Dollar Mojo

The rising dollar is accounting for 2/3rds of the drop in gold today. Why the dollar has risen in the teeth of bad economic news is always a conundrum, but it seems that the equities like weaker retail sales because it could portend deeper cost cutting by corporations. 

Then there are the last straggling Doubting Thomases who believe the Fed will drop acid and begin tapering this week. What are the odds on that? We'd like to think that the remaining decline in gold today is simply due to profit taking and some sidelining ahead of the FOMC confab.

"Investors are keen to see what the Fed will say with regard to the softening seen in some of the recent U.S macro data and whether this will impact the central bank's tapering timeline," said Edward Meir, metals analyst at futures brokerage INTL FCStone. We are getting firmer in our belief that the Fed could push tapering of until March of 2014. 

European and New York stock exchanges were all up today. Asia was mixed, tending toward the downside. Oil is struggling with the higher dollar and 10-year T-note yields were down in the U.S., Germany and Japan. 

"It still seems that the Fed [is creating] this good news is bad news, bad news is good news scenario," Randy Bateman, who oversees $15 billion as chief investment officer of Huntington Asset Advisors in Columbus, said. "The anticipation is that the Fed will retain its purchasing of $85 billion in monthly Treasury and mortgage securities, which is going to continue to help the housing market. That will be taken fairly well by the market." 

We should be watching general volatility as we head into the midst of the 4th quarter. It helps gold, but sometimes hurts silver. Volatility has diminished since the shutdown/debt ceiling crisis passed, but as soon as the holidays are over look for it to rise again.

There is still plenty of money to be made in gold and silver. We just have to pick our spots, not fire our guns prematurely and be willing to take profits readily.

Wishing you as always good trading,