The Equities Juggernaut

You know those people who decide that, when they come to a railroad crossing, decide they can beat or somehow get around the lowered gates? They can't.

Gold bulls are pretty much in the same position right now. Equities are a speeding train and it's best to just let it pass. Earnings season is going to end soon and then everyone on the street will be back wondering where stocks are going - indeed, where the economy is going.

One more word about tech equities: bubble. Why not just bid up the price of tulip bulbs in Holland?

Because of the continuing stock rally, money that was being held in gold ETFs and other gold-related instruments is being moved into equities. The result is that ETFs and the others are being forced to quietly sell gold without really spooking their sales niches too badly.

Overall, any new money that is coming into the casino is not moving to precious metals (for the most part) or into other commodities. Agricultural commodities are slowly being ground down in price. (We don't include livestock here because of the strongly seasonal nature of, for instance, hogs.)  

Oil seems finally to be coming down to earth, losing a couple of bucks on the day.

Some of these price changes are due to dollar strength, but a good deal of it is cyclical, or even structural. (Like the supply and demand see-saw of gasoline prices.) Other drivers are temporal. (Drought in the U.S. south-central farming and ranching belt.)

This week is an aberration. The long-term trend is up for all manner of commodities. This is the canary in the coal mine for an inflationary trend.

We've said it so many times that we feel we have to ask your indulgence: we need inflation to drive the economy forward and, as gold bulls, we need it to give gold a reason to climb higher. At the same time, we need a good, strong, healthy correction in equities.

As always, wishing you good trading,