Gold Stumbles Over Buck

When the dollar strengthens, there is little hope for gold to likewise do so.

Dollar strengthening means generally that the U.S. economy is strengthening. That bolsters the buck.

The strengthening U.S. economy means that risk-takers will follow their hopes into the equities markets, which draws money out of protective investments like gold, bonds and sturdily steady currencies like the Swiss franc.

Perhaps most telling amidst the U.S. data is that consumer sentiment finally appears to be coming in line with the huge American economy's actual performance. That bodes well for more growth because, as is well known, consumers drive western economies, especial in the U.S.

Of course, today the U.S. equities markets were down modestly but the small drop was really a chance to let the boilers cool down.

However, the dollar also rose because it is widely anticipated that the European Central Bank is about to loosen monetary policy very soon. That means the euro will be less attractive and the dollar more attractive.

Some momentum selling following yesterday's drop in gold nicked the yellow metal a little bit, too, but "regular" trading wasn't the primary problem behind the $4.50 (5PM in NY) drop. In fact, gold bulls might take just a tiny, little bit of heart that the price didn't bolt further to the downside.

Quiet in Ukraine; a subdued atmosphere in the South China Sea and a general feeling of more peace - the President's address at West Point concerning Afghanistan - is also helping keep the lid on gold.

The Russians have started chattering about the safety of their gold reserves, which is humorous. The value of their gold is about $45 billion. That's a little less than the daily GDP of the United States. The Russians have the 7th largest gold reserve in the world. The U.S., Germany, Italy, France and China make up the top five.
 
As always, wishing you good trading,