Gold Bounces Plus To Minus & Back Again & Again

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The push and pull of dollar strength fighting with regular-trading investors has bounced gold from plus to minus, back and forth a number of times today – but in a very narrow range. Economic news was the inspiration for the indecision.

Retail sales in the U.S. fell in February by a seasonally adjusted 0.6% against expectations that they would rise 0.3%. The culprit was Old Man Winter. Additionally, core retail sales, a measure excluding automobile sales, slumped by 0.1% in February compared to forecasts for a 0.5% increase. Core sales in January dropped 1.1%, revised downward from a previously reported fall of 0.9%.

This has given pause to those who entertain notions the Fed will be raising rates anytime soon, especially given the fact that the retail/consumer mega-sector accounts for 70% of the U.S. economy.

In turn, that put a damper on the dollar’s meteoric rise.

Crude oil’s latest swoon certainly did not help gold. West Texas crude resumed its role as a bearish outside influence, down over 2% in late afternoon. Brent North Sea was also down, although not by as much. And yet, the pumping continues on and on and on. Are we headed for $40 per barrel again?

As if gold bulls didn’t need any more bad news, the Dow, despite the oil drop and chip maker Intel’s earnings warning, finished the day up 250 points. Microsoft’s decline also was shrugged off.

We believe, though, the equities’ optimism is due to the fading chances the Fed will pop a surprise rate increase in April or even June. Easier credit for Wall Street means they will still have plenty of easy credit to play with and probably continue to drive equities up.

Gold traders today seemed to be the laggards in reassessing the Fed rate-rise issue. We have to remain very cognizant that the interest rate question will hound gold for some time. The rise is coming. We just don’t know when. One thing we can count on is that it will be a small rise.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer