Equilibrium

Equilibrium

Bargain-hunting and short covering seem to have typified buying today in gold and silver markets. Many of the bigger decision-makers checked in to their offices and trading screens today, apparently too impatient to wait till Monday. But they liked what they saw in the precious complex and drove gold up about 1% and silver up about .75% on the day.

There are a few other factors at work, none of them macro trends. An equilibrium is always sought in markets as in physics. On a simplistic level that means a trader tries to beef up his soft bets and back off his more heavily invested bets. Gold has endured a lot of bashing and analyst negativity but it seems the New Year - thus far - has begun smiling on precious metals again. This, on a larger level, translates to re-calibrating portfolios.

Impressively, gold is up $18 as of 4:30 NY time in spite of the fact that with dollar strengthening gold actually lost $4-worth of ground because of the greenback bulking up.

The strength of the dollar plays two ways for precious bulls. It surely hurts the prices but it does encourage traders who, in spit of hampered prices, begin to see the buy as a bargain. It is mostly psychological, but like many aspects of the markets, it is grounded in one version of reality.

The rise in the dollar is telling us a few things. First, it is telling us that bets are going to the board that more tapering will occur and soon. It also tells us that the U.S. economy is strong but wavering. (Another counterintuitive concept.)

The equities markets have softened considerably through the latter part of the holiday season. A lot of contemplation and analysis away from the hurly-burly of the trading floor may have cooled some fevered brows.

We should always be sniffing the air and testing the waters for signs of inflation.

As always, wishing you good trading,