Dollar Sags, Gold Gets Small Advantage

The rising dollar took a breather today, so gold got to skip up a small fraction. Oil, however, continued its death spiral, and now speculation centers around not whether, but when, crude will touch $70 or $71.

The euro weighed on the dollar after it became clear that the central bankers of European national banks found fault with ECB chairman Mario Draghi. It is not so much the substance of what Draghi has been pushing - effectively a U.S. style quantitative easing program - but rather the fact that he announced specific targets, which, evidently, the central bankers explicitly did not want to reveal.

We're not sure why the lack of transparency, but regardless, the euro strengthened, perhaps on bets that "nothing would happen" in order to punish Draghi. There is a better chance that Draghi's proposals will be enacted and he will only be taken to the woodshed. It's late in the game for Europe to pull out of the projected QE without tipping themselves into recession. We're betting the dollar will resume its upward climb soon.

The energy pricing situation is becoming an enormous factor in equities, which stand mixed in late afternoon trading in New York. Saudi Arabia lowered its export price to $82 (to the U.S.), and coincidentally, there are rumors that Iran and the West have reached a deal on that country's nuclear capabilities. Such a deal would release Iran's oil into western pipelines, bring them back into the international fold, and would undercut the Saudis as the lynchpin of American and European Middle East diplomacy.

Lower oil prices hurt some components on the U.S. equities markets, although not nearly as harshly as in yesterday's trading. The Dow is up marginally, while the S&P 500 and NASDAQ are both up about a third of a percent.

Bond yield are predictably lower, although not by very much.

The midterm elections have sidelined some money, but gold and silver have not benefited by turning into havens. The more general consensus seems to be that we will meet the new boss who will be the same as the old boss. The product won't be new either at the big political factory in Washington: gridlock.

Wishing you as always, good trading,