Gold Is Behaving As Much More Than A Safe Haven

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The biggest news of the day is the soaring price of gold.

More impressive is that, while some of the gain was generated by a weaker U.S. dollar, most of the advance came via regular trading. That is to say that a lot of people wanted to buy gold.

They also wanted to buy silver (up 2.00%), platinum (up over 2.00%) and even laggardly palladium (up 1.25%). This is classic haven buying, certainly what with volatility still high, but it also might be pointing to a longer-term trend of actually investing in precious metals. One might even describe it as a flight to quality.

Bond face value prices were up today after a successful auction of 2-year paper, but – and this is germane to the allure of precious metals right now – those prices didn’t rocket into space. That tells us that bonds are working on a business-as-usual basis whereas gold, silver, et al, are moving up for deeper reasons.

The strong uptick in gold came on a day that would seem not to be favorable toward investing in precious metals.

The Dow is up at 3PM in New York by 1.75%. The S&P 500 is up 1.35%, while the NASDAQ brings up the rear, moving higher by 1.00%.

A lot of chatter surrounding the crude oil market is driving action in equities. Word has it that OPEC is about to reach an agreement on output and pricing. However, like any big and complicated deal, believe it when you see it. And even then…

West Texas Intermediate rose 3.2%. Brent was up by almost 4.00%. Both the U.S. and world benchmark crudes are operating firmly in the $31+ per barrel range.

Europe was able to take advantage of the optimism in oil (short lived as it may turn out to be). The DAX, FTSE and CAC all turned positive. The CAC led the way with a full 1.00% gain.

Asia was not so lucky. Markets there closed before oil began its rampage up.

The Nikkei and Hang Sen were both down significantly but not enough to call out the National Guard.

Shanghai was devastated, though. It fell 6.38% There is also worry in China that the Fed will issue a statement tomorrow that will be unfavorable to the Chinese economy.

Our feeling is that the Chinese economy will be hurt regardless of what the Fed might say regarding interest rates in the near to middle-term future. China is in a fragile state, economically.

Years of state-controlled economics may well be coming to a rocky end sooner than we think.

Stay tuned for what the Fed statement tomorrow afternoon will mean for other geographic regions and specific economic sectors – like manufacturing and housing – in the next four to six months.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer