dust had settled, Europe and Asia were closed for business, whereas the U.S. had time to digest the particulars.

That little bit of strength in U.S. stocks helped throttle back gold's upward movement. It looks as if it will close about even for the day. No one in gold wants to take a risk on speculating about risk appetite in the equities. It's too tangled for now.

Silver is in a slightly different mode. We think investors are still buying into the rally. And, silver has been chronically oversold for a year. There is also improving industrial demand, as we noted yesterday. Further, silver functions as a sort of "safe-haven-lite." Tastes good but less filling.

We only have anecdotal evidence of this, but it appears that some trading houses are having their freshly-minted floor traders mess about with silver to see if they can make some money before moving on to bigger shows on bigger stages. So our friends in new York tell us.

We are getting more and more comfortable with the school of thought that says the equities market is waiting for a small but scary event to begin its pullback and allow gold and silver to be ushered in as sound investment alternatives.

Also, please keep in mind that next Friday is Independence Day in the U.S. and markets will be closed. That effectively shortens the day Thursday, as well, and can cut into activity on Monday. That means volumes all around should be smaller and volatility thus higher. A word to the wise.

As always, wishing you good trading,