The Dollar Continues Stampede

The dollar again hammered its way through the trading village, beating on doors, setting roofs on fire, bringing down almost everything in its path.

Even the equities were affected today, especially those with big energy components in their rosters - the Dow and S&P 500. Crude oil was beaten up and will close well below $80 per barrel. Brent North Sea oil is tumbling, too, though it has shown a bit of resistance to a complete capitulation.

The ISM Manufacturing Index hit 59.0 in October, its fastest growth rate in three-and-a-half years. That led to yields on the benchmark 10-year T-bills hitting their highest level in over three weeks, although they're nothing to write home about. Yields rose so price of the bond fell.

The runaway dollar is, naturally squashing any hopes the gold bulls have at the moment.

Whether the U.S. elections will have anything to do with gold prices remains to be seen. We're afraid, as are all Americans - and their friends, that just like a divided Senate, a Senate unified under one party will have a hard time. The Democrats, who smarted when they held a super-majority and Republicans used various parliamentary tactics to stop their agenda, are unlikely to forget. And then there is a President in the White House, who despite coolness, will surely not allow anything to pass his desk without sending it back for a veto override. Super majorities are hard to come by in veto votes.

But, even through it all, the U.S. seems to recover and indeed seems to be the only game in town. As U.s. manufacturing was expanding to those lofty levels, China's manufacturing was shrinking and was in the low 50' on the index - near the contraction point. Given China's record of fudging data, it's safe to assume that it already is in a manufacturing recession.

So, the dollar will continue strong, the need for gold will be scant.

Wishing you as always, good trading,