Faith In Precious Metals

Despite facing tremendous greenback-strength headwinds today, gold and silver are hanging on to their gains in mid-afternoon trading. This is important because it means, among other things, that investors are feeling positive about precious metals as havens, and even as longer-term investments.

At 3PM in New York, the dollar is accounting for a 1.5% loss for gold, silver, platinum and palladium. However, so-called regular trading is accounting for a 2.2% rise in gold, a 3% rise in silver. Platinum and palladium, in regular trading, are up 2.25% and 2.40%, respectively.

This jolt to the dollar’s turbine is due to the European Central Banks announcement regarding round of quantitative easing. The move sent the euro down across the world. (We can look forward to less expensive European products.)

The ECB's program will start in March of this year and last at least until September 2016, however. Mario Draghi, president of the ECB called it “open-ended.” Corporate and government bonds will be purchased in the amount of 60 billion euros ($69 billion) a month.

It is expected that the central banks of the constituent nations of the EU will share some of the risk with the ECB.

"Today's monetary-policy decisions [regarding] additional asset purchases was taken to counter two unfavorable developments. First, inflation dynamics have continued to be weaker than expected," Draghi said.

"Second, while the monetary policy measures adopted between June and September last year resulted in material improvement in terms of financial market prices, this was not the case for the quantitative results."

On the news, worldwide equities prices were up. U.S. exchanges prospered the most, all three outfits rising more than 1.5%.

The one troubling spot was crude. West Texas Intermediate is down $1.00 per barrel Brent was a little luckier, falling only 7 cents. More and more, investors, traders and economists of every stripe are pondering what the depressed prices will mean.

Obviously if you’re an exporter, your income falls. If you’re a heavy importer without munch in the way of energy resources, you’re doing the happy dance. Countries like the U.S., both a big producer and giant consumer should figure it to the plus side. It will naturally shake out the shale oil industry a bit, but that was probably necessary to reduce inefficiencies.

There are a lot of people who view the plummeting crude prices as one of the sources of volatility in other markets. This has some truth to it. But the volatility issue really should be placed at the feet of the Europeans (who now seem ready to rectify the problems). The largest aggregated economy in the world has to step up and lead. China and Japan even more so, also need to keep their boilers turned up.

Wishing you as always, good trading,