Fundamental Crosswinds

itters began early over what might be revealed in the release of the FOMC meetings minutes.

That is the only explanation for the gold market's stubborn refusal to respond to the renewed fighting between Ukraine and Russia.

The situation in central Europe should be beating the haven seekers like native guides pushing big game toward hunters. We are at a loss as to explain the cold-blooded response by traders. Although we can offer this speculation: there have been so many flare ups and die downs that people are beginning to get the boy-who-cried-wolf syndrome.

Just wait a day or two, they tell themselves and those in the same game, and things will change again.

Indeed, within hours of a report by the Ukrainian government that it had bombarded Russian artillery pieces that tried to slip across the border between the two countries, Russia tamped down the rumor by calling it "a fantasy." We await the truth of the matter.

After hitting lows for the session around 1292, tensions "over there" pushed gold back up, though in late afternoon it is off its high for the day (1311). Some of the rebound is due to dollar strength.

Not surprisingly, Japanese and Swiss currencies plays, (as well as the dollar), are pulling the money in that fled equities.

"Risk has evaporated from the markets after the Ukraine headlines,'' said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. "We have seen investors use the yen and Swiss franc as safe harbors.''

Crude oil also marched into the fray, picking up around 1.5% in price today. Energy still rocks and rolls the world.

That's about half the story. Another chapter is the continually unfolding saga of an enormous fall in physical buying in India and China, as well as the rest of south central and south eastern Asia. It's too expensive for people living in those places. Now we are on the verge of a new paradigm in physical buying in those countries. It may take five years before Indians and Chinese return to traditional buying habits.

Before wishing you a good weekend, etc., let's briefly turn to the FOMC minutes due out this coming Wednesday. The hawkish among analysts who scour the Fed's every word will no doubt see evidence that interest rates are about to be raised. Argue it any way you would like, but ponder these figures for the U.S. economy (these are projections).

The top-line Consumer Price Index (CPI) projected to rise 0.1% in July (2.0% year over year), with core CPI rising 0.2% (2.0% YoY). Oil prices have been flat for 45 days. Food is actually getting cheaper in real terms. Automobiles are priced about where they were in 2008. No inflation? No hike in rates.

As always, wishing you good trading,