Economic Growth Hormones

The news today is dominated by the revision of U.S. GDP to reflect 5% growth in the third quarter. After starting the year in the negative by -2.1%, the world’s biggest economy has become a roaring beast out of a story legend. The second quarter saw 4.6% growth. Combined, year-to-date, that means that the economy is growing at a 3.75% rate for the year.

The Q3’s 5% growth rate is the highest since 2003. It is becoming more than impressive. It’s fearsome.

The dollar, reflecting the revision, rose and in the process dragged gold down, all of the loss clearly attributed to greenback power. In so-called regular trading, bargain hunters and a touch of short covering inched the price of gold up, but that withered in the dollar’s winds.

Of course, the equities also responded correspondingly. The Dow will close comfortably above 18,000 for the first time ever and the S&P might well be on its way to 2100. NASDAQ was not invited to today’s party, losing 0.15% on the wringing out of valuations in the biotechnology sector, something ordinary rather than a surprise.

Oil put some points up on the board. A few brave bulls are peeking in the back door, but we think their time is still some way off.

The other news is not really news, but rather the appearance of that yearly delicate condition known as “Winter Holiday Syndrome.” Volume is light, volatility is high, and a move by a major player in either direction can make precious metals twitch like a person touching a high-voltage wire. So, we are still wary about our positioning.

The shift into high gear of the U.S. economy is going to be big news for some time to come. It will affect prices on all exchanges, commodities and equities alike. Spectacular growth also fuels speculation that the Fed will raise interest rates sooner, rather than later. Naturally, that will affect gold.  Wishing you as always, good trading,