Damned If You Do, Damned If You Don't

Gold fell again today. This time it was after extremely dovish statements by Fed chairwoman Janet Yellen. It leaves us scratching our fundamental heads.

Gold seems to be getting beaten about the head and shoulders regardless of what the Fed says or does, and that provides a great mystery. Equities seem to prosper at least when the Fed tends toward dovishness, although they also seem to be doing quite well when the Fed is hawkish.

We think there is a hidden message in Yellen's comments today, which dwelled on unemployment. There is, she said, "considerable slack" in labor demand.

An advance survey is saying that the U.S. economy has added 200,000 new jobs in March, well above the 175K in February. We shall see if official Department of Labor stats bear this out in the next few days.

The hidden message? Don't bet your booty on an interest rate rise right now.

In her remarks to a Fed community development conference, Yellen cited unacceptable numbers of partly employed workers, stagnant wages, lower labor-force participation and longer periods of joblessness when she hinted at continued easing.

"This extraordinary commitment is still needed and will be for some time, and I believe that view is widely shared by my fellow policy makers at the Fed. The scars from the Great Recession remain, and reaching our goals will take time."

According to Bloomberg, the chance the central bank will increase its benchmark rate to 0.5 percent or more by January is 13 percent, based on futures contracts. The odds were about 11 percent a month ago.

Slack physical demand for gold, especially in China, added to today's loss. Investors there are holding their breath and holding on to their money as China goes through a somewhat prolongued growth slump. (That's not the same as an economic contraction, but rather a decline in the rate of growth.) Supposedly China is going to stimulate its economy somehow. What that will be composed of is not yet known.

As always, wishing you good trading,