Gold Faces Down Big News

Remember 1992? Clinton elected; the senior Bush was ending his term of office. The Millennial Generation newborns (now in their 20s and 30s) were in the midst of their own particular baby boom. Yugoslavia began to break up. Russia and the U.S. stopped targeting each other's cities with nukes.

And, housing was booming, despite a recession.

Today, 22 years later, the U.S. Census Bureau and The Department Of Housing And Urban Development announced that sales of new single-family homes jumped 18.6% in May to reach a seasonally adjusted annual rate of 504,000.

That brings the rate for new homes sales to approximately the same level seen in May 2008 - roughly four months before the Great Recession kicked into high gear.

You would be judged sane if you thought that precious metals prices might crumple in the face of such numbers. But, it didn't happen. In fact, gold and silver are seeing very modest rises with about 30 minutes left in afternoon trading.

What's fueling this fierce holding of positions?

The fear of inflation is one aspect. Silver, though, additionally is profiting from renewed industrial demand as the U.S. and China both have reported their industrial strength still building a head of steam. And, Europe and Japan are working on intense new stimulus programs to kick start those staggering economies. Better late than never.

The new-housing sales can only bode well for the American economy, since the one laggard sector in the recovery has been construction. And, if the Fed holds true to its word, interest rates will be kept low for another eight to twelve months, even as QE3 finishes winding down.

All that spells i-n-f-l-a-t-i-o-n. And that spells strength in precious metals.

Possibly most astounding of the more granular aspects of the data is the report that new home sales in the northeast are up 54.5% year over year. What is this? China?

Meanwhile, President of the New York Fed Paul Dudley said in Puerto Rico that "The market expectations are that the Federal Reserve will start to raise short-term interest rates around the middle of 2015. That sounds to me like a reasonable forecast, but forecasts often go astray, so I wouldn't put too much weight on that particular set of forecasts."

That's an open-ended observation. But he clarified it by saying, "In the current environment it's still very, very appropriate to continue to follow very accommodative monetary policy."

"We've said very clearly that what we are going to do depends on how the economy evolves," Dudley continued. The Fed grand sachems believe they can "get the unemployment rate considerably lower and still not have an inflation problem," according to Mr. Dudley.

Pay attention. Pay very, very close attention. Dudley matters as much as Yellen. The New York Fed tail wags the dog.

As always, wishing you good trading,