Equities Take Off Sending Gold Down

Optimism returned to the equities markets ‘round the world and with it brought renewed strength in the U.S. dollar.

That combination spelled trouble for gold.

With both stocks and the dollar having taken wing, there seemed to precious metals traders that there was no real reason to buy into gold as a haven. In regular trading, as of 4 PM in New York, the yellow precious metal had lost around $5.00. Dollar strength took it down another $8.00 for a total of $13.00 on the day. In fact, components of the entire precious metal complex were off well over 1% today.

Good economic data drove much of the action on Wall Street. Personal income was up 0.4%, a tenth of a percentage point above the consensus target. Pending homes sales were up 3.1% in February.

Additionally, there was talk in China about further easing and a generally optimistic tone from comments coming out of that country’s economic bureaucracy. Zhou Xiaochuan, governor of the People Bank's of China, warned on Sunday that the world's second-largest economy must be vigilant for signs of deflation. That is a big hint about further monetary policy adjustments.

Elsewhere, Europe’s Greece problem saw its temperature decline as many felt the major combatants were getting closer to a lasting deal on Greek debt.

Iran and the interested negotiating powers conveyed a mild sense of optimism about the nuclear talks concerning the Middle Eastern country’ bomb-making capabilities. That in turn affected the price of crude since, presumably, any deal would allow Iran to export much more oil than it is doing right now.

While on the surface it might appear that Saudi Arabia and its allies’ imminent invasion of Yemen is bad for the region, the truth is that it sent a message that stability might stem from solid, sustained military action in a country that is now, for all intents and purposes, a failed state.

The yield on U.S. 10-year bonds was up modestly, stabilizing for the moment just under 2%.

Fed Chairwoman Janet Yellen’s remarks, which were only a fine-tuned version of previous comments she has made, may have been seen as less dovish by analysts. Two other Fed governors will release comments sometime this week as well, so we may see some cross currents cutting through the monetary seas that could affect gold.

However, the biggest driver of Fed and investor opinion will be the release of U.S. jobs data on Friday. A strongly positive report might see investors position their portfolios for likelier tighter monetary policy sooner rather than later.

Keep in mind that because of Good Friday, for most markets, this is a short trading week.

Wishing you as always, good trading,